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Financial Literacy WashU

A guide on understanding finances and becoming fiscally responsible

What is a Credit Score?

Length: 4:44  Description: Talks about what effects your credit card, how it is calculated, and how your score can affect how much you're paying. 

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

 

 

Go to the Visualizing Your Credit Score tab for more credit monitoring websites.

* = check glossary for definition