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Credit Score Breakdown

Credit Score Breakdown

You’ve heard about credit scores before, but what do you actually know about them? How long have they been around? How do you check them? How are they calculated? We’re here to help you answer these questions and more.

What is a Credit Score?

A credit score is a number (usually between 300 and 850) that represents your creditworthiness. It’s a standardized measurement that financial institutions and credit card companies use to determine risk level when considering issuing you a loan or a credit card. Basically, it provides a snapshot of how likely you are to repay your debts on time. Widespread use of credit scores has made credit more widely available and less expensive for many consumers.

Credit Score History

The credit scoring system that we’re familiar with today has been around since the 1980s. Before then, there was no standardized way to measure creditworthiness, so it was up to individual lenders to make judgment calls on whether or not to loan money to someone. The old system was time-consuming, inconsistent and quite biased, so a credit scoring system was introduced.

The FICO® score is the best known and most widely used credit score model in North America. It was first introduced in 1989 by FICO®, then called Fair, Isaac and Company. The FICO® model is used by the vast majority of financial institutions and credit lenders, and is based on consumer credit files from the three national credit bureaus: Experian, Equifax and TransUnion. Because a consumer's credit file may contain different information at each of the bureaus, FICO® scores can vary, depending on which bureau provides the information to FICO® to generate the score.

How Credit Scores Are Calculated

When credit scores were first introduced, they were used primarily for loaning money. Today, credit scores have much more pull, and that’s why it’s important to understand how they’re calculated. Your monthly car payments, your ability to snag the apartment you’ve been eyeing, and even the hiring manager’s decision on the new job you applied for can all be influenced by your credit score. Taking the time to familiarize yourself with how credit scores are calculated is the first step to getting a strong score. Each credit bureau uses a slightly different calculation, but the basic breakdown goes like this:

  • 35% is based on payment history. Making payments on time boosts your score.
  • 30% is based on capacity. This is one of the areas where the less you use of your total available credit, the better. If you get close to maxing out all your credit cards or lines of credit, it tanks your score, even if you’re making your payments on time.
  • 15% is based on length of credit. Good credit habits over a long period of time raise your score.
  • 10% is based on new credit. Opening new credit cards (this includes retail credit cards) has a negative short-term effect on your score, so don’t open a whole bunch at once!
  • 10% is based on mix of credit. Having a combination of different types of credit (like revolving credit and installment loans) boosts this part of your score. Credit cards are considered revolving credit, and things like car loans and mortgages are installment loans.

What is a Good Credit Score?

The different credit scoring models may have a slightly different calculation, but scores typically fall between 300 and 850. A score in the mid-700s or higher is considered prime – meaning your credit is in excellent shape. Most scores in the “good” range typically fall in the 600s and 700s. Scores in this range will typically still get you approved for a loan, but with a higher interest rate than if you had a prime credit score. Nobody likes the idea of paying more money for no reason, so it makes sense to adopt credit habits that will boost your overall score.

How to Check Your Credit

Curious about your credit? Robins Financial offers eligible members the ability to view their FICO® Score within Digital Banking. Log into Digital Banking today to start reviewing your FICO® Score. You are also entitled to one free credit report per year from each of the major credit bureaus. You can request your free credit report at When you receive your credit report, you’ll notice that it does not list your three-digit credit score. Despite this, your credit report still a helpful reference because it serves as the basis of your credit score. If you know how your credit score is calculated, then you know which factors to look for on your credit report that might be influencing your score for better or for worse. It’s also an easy way to look at which credit accounts are currently open, which have been closed, and what your repayment history looks like.

We offer the financial tools to help you succeed. Our credit cards and loans not only help you get what you need, they also contribute to your credit score. Responsible use of these financial tools over time will help you improve and maintain your credit score.

At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.

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