When you do business with lenders or credit card issuers, they report the payment history on your accounts to at least one of the three credit bureaus (Experian, TransUnion, or Equifax). The bureaus, in turn, put that information into a credit report that contains your credit history and personally identifiable information.
A credit score is a three-digit number that is calculated by applying a mathematical algorithm to the information in one of your three credit reports, which are generally updated each month.
Credit scores represent your creditworthiness and help lenders determine the likelihood that you will repay a debt as agreed. If you have car insurance, a loan, or credit cards, the premiums you are paying and your interest rates may be determined in part by your credit scores.
While there are multiple credit scoring models, the FICO® Score* is one of the most commonly used by lenders and businesses to determine how reliable you will be in paying back a debt.
What does my credit score mean?
When lenders pull your credit scores, they are typically using them to determine how likely it is that you will pay them on time if they issue you a loan or credit card.
It’s important to note that credit scores are not stored as a part of your credit history. They represent a snapshot in time, which is why your credit scores can go up or down over time, depending on your behavior.
Understanding my credit score factors
It’s important to understand the factors that go into determining your credit scores so you know how to improve them if necessary. For the FICO® Score 8, there are five main factors that impact your score. They are all weighted differently:
- Payment history: Your payment history — how regularly you pay your bills on time — accounts for 35% of your score. Late or missed payments can negatively affect your score, while a pattern of making payments on time is the best way to keep your score high.
- Amount of debt: The amount of debt you have relative to how much is available to you, sometimes referred to as your credit utilization ratio, accounts for 30% of your score. This is calculated by dividing how much credit you use on a monthly basis by the total amount of credit available to you. So, if you have three credit cards with a combined credit limit of $10,000, and you have a total combined balance of $3,000 on all three cards, your utilization ratio is 30%. Most experts recommend keeping your ratio below 30%, and for the best scores, below 10%.
- Credit history length: How long you’ve used credit, including your oldest and newest accounts — as well as the average age of all your open accounts — accounts for 15% of your score. Generally, the longer you’ve had positive credit, the higher your scores.
- Amount of new credit: The total amount of new credit accounts for 10% of your score. This takes into consideration how many accounts you’ve opened recently and how many recent hard inquiries you have on your credit report. Too many new accounts and inquiries could indicate greater credit risk. Hard inquiries tend to stay on your credit file for two years but should only affect credit during the first year.
- Credit mix: The variety of types of credit you’re using accounts for 10% of your score. If you have different kinds of credit, like credit cards and installment loans, you’ll score higher than if you only have one type of credit, such as retail cards.
By monitoring your credit regularly, you can track your FICO® Score and credit report to see where you stand. When you receive your score, you may also get some guidelines on your score profile and why your score ranks where it does.
For more information about your credit score, see the following articles:
- What is a thin credit file?
- How to choose and use your first credit card
- Can automatic bill payments help my credit score?
*FICO® is a registered trademark of Fair Isaac Corporation in the United States and other countries. Barclays and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. Barclays and Fair Isaac do not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history or credit rating. FICO and “The score lenders use” are registered trademarks of Fair Isaac Corporation in the United States and other countries.
A credit score is a 3-digit number calculated using information on a credit report that serves as a numerical representation of a person’s creditworthiness. A credit report is a summary of your credit activity such as the payment history and status of your credit accounts which potential lenders use to offer you credit and on what terms. Your FICO® Credit Score and key factors are based on data from third-party providers who are not affiliated with Barclays. Barclays does not guarantee the accuracy of any credit information that is provided to you by these third parties.
Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8 or another type of credit score. FICO® is a registered trademark of Fair Isaac Corporation.