Back to Blog Main

How Credit Scores are Calculated

Having a good credit score puts you at an advantage when it comes time to borrow money.
  • Air Defense
  • Platoon
  • Recon

Your credit score is a three-digit number that lenders use to help determine how likely you are to repay them on time. The higher you score, the more likely you qualify for loans and credit cards with the best rates, which will save you money.

You probably already know that paying your bills on time, keeping credit card balances and other debt under control can boost your credit score. However, there are other ways to improve your overall score. Learning how your credit score is calculated is the first step to becoming an A+ borrower. 

What Is A Credit Score? 

Your credit score, also known as your FICO score, is basically the score of life that rates consumers on a 300 to 850 scale. It’s a number calculated from several financial factors to help lenders determine if you are a credit risk. 

You can access your FICO score for free when you log into your Andrews Federal Digital Banking without impacting your score. If your score is below 650, you’ll pay high rates on loans and credit cards. However, if your score is 700 or higher, you’ll benefit from the best interest rates. Banks and lenders don’t just use FICO scores; insurance firms, landlords, and even employers use your FICO score to determine how responsible you are.

Three agencies provide credit scores to the public – Experian, Equifax, and Transunion. You can also get scores on the internet, including AnnualCreditReport.com. 
Credit Score Criteria

Determining your credit score is more complex than computing a student’s grade point average. By one estimate, about 36 billion pieces of data determine scores for 220 million American consumers. 

Here are the main factors that make up your credit score:

•    Payment history - 35% 
•    Amount owed - 30%
•    Length of credit history - 15%
•    Current credit mix - 10%
•    New credit - 10%

Now, let’s dig into each category that contributes to your score.

Payment History

It’s no secret that overdue bills, loan, and credit card payments are score killers. But the major credit bureaus that report on scores dig even deeper. They will look closely at the frequency of any late payments, how much was owed, and more, including bankruptcies and foreclosures.

When we’re busy, it’s easy to forget payment due dates. Log into Andrews Federal Digital Banking to set up automatic payments so you’ll never miss another payment again. 

Amount Owed

It’s not quite as simple as keeping your debt in check. Credit agencies compare your total debt to the amount of borrowing power available to you. They examine how close you are to limits on credit card limits and other types of debt like home equity lines of credit. If you have available credit that you are not using, you’re considered a better credit risk.

So, don’t max out your credit cards and pay off the balance every month. If you need to carry a balance to help make life more affordable, consider applying for our low-rate Simplicity Visa® credit card.

Length of Credit History

The credit bureaus look at how long your oldest accounts have been open. They want evidence that you have reliably made on-time payments over a lengthy period. Young people – especially those carrying student loans, often avoid credit cards and other types of debt. However, avoiding debt isn’t the best idea.

You can start to build your credit rating by paying bills on time. But it would help if you also took on manageable debt. Consider a low-rate credit card to help you build your credit history.

Also, never close an older credit card. While closing a card may reduce your temptation to spend, you would completely erase a chunk of your credit history that could help increase your score.    

Current Credit Mix

Not all debt is created equal. Credit cards are known as revolving debt since you draw on money as you need it, pay it back, and then use it again. Auto loans and mortgages are examples of installment loans, where you borrow once and then make monthly payments. Creditors like to see that you’re able to manage multiple types of loans. 

New Credit

Rating agencies also look at your recent credit applications. If they see that you have applied for multiple credit forms, that can be a sign of personal financial trouble. So, avoid applying for more than one credit opportunity within a given month. 


Having a good credit score puts you at an advantage when it comes time to borrow money. A strong score will almost always qualify for the best interest rates, which means you'll pay lower finance charges on credit card balances and loans – making it easier and faster to pay off debt for larger purchases like a home or vehicle.

Stay connected with Andrews Federal Credit Union