Are you confused about how credit scores are counted? If so, you're not the only one. In my past experience working as a credit counselor and financial educator, I discovered that this topic penetrates most users, and for good reason.
Credit scores are not calculated using simple mathematical formulas. Instead, they are calculated using algorithms weighing many data points, including the length of your credit history, how much debt you owe, and more.
So, it makes sense that credit scores are hard to understand. That said, there are basic principles that anyone can learn to help them better understand their scores.
Credit score is your credit history represented as a number. It's a three -digit figure you can look at to tell you if your credit history, as recorded in your credit reports, is generally positive or negative. The more positive history you have in your reports, the higher your scores.
One useful way to understand credit scores is to imagine that you are a student who turned in a writing assignment in a writing assignment.
Think of your essay as a credit report, as it is a document that shows the work you have done. And the degree you receive is your credit score. If I want to quickly decide how good your writing is, I can look at your degree or even compare it to other student grades.
Like degrees, credit scores give you a quick way to evaluate what's in your credit reports and see how you are doing compared to other users – and they allow lenders and credit card publishers to do the same.
Read more: Average Credit Score by age: How do your scores compare?
One of the most common misconceptions I heard people repeat about credit scores is that each person has only one score.
The truth is that each person has multiple credit scores. Furthermore, there can be a lot of variation from one of your scores to the next, and your scores can even change day by day.
Why do you have so many different scores? Several elements are going to create a score, including:
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The scored company: Multiple companies calculate credit scores. Fic is the most common scoring model used by most lenders, but Vantagescore is another popular option.
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The algorithm: FICO only offers dozens of different scores that can be used in a specific scenarios. For example, FICO scores have been made specifically for approval of car loan applications.
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The credit report: Each credit score is based on the information in one of your credit reports only, but you have three different reports to choose from (Equifax, Experian, or Transunion), and there may be different information in each.
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The scoring range: Traditional credit scores use a range of 300 to 850, but some variations score you anywhere from 250 to 990.
This leaves a lot of space to vary in your credit scores. For this reason, lenders usually want to look at many of your credit scores before approving you for a major borrowing decision such as a new car loan or mortgage.
Credit scores are based on a few specific categories of information listed in your credit reports. In terms of FICO scores, five categories go to your census.
In my experience, people often think that each factor is just as important, or repairs on the categories that have a minimum impact on their scores. But if you want to build a great credit, you'll need to put more focus on the categories with the most weight.
Here is an analysis of each of the five categories used to calculate your Fico scores:
For Vantagescore, the categories used to calculate your credit scores are slightly different. However, essentially, Vantagescore models use the same information as FICO, but they cut it into more specific categories.
Read more: Vantagescore vs Fico: How do these two major credit scoring models compare
If you hope to improve your credit scores, it is important to know what is and is not included in your score calculations.
For example, Nondebt accounts are not included in your credit scores unless you use an alternative scoring service as an experiment or Trouble. The following types of accounts do not affect your traditional credit scores unless your payment is late and the account goes to conclusions:
As for Buy now, pay later Loans (BNPL), the impact on your credit scores varies by company. In 2025, Affirm announced that it would begin reporting information paying users to Experian. With a szzle, on the other hand, you have to opt in to enchant if you want your loan to affect your credit. Klarna loans are currently not affecting credit scores.
Credit scores are usually recalculated once a month. However, if you track your scores, you may notice more or less often credit score updates. That's because your lenders and credit card companies usually report your account information to the credit centers monthly, but they don't all do it on the same date. For that reason, you may see your credit scores change, even if nothing has changed at your end.