Your credit score determines how much you will pay in interest on credit cards or other loans, such as car financing or mortgages; the cost of insurance; whether or not you can rent an apartment or secure utilities; even whether you will be selected for a job.

FICO and the Number
A credit score is a number—usually between 300 and 850—derived by statistical analysis using the data on your credit report. Fair Isaac Corporation created the credit-scoring system, which is now used by the three major credit bureaus.

Fair Isaac Corporation (FICO) says its credit-scoring formula is used to assess the credit-worthiness of customers by 70 percent of the leading U.S. banks, 65 percent of the world's credit cards, and three out of four U.S. mortgage originators.

Total Score Components
The way credit scores are computed is not public knowledge because Fair Isaac Corporation has kept its formula a secret. The company has revealed that 35 percent of a score reflects how often you pay your bills have on time; 30 percent from the amount of money you owe; 15 percent from how long you have been establishing your credit history; 10 percent from new credit, and 10 percent from the types of credit you are using.

Payment History (35%)

• Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
• Presence of adverse public records (bankruptcy, judgments, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)
• Severity of delinquency (how long past due)
• Amount past due on delinquent accounts or collection items
• Time since past due items (delinquency), adverse public records (if any), or collection items (if any)
• Number of past due items on file
• Number of accounts paid as agreed

Amounts Owed (30%)

• Amount owing on accounts
• Amount owing on specific types of accounts
• Lack of a specific type of balance, in some cases
• Number of accounts with balances
• Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
• Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Length of Credit History (15%)

• Time since accounts opened
• Time since accounts opened, by specific type of account
• Time since account activity

New Credit (10%)

• Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
• Number of recent credit inquiries
• Time since recent account opening(s), by type of account
• Time since credit inquiry(s)
• Re-establishment of positive credit history following past payment problems

Types of Credit Used (10%)

• Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)