Financial Literacy WashU

A credit score is a statistical number that evaluates a consumer's creditworthiness and is based on credit history. Lenders use credit scores to evaluate the probability that an individual will repay his or her debts. A person's credit score ranges from 300 to 850, and the higher the score, the more financially trustworthy a person is considered to be.

It's calculated using 5 factors:

• Payment history - 35%
  • Your payment rate (how often to you are paying your credit)
• Total amount owed - 30%
  • How much of your total credit limit you're using. 
• Length of credit history - 15%
  • How long you've had a credit history and the average age of open accounts. 
• Types of credit - 10%
  • Various types of accounts you have, like credit cards, retail accounts, installment loans, mortgage, etc. 
• New credit - 10%
  • How often you are applying for credit and what type of credit you are applying for

Definition from Investopedia