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Posted on Feb 21, 2015 | 2 comments

Your credit score: How it’s calculated and why you should care.

Your credit score: How it’s calculated and why you should care.

Your financial flexibility is written in the numbers of your credit score. It affects the cost of credit (loans) you take out, your ability to rent or buy a home, the insurance rates you pay—and even the jobs you can get.

So, it’s important to know your score, and how it’s calculated. Scores range from 300 to 850, and the higher the better. While major credit bureaus keep the exact formula a mystery, experts break it down this way:

  • 35 percent of your score is based on payment history.
  • 30 percent is based on credit utilization, a ratio of the amount you owe to the amount of credit available to you. A good rule of thumb is to keep your card balances at no more than one quarter of their limits.
  • 15 percent is based on the length of time you’ve had credit. With a longer payment history, bureaus can make a more accurate prediction of your future actions.
  • 10 percent is based on new credit. The number of recently opened accounts and the time since they were opened, the number of recent credit inquiries, and the re-establishment of positive credit following payment problems are all considered.
  • 10 percent is based on the types of credit you have. A higher score is awarded if you can show experience with several different types of credit accounts, such as secured and unsecured credit.

Remember, a credit score is a “snapshot” based on the information in your credit report at that moment. You can obtain one free credit report per credit reporting agency each year by visiting annualcreditreport.comThis link opens a third-party website that is not affiliated with STCU..

Your score may vary from one credit-reporting agency to the next because your credit history may be different at each of those agencies. The important thing to remember is that maintaining a positive credit score will provide you with greater financial flexibility and greater ability to enjoy financial freedom in the future.

7 ways to improve your credit score

  1. Pay bills on time, every time.
  2. Review your credit report and correct any errors.
  3. Pay down or pay off existing debt instead of moving it around.
  4. Avoid aggressively transferring balances to new cards.
  5. Avoid taking on additional debt.
  6. Apply only for credit that you need.
  7. Repay collection accounts, judgments, and liens.



  1. When will the new credit score tool be available at no charge to credit union members?

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