March 24th, 2011

Credit 101: Anatomy of a Credit Score

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credit 101

*Welcome to our weekly credit lessons to brush up on your credit know-how!*

While scrolling through the Credit Karma blog, I stumbled upon a credit score quiz. I’m happy to say that I only missed three out of ten questions, but I also realized that I, along with many other consumers, am still a credit newbie. So I’m going to start by brushing up on the basics.

Anatomy of a Credit Score

Your credit score is a three-digit number that has an effect on many areas of your financial life. It’s used by lenders to determine your creditworthiness, or the likelihood that you’ll pay your debts in a timely manner. Whenever you apply for credit, such as a credit card or a home mortgage, a lender will use your credit score to decide whether or not to approve you for that credit.

Your score fluctuates depending on key credit-influencing actions over your lifetime of owning credit, from credit cards and loans to mortgages. The actual credit score number can differ depending on which credit bureau (Equifax, Experian, or TransUnion) is pulling your information and what kind of credit score model is used.

There are several key factors of your credit score that are similar across all credit score models. I unravel the mystery by outlining six significant components and how they factor into your credit score.

Open Credit Card Utilization

Credit score weight: HIGH

You can calculate your credit card utilization rate by taking your total credit card balances and dividing it by your total credit card limits. The resulting percentage is your utilization rate, and ideally should be under 30% on average. You don’t have to carry over a credit card balance from month to month; you just need to show active credit use over the month.

Having a healthy credit card utilization rate of 30% or less communicates to lenders that you don’t pose a high credit risk and use credit responsibly.

Percent of On-Time Payments

Credit score weight: HIGH

This is the percentage of on-time payments you’ve made during your credit history. Because it’s heavily weighed, just one or two late payments can significantly affect your score.

Paying bills on time is the best way to maintain a good credit score because it proves to lenders that you’re reliable and will pay back your debts.

Derogatory Marks

Credit score weight: HIGH

Derogatory marks on your credit report include collections, bankruptcies, and liens. They can take 7 to 10 years to clear from your credit history, so avoid them in order to dodge a significant drop in your credit score.

If you have a derogatory mark on your credit report, it shows a lender that you may have significantly mismanaged a portion of your credit and he may be less likely to lend to you.

Average Age of Open Credit Lines

Credit score weight: MEDIUM

The older your credit history, the more accurate an assessment of your creditworthiness over time. The average age of your credit cards and other accounts is a strong indicator of your credit history.

By seeing you’ve managed you credit over a longer period of time, lenders can better assess how you will manage the credit they extend you. Closing your oldest credit card account will generally result in a drop in your credit score.

Total Accounts

Credit score weight: LOW

Consumers with more credit accounts generally have better credit scores because it indicates that more lenders are willing to grant them credit. Also, having various different types of credit shows an ability to manage multiple kinds of credit.

Total Hard Credit Inquiries

Credit score weight: LOW

Each time you apply for credit, a hard inquiry is placed on your credit report. Although this is not a heavily weighed factor of your credit score, hard inquiries will affect it negatively and many hard inquiries can add up to a big dent on your score.

Through Credit Karma’s Credit Report Card, check out how each of these factors impacts your score and what areas to focus on. Take a step with me towards a better understanding of your credit score.

What credit basics do you want to know more about? Let us know in the comments below!

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.


  1. Isn’t is horrible how just one three digit number means everything to how your life is going to play out!

    Celine Bowdwick at 7:35 pm on September 29, 2011
  2. Is it better to get a bank credit card from union franklin mint or just a reglar bank card or regular credit card who takes more points from your credit score???what also is a high Fico score.

    dawn demeglio at 9:19 pm on February 15, 2015
  3. Mike

    Thanks for your question, Dawn. A hard inquiry will have the same effect on your credit score no matter what type of card it’s for. You can read more about hard inquiries here:

    You can also read more about what makes a good credit score here:


    Mike at 10:31 am on February 16, 2015
  4. I am self-employed . For.13 years I have worked at same location . Credit report list unknown employer RAG in Oct. 26 2003 . Report also list former bussiness address with incorrect date Sept.1 2003. This is not were I conducted business on that date, 2 years earlier would be correct. Can someone help ? Can Credit Karma help ?

    Vann at 11:05 am on June 21, 2015
  5. what is the best way to get my credit score up to like 620-640 by 2017

    heather till at 5:38 pm on June 23, 2015
  6. Enola Guerrero

    Hi Vann – Please contact the credit bureau about the information on your report:

    Enola Guerrero at 10:47 am on June 24, 2015
  7. Enola Guerrero

    Hi Heather – Great question! Check out our tips to improving your credit here:

    Enola Guerrero at 11:09 am on June 24, 2015
  8. Here’s a question, how does something like utilization of an account protection program effect my credit score? Like if I don’t have enough money to pay an automatic bill pay I have set up, my financial institution will cover it and charge a $30 fee for the service. It saves me and keeps me in good standing with my bill collector, and my direct deposit covers the difference about a week later when it comes in, but how does it register on my credit report? Thank you for your time.:-)

    Celeste at 7:13 am on July 12, 2015
  9. Enola Guerrero

    Hi Celeste – Updates from lenders and credit bureaus can take up to 30 days or longer to update on Credit Karma. Thank you.

    Enola Guerrero at 12:12 pm on July 14, 2015

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