How your credit score is calculated
Credit Score: How is it calculated and what does it represent?
Credit score is a calculated by a mathematical algorithm or a formula. It is based on the information in your credit report and compared to the information on tens of millions of other people’s credit reports. The score represents how likely you are to pay your bills. The higher the score, the better you are represented to lenders. People with the highest scores get the lowest interest rates. The score tells lenders whether you are worthy to obtain a credit line.

The table below represents the range of credit scores and the percentages of population, which fall within each range. The vast majority of people will have scores between 600 and 800. A score of 720 or higher will get you the most favorable interest rates on a mortgage. It pays to have a great credit score. Your credit score will determine whether you get credit and what your interest rate will be. For example, the difference between a score of 520 and a score of 720 is $300 in monthly payments, and $100,000 on a 30-year mortgage according to Fair Isaac's reports.
Your credit score may vary, according to the algorithm or formula, which is used to calculate it. Each of the three major credit bureaus uses their own version of the FICO scoring method. Vantage Score is a new method of calculating your credit score, which gives you a letter grade (A,B,C,D,F) based on the range of scores you fall in (between the score of 501 to 990). For example, if your score falls between 501 to 660, you will receive an F, while a score between 901 and 990 will provide you with a letter grade A. You can order your Vantage Score online at Experian's Web site for $6.

Once again, your score is calculated based on the information in your credit report. Refer back to the pie chart in the “credit report“ section to review the types of information in your credit report.
Factors NOT counted in your credit score:
  • age
  • race
  • sex
  • job or length of employment at your job
  • income
  • education
  • marital status
  • whether you've been turned down for credit
  • length of time at your current address
  • whether you own a home or rent
  • information not contained in your credit report
Even though this information is not calculated in your score, lenders may consider these factors when reviewing your credit report nonetheless.