The best answer to the question of how your credit score is calculated is that no one knows exactly how the score is determined because credit score models and formulas are closely protected secrets of the companies that generate the credit score.  A consumer’s FICO score is the most commonly known credit score, and it is used for
underwriting home loans, car loans, and credit cards.  While we do not know the exact formula, we do know key elements of your credit history that are used to generate the credit score. These areas include:

Your payment history. Approximately one third of your credit score is based upon whether delinquent payments have been noted on existing accounts.  Keep in mind that
recent missed payments and major delinquencies like collection accounts and judgments affect your credit score more than older problems.  This does not mean old debts do not hurt you because they do, but more recent deliquency hurts you more.  Get current on your bills, and stay current on your bills.

Your level of debt.  This element is the next biggest factor used to determine your credit score and is believed to be about 30% of the credit score.  If you maintain a lot of debt at or near the top of your available credit then your credit score will be adversely affected.  It is a better practice to refrain from maxing out a credit card and be careful that you do not carry many credit cards at or near the high credit limits.  You may also want to avoid signing up for excessive department store credit cards and then charging close to the maximum of your available credit after opening the account.

Your credit history length.  Another element of your credit score is the length of your credit history.  Obviously longer good credit history is better and more established then shorter credit files.  Lenders do not like “thin credit files” because they are smaller and therefore harder to rely upon because of the shorter credit history. Personally, I always keep my older credit lines open even if I use the credit line infrequently because I want to have a credit file that has older rather than newer credit accounts.

Your type of credit.  This is a smaller element of your credit score, but it does help determine your ultimate credit score.  Some lenders believe that getting a loan from a bank is better credit than obtaining a loan from a finance company.  Moreover, the scoring models are believed to prefer a mix of installment and revolving debt.
This element of a credit score is personally my least favorite as I believe this area is too subjective, but consumers should be aware that they could be penalized based upon from whom they obtain credit.

Your credit inquires.  Many consumers that I speak with regarding credit report inaccuracies in Virginia are overly fixated on their credit inquiries.  I have seen reports that credit inquiries are believed to account for as little as 10% of a credit score.  Credit inquiries are typically a problem when they are broad based across many different types of credit.  If you apply for a mortgage, car loan, department store account, and credit card all in a short time period, the frequency of the applications to different types of credit could negatively impact your credit score.  On the other hand, multiple inquires to shop for the best interest rate to purchase one car will probably not have that big of impact on your credit score.

Knowing how your credit score is calculated is important to increasing and protecting your credit score. By knowing the factors, periodically checking your credit file, and
correcting inaccurate credit reports, a consumer should receive the benefits of
better interest rates on loans for houses, cars, and credit cards.