How credit scores work, in general

Resources · Debt basics · 4 min read Building

Key points

• A credit score is a number that sums up the information on your credit report.
• Different agencies and models produce different scores, on different scales.
• Repayment history and how much of your available credit you use tend to matter a lot.
• Scores change over time as new information is added.

What a credit score is

A credit score is a number built to give lenders a quick read on how likely you are to repay. It’s worked out from the information on your credit report.

The report is the full story. The score is the headline.

And scores work differently around the world. In some countries a few well-known scoring models dominate, and people talk about their score constantly. In others, each credit reporting agency runs its own scale, so the same person can end up with very different-looking numbers. Then there are places where lenders lean mainly on the report and their own assessment, and consumer scores matter less.

Because the scales differ, a number that looks high on one might be average on another. Only compare your score within the same model.

Why you might have several scores

Having more than one score at the same time is normal. Different agencies hold slightly different information about you. Different models weigh things differently. Lenders sometimes run their own scoring on top of agency data. And scores get calculated at different moments, while your report keeps changing underneath them.

So don’t fret if the numbers don’t match. The direction they’re moving over time tells you more.

What usually affects a credit score

The exact formulas are kept private, and they vary between models and countries. But across many systems, the same broad factors keep showing up.

Repayment history

Whether you’ve paid on time is usually one of the biggest factors. Late payments, missed payments and defaults tend to drag a score down. In systems that record positive history, a steady run of on-time payments tends to help.

How much of your credit you’re using

Many models compare what you owe with your available credit limits. Using a big share of your limits can lower a score. Using a smaller share tends to help. You’ll sometimes see this called credit utilisation.

For example, owing $4,000 across cards with $5,000 of limits means you’re using 80% of your available credit. Owe $1,000 against the same limits and you’re using 20%.

Length of credit history

A longer track record gives a model more to go on. Older accounts in good standing can help.

Recent applications

In some systems, applying for lots of credit in a short time can lower a score, because it can look like financial pressure. Many systems treat “soft” checks, like looking up your own score, differently from the “hard” checks that happen when you apply.

Mix and type of credit

Some models look at the types of credit you have. This usually counts for less than the factors above.

Serious events

Defaults, court judgements and insolvency tend to hit harder and stay longer.

What usually doesn’t affect a score

In most systems, your income isn’t part of the calculation. Neither are your savings. Checking your own report or score doesn’t count against you either. And many systems exclude personal characteristics such as age, religion or ethnicity.

Rules vary, though. The agency’s own website is where to check what goes into a particular score.

How scores change

A score isn’t fixed. It gets recalculated every time your report updates. Over time, a run of on-time payments and balances coming down tend to move it. So does older negative history becoming less recent. New accounts and new applications move it too.

There’s no shortcut. Be wary of anyone selling a quick fix for your score. Change comes from what’s recorded on your report, and that builds up month by month.

How a debt plan connects

Paying debts down can nudge several of those factors at once. On-time payments build your history. Lower balances cut how much of your available credit you’re using.

Some people focus on their score. Others focus on the debts and let the score follow. It depends what you’re aiming for, maybe a home loan application coming up, or maybe just less stress each month.

If keeping up with payments is a struggle, free debt help is available, and it’s confidential.

Common questions

What affects your credit score the most?

Across many systems, repayment history and how much of your available credit you use tend to matter a lot. The exact formulas are private, and they vary between models and countries.

Does checking your own credit score lower it?

In most systems, no. Checking your own report or score is usually treated differently from a hard check when you apply for credit.

Why do I have different credit scores?

Agencies hold slightly different information, models weigh things differently, and scores are calculated at different moments. It’s normal for them not to match.

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General information only, not financial advice. Your situation is your own.