Inside Your Credit Score
Five inputs, one number, and the most consequential algorithm in your financial life.
The walkthrough
Your credit score is not stored anywhere, it is computed on demand from a file held by a credit bureau. When a lender pulls your credit, the bureau runs your raw history through a scoring model (most often a FICO or VantageScore algorithm) and returns a three-digit number, typically on a 300–850 scale. Pull from a different bureau or a different model version and you can get a different number from the *same* data.
The data comes from lenders reporting monthly to the three big US bureaus, Equifax, Experian, and TransUnion (in the UK: Equifax, Experian, and TransUnion UK). They report your balances, limits, and whether each payment was on time. Crucially, reporting is voluntary and not universal: a lender might report to only one or two bureaus, which is why your three files, and three scores, rarely match exactly.
FICO weights five categories: payment history (~35%), amounts owed (~30%), length of credit history (~15%), new credit / inquiries (~10%), and credit mix (~10%). The single most powerful lever inside "amounts owed" is credit utilisation, your balances divided by your limits. Keeping utilisation low (rule of thumb: under ~30%, ideally under 10%) is the fastest legitimate way to move the number.
A key timing quirk: most issuers report the statement balance, not what's left after you pay. So you can pay in full every month and still look 60%-utilised if you spend heavily *before* the statement closes. Paying down before the statement date, not just before the due date, is what the model actually sees.
Two failure modes dominate. Hard inquiries (a real credit application) shave a few points and linger ~12 months, while soft inquiries (your own check, pre-approvals) are invisible to lenders. And a single 30-days-late mark, reported once a payment is a full billing cycle overdue, can cost more points than years of perfect history earned, and stays on file for up to seven years.
The takeaways most people get wrong: checking your *own* score never hurts it, closing an old card can *raise* utilisation and *shorten* history (often lowering the score), and there is no single "real" score, just a family of model outputs from three separate data files.
The rail map
How the number gets made
- 1You borrow
Cards, loans, and mortgages create accounts that lenders track month to month.
- 2Lenders report
Each issuer voluntarily sends balances and payment status to one or more bureaus.
- 3Bureau files
Equifax, Experian and TransUnion each keep a separate file, so they rarely match.
- 4Model scoreshighest cost / risk
A FICO/VantageScore algorithm weights five categories into a 300–850 number on demand.
- 5Lender pullswhere value leaks
At application a hard inquiry returns the score; the rate or decline follows from it.
Glossary
Credit bureau
A company (Equifax, Experian, TransUnion) that holds your credit file and runs scoring models on it.
FICO / VantageScore
The two dominant scoring algorithms; both output roughly 300–850 but weight data slightly differently.
Credit utilisation
Your balances divided by your credit limits, the biggest fast-moving lever on your score.
Hard inquiry
A score-affecting check triggered when you actually apply for credit; lingers about 12 months.
Soft inquiry
A check (your own look, a pre-approval) that is invisible to lenders and never affects the score.
Statement balance
The balance on your closing date, usually what gets reported, even if you later pay it in full.
Check yourself
1.Why do your scores from Equifax, Experian and TransUnion often differ?
2.Which single category carries the most weight in a standard FICO score?
3.You pay your card in full every month but still see a high utilisation figure. Why?
4.Does checking your own credit score lower it?
5.Why can closing an old, unused credit card actually lower your score?