How is your Personal Credit Score Calculated?

First of all, there are many different credit scoring algorithms, with FICO being the main score that almost all lenders look at. Every consumer is allowed to pull one free credit report per year, but your score is not included. The credit reporting agencies, Equifax, Experian, and Transunion only collect and save your account data.  FICO, the company, pulls the data when requested from each of the credit bureaus and runs the calculation to get your score. It’s a very complicated, and highly secretive algorithm, which is why there are so many other algorithms.

What we do know:

35 percent: History of on-time or late payments

30 percent: Available credit on your open credit cards (balance in relation to credit limits)

15 percent: The age of your lines of credit (old cards are good)

10 percent: How often you apply for new credit (number of inquiries)

10 percent: Mix of credit you have (mortgage, revolving credit cards, installment loans, etc.)

All credit scoring algorithms will use this basic formula. When you sign up for credit monitoring, you’re usually signing up with an independent company that pulls your information from all three bureaus and consolidates them into one report.  Each of these tri-merge companies use their own slightly different credit scoring algorithm. Some of these scores are called Beacon, Vantage, Plus, among many others.  What this means, is that your credit monitoring service scores will more than likely slightly differ from the scores your mortgage company (or any other creditor pulling your data) use. Not a lot, but you should be aware that they will be different. So when comparing credit scores, make sure you’re comparing apples to apples.

Expert Credit Consultants, LLC specializes in establishing business credit and funding using the exclusive Business Credit and Finance Suite as well as credit restoration and optimization. www.ExpertCreditConsultants.com.