Each credit bureau has its own way of doing things. They follow the same rules and guidelines as set out by the NCR (National Credit Regulator), but they have their own way of interpreting your information. One credit bureau may regard a specific detail with more concern than another. They apply different calculations and will come to different credit scores for the same person.
The lenders who have given you finance, for example, need to report your credit transactions to the credit bureaus. But, sometimes they only report it to certain credit bureaus. Therefore, the credit bureaus may have different information about you. So they will give you different credit scores, especially when they have different sets of information about you.
Because your credit score differs from one credit bureau to another, you need to use the combined results of more than one credit score to get a better representation of your credit health. Remember some lenders only report to certain credit bureaus.
The basic building blocks and their percentages when making up your credit score
So how do they calculate it? What determines your credit score?
Your total credit score is made up of different categories. Each category counts toward a specific percentage of your credit score. It’s difficult to pinpoint exactly what weight each category counts towards your total credit score because each credit bureau has its own method, but we’ve done some heavy digging and created the averages most people can people depend on. The breakdown below will give you a great idea of where to focus on improving your credit score.
*Please note, the amounts that follow are estimates because each credit bureau has its own way of calculating your score.
Payment History – 35%
Payment history is probably the most important category. It determines about 35% of your credit score. Paying on time gives you a better score. Lenders want to know if you pay on time.
Debt Utilization -30%
This category determines about 30% of your credit score. It measures how much debt you use. You have a specific total of debt available to you and this category measures how much you use.
Let’s say you have a credit card, for instance. You will score well in this category if you use less than 30% of the available balance on your credit card. This principle counts for the rest of your accounts and credit cards as well. Make sure you don’t use more than 30% of the total credit available to you.
Credit History Length – 15%
The age of your credit report also counts towards your score. It determines about 15% of your total credit score. Older credit reports score more points here. Lenders want to see your faithfulness over a longer period of time. They trust older credit reports more. Whether it’s a good score or a bad score, an older record helps to predict future patterns.
Recent Activity – 10%
Lenders want to know if you have been applying for credit lately. This category counts about 10% of the total of your credit score. Lenders judge customers as risky when they apply for credit regularly. You will score points here if you refrain from applying for more credit on a regular basis.
Credit Mix – 10%
All the different kinds of debt you own are called your credit mix. This category counts about 10% towards your credit score. Lenders would like to know if you can manage different types of credit at the same time. You’ll score more points here if you own more types of credit. Here follows a shortlist of the types of accounts and credit considered in this category.
- Credit cards
- Personal loans
- Car loans
- Home loans
- Accounts and subscriptions (cell phone, gym, health insurance, etc.)
This is just a few of the types of credit. They may consider many more. Please also note that these percentages are an estimate. Each credit bureau may change these estimated percentages according to their opinion and experience.