Understanding Your Credit: How Are Your Credit Scores Calculated?


If you are reading this, you are probably trying to either fix your credit or get your credit higher than it already is. Great job! Doing some research is always a great step forward, especially when it comes to your finances. But, before I dive into the meat and potatoes of how your credit scores are calculated, I just wanted to give you a bit of information behind the two well known and widely used scoring systems: the FICO credit score and the VantageScore credit score.

What is the FICO credit score?

The FICO system is the most well known credit scoring system by the general public, which is you and me. Unless you work with pulling credit on a regular basis, you may only know of this credit scoring system, although there are a multitude of others.

Let me give you a very brief history lesson. Seriously, I won’t dive in too deep, just this paragraph, I promise! FICO or Fair Isaac Corporation which was originally named Fair, Isaac and Company (hence the acronym FICO) is a data analytics company that’s based out in San Jose, California. Their focus? Credit scoring services. Their product? Is the FICO scoring system, which measures the financial risk of a consumer. This system has been around since 1956 and has made credit more widely available. That’s it! Painless right?

For a time, FICO reigned king but then the credit bureaus (Experian, Equifax, and Transunion) had some other plans. Currently, the only way you can get a FICO score is if you purchase it directly from FICO. It still remains a well known and highly used scoring system. Of course, you could get your credit score from Credit Karma or from many banks who offer credit monitoring services for their clients for free. However, these scores are not FICO scores and will show some differences in range. Which brings me to VantageScore.

What is a VantageScore credit score?

Back in 2006, the three credit bureaus decided to band together and make their own version of a credit scoring system to compete against the well known and established FICO. In the beginning, the scoring ranges and numbers were nowhere near the same as FICO’s, however, they are now closely comparable but still have some differences. Just like with the FICO scoring system, it was created to measure the financial risk of a consumer.

What about the scores offered on the individual credit bureaus websites? Well they are either their own in house scoring system, a combination of their system with FICO, VantageScore, a combination with their system with FICO and VantageScore, or a combination of FICO with VantageScore.

Due to it being created by the bureaus and the fact that lenders use the bureaus information to figure out if you are or not worth the risk, many lenders have switched over to using the VantageScore credit scoring system. Don’t misinterpret what I am saying though, both systems are highly used and blended together in several combinations. VantageScore is used by lenders, landlords, and credit card issuers.

What are the FICO score ranges?

As you may already know, FICO scores come in a three digit number that starts at 350 and ends at 850. They’re grouped as followed:

  • 850-800: Exceptional
  • 799-740: Very Good
  • 739-670: Good
  • 699-580: Fair
  • 579-300: Poor

How does your FICO score impact your life:

The ranges in the scoring system can make or break you. If you are in the very poor range, you will have to pay high interest, may have to put a large deposit or pay a fee, or may not even get approved at all, whereas if you have exceptional credit, you will get the best of rating and have the best chance of approval.


What are the VantageScore ranges?

Just like the FICO score, VantageScore also comes in a three digit scoring system. With ranges:

  • 850-750: Excellent
  • 749-700: Good
  • 699-650: Fair
  • 649-550: Poor
  • 549-300: Very Poor

How does your VantageScore impact your life:

With VantageScore, if you are in the poor range, you probably won’t get approved for anything. If, for example, you wanted to get a credit card, the only possibility would be a prepaid credit card or maybe a secured credit card. As with FICO, you will get the best rates and more favorable conditions and terms, as well as the best chance of approval.

What are the main scoring factors for the FICO score?

Both scoring systems are based on getting 100% on a test. No, it’s not an actual test, I’m just saying that figuratively so don’t spaz out! When I say test, I mean your credit score, and it consists of 5 parts or factors that total 100%. Ace them all and you get that 100% score (850). Mess up on any of those parts and you’ll get penalized by your score going down.


The most influencal factor for your FICO score would be your payment history on loans and credit cards. It holds 35% of the score and that is self-explainitory. Just pay your bills on time!

The next one up would be your total debt and amounts owed. This holds 30% of your score. Have you heard of the term, credit utilization? Well this is where that resides. Use all of the credit that you have been loaned (maxing out your credit cards for example) and your score will go down. Use a small portion of your credit, while making timely payments, will make your credit score go up.

Next would be the length of your credit history which is 15% of your score. This part is also pretty self-explainitory. The longer you have that account, the better it is for your score.

The next two hold the least amount of weight against your score. Each one is 10%. One would be new credit (such as getting multiple approvals for credit cards and loans) and the other would be a your credit mix (such as having a car loan, credit card, and retail cards).

What are the main scoring factors for the VantageScore?

VantageScore is a bit different, however the concept is similar to the FICO score. One major difference is that it uses 6 facotrs to determine your passing grade instead of 5.

The most influential factor for VantageScore would be your payment history. It holds a whopping 40% of your score, that’s almost half! It makes scense though, as it is specifically made for lenders in mind (lenders don’t like risks).

Second down the line would be the credit age and credit mix. This part of the scoring takes up 21% of your score.

After that, it would be your credit utilization, which is 20% of your VantageScore credit score.

The last three minor ones are as follows: balances at 11%, recent credit applications at 5%, and available credit at 3%.

These two scoring systems can make or break you. Seriously! Having great credit is like driving on an empty road and having only green lights where ever you go, whereas having bad credit is like being stuck in Manhattan traffic for over 3 hours.

It definately sucks!

But, credit isn’t the only thing lenders look into in order to determine if they will lend to you. So even if you have an 850 credit score, you still may not get approved for that mortgage. It is only a major part of what they look into, not the entire picture.

I hope that you found this information useful! Please feel free to share and comment below!