How Is Your Credit Score Really Determined?

 A large part of my legal practice involves bankruptcy. One of the regular questions clients ask me after bankruptcy is: How do I build my credit score?

Whether you have filed bankruptcy or not, you need to first know how a credit score if calculated. Then you can do what is necessary to build up that score.

History of timely payments

The largest determiner of credit score (35%) is based on whether you paid your debts on time. Obviously the more timely your payments, the higher the credit score.

Outstanding Balances/Utilization

The second largest determiner of credit score (30%) is a comparison of credit used to credit available. To maximize the score, do no use more than 30 percent of the limit on your credit cards or line of credit.

Incidentally, new loans or new credit cards harm your score at first, but after 6 months of on time payments, your credit score is raised.

Credit History

The older your credit history, the higher your score is. This factor determines 15% of your credit score. Someone with 10 years of timely payments gets a higher score than a person with 10 months of paying on time.

Type of Credit

It is best to have a variety of types of credit. For instance, 3 to 5 credit cards, a home loan, and a mortgage could maximize this factor which amounts to 10% of your credit score.

Credit Inquiries

A lot of creditors inquiring about you can negatively affect your score. These are called “hard” inquiries and determine 10% of your credit score. If you shop around for a car loan by going to 5 different banks who then make inquiries, your credit score decreases.

If you check your credit score yourself, this is known as a “soft” inquiry and does not impact your credit score.


If you want to maximize your credit score (and by doing so decrease your cost of credit) it is important to understand how credit scoring works.

If you have questions on credit scores, debt, or other financial matters, you can contact Attorney Fred Boyk at (419) 327-6160