How a credit score is actually calculated
The five inputs, roughly how much each one weighs, and which ones you can move in a month.
Most people find out how their credit score works the same way: by being surprised by it. A card application gets declined, or a rate comes back higher than the one in the advert, and only then does anyone go looking for what the number is made of.
For the FICO models most US lenders use, it is five inputs with very unequal weights. Payment history is about 35 percent: whether you have paid on time, and how long ago any misses were. How much you owe relative to your limits is about 30. The age of your accounts is 15. Recently opened credit is 10, and the mix of account types — cards, instalment loans, a mortgage — is the last 10. The percentages are approximate, and VantageScore and the newer FICO versions shuffle them a little, but the order rarely changes. History first, utilisation second, everything else a long way behind.
That ordering tells you what you can actually move. Payment history is the biggest input and also the slowest: a late payment stays on the file for seven years and the only cure is time. Account age is entirely time. Credit mix is mostly a question of whether you happen to have a mortgage. None of those respond to effort this month.
Utilisation does. It is recalculated every time a balance is reported, usually once a month, and it has no memory. Carry $4,000 across cards with $10,000 of combined limits and you are at 40 percent. Pay $2,000 of it down before the statement date and you are at 20 by the next report. Under 30 percent is the threshold everyone quotes; under 10 is where the models stop caring. Two people with the same debt and the same income can sit thirty or forty points apart on nothing more than when in the month they pay.
One last thing, because it stops people looking. Checking your own score does nothing to it. A soft pull — you looking, or a lender pre-screening you — is invisible to the models. A hard pull, which happens when you actually apply, costs a few points and fades inside a year. Several hard pulls for the same kind of loan within a few weeks are treated as one, because the models assume you are shopping around. Which you should be.