How is your credit score calculated? The statistical model (aka FICO Score) used by all three credit bureaus and in some form or other by all banking institutions was developed by Fair Isaac. This scoring model did not start out to be the industry standard, but since it was the most complete model used available at the time when the banking industry was interested in such information, it became an integral part of the credit granting process. The model took years to develop and Fair Isaac has all kinds of empirical data to back up the accuracy of their model.

Factors used to create a credit score, in order of importance (information marked with a * is obtained from an application, not considered in a credit bureau score) :

Major derogatory items on your report (bankruptcy, collections, foreclosure, slowpays)

Time at present job

Occupation (Professionals are given heavy weightage)*

Time at Present Address

Ratio of balances to available credit lines (the lower the better)

Are you a homeowner? (if you are, this is heavily weighted)*

Number of recent inquiries

Age (50+ is the best)

Number of credit lines on your report

Years you have had a credit in the credit bureau database