How are credit scores calculated?
Credit bureau scores are calculated by computer software containing a scoring model. Each model is built by analyzing the information contained in large samples of anonymous borrowers’ credit files. Analysts tracked how those borrowers paid their bills and identified patterns in the credit bureau data that correlated to payment history.
While FICO does not disclose how they actually compute the credit score, it really is not much of a secret. The FICO score itself is calculated by using a combination of data that appears on your credit report. This includes approximately: * 35 percent – An individual’s history of making credit payments on time * 30 percent – The total debt to available credit ratio * 15 percent – The length of time credit lines have been open * 10 percent – The frequency with which someone applies for new credit * 10 percent – Other factors such as the types of credit lines In 2008, FICO made some modifications to the way they measure an individual’s credit score. The new system not only shows the how likely they are able to pay back debts, but it gives some insight as to how well they also manage debt in general. One of the biggest improvements people will see is that in the past, one missed credit card payment could severely damage your credit score if it were to be reported by the lender. The 2008
