How Is My Credit Score Determined (and Why Might it Fluctuate by Credit Bureau)?

iStock / iStock

In an effort to help readers better manage their finances, mental_floss has teamed up with personal finance expert, Chase Slate financial education partner and award-winning podcast host Farnoosh Torabi to answer your most pressing credit- and money-related Big Questions. Have a question you’d like to ask? Ask it here, or by tweeting it @mental_floss.

Every day, numbers help define us. Our blood pressure is a pretty decent indicator of our heart health. Our age might determine whether we can vote, see a movie, or get a discount at the ticket window.

While there’s nothing mysterious about many of these measures, one of the biggest numbers used to identify us—our credit score—can be. From buying a house to getting a cell phone contract, the information pulled up when a lender requests a credit report could mean the difference between paying huge interest fees and potentially securing the deals we want. But how does it work?

Naturally, it comes down to more numbers. “Your credit score depends on several factors, the largest being your payment history,” says Torabi. “That makes up 35 percent of your FICO credit score calculation. “On-time payments can raise your score; late payments can detract from it.”

The second most important, Torabi says, is your credit utilization. Say you have three cards with $10,000 in available total credit. If you’re $2,000 in debt, your utilization would only be 20 percent. “The lower your utilization, the better for your score,” she says. “In fact, the highest credit scores tend to be held by individuals with credit utilization of under 10 percent. That’s why it’s important to maintain low balances and not get on that ‘monthly minimum’ bandwagon if possible.”

Utilization accounts for 30 percent of your score. Another 15 percent is related to how long your credit history is—the longer, the better. (Young folks without a credit history should ask their parents about becoming an authorized user on their credit accounts.) 10 percent looks at how many new lines of credit you’ve opened. (Applying for too many in too short a time can be damaging.) Finally, the remaining 10 percent considers how many different lines of credit you have between cards, car loans, or personal loans.

That resulting basic FICO® Score can range from a 300 to a maximum of 850, with the numbers being calculated by three major bureaus: TransUnion, Equifax, and Experian. You may also notice the number can vary a little—or even a lot—between the three. Why? “Credit bureaus keep track of the same information but sometimes in different ways,” Torabi says. “Lenders report your credit information to the bureaus, but sometimes at various times so you can’t assume that all bureaus always have identical information.”

Mistakes can also happen, from accounts you didn’t realize you’d signed up for to late payments that were actually on time. You can always contact the agency to correct the record, which normally gets updated once a month. Your credit card company may also offer tools and resources to help you ensure they’ve got your (correct) number.

When it comes to your financial health, there’s nothing more important than knowing where you stand. Chase Slate offers a variety of tools to help you monitor your credit health. Chase Slate cardholders have access to a custom Credit Dashboard that provides a comprehensive view of their credit health, including their monthly FICO® Score for free along with the reasons behind the score, the top positive and negative factors impacting it and tailored tips for improving credit health overtime. Visit Chase Slate to learn more about this resource and other ways of managing your credit.

FICO® is a registered trademark of Fair Isaac Corporation in the United States and other countries.