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Purdue Federal Credit Union

Phone #: 800.627.3328
Routing #: 274976067

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Breakdown of a Credit Score

itsamoneything-purdue-credit.pngCredit Score Breakdown

You’ve likely heard about credit scores before (thanks to all those commercials with terrible jingles), but what do you actually know about them? How long have they been around? And what’s the deal with checking them?

A credit score is a number (usually between 350 and 800) that represents your creditworthiness. It’s a standardized measurement that financial institutions and credit card companies use to determine risk level when considering issuing you a loan or a credit card. Basically, it provides a snapshot of how likely you are to repay your debts on time. Widespread use of credit scores has made credit more widely available and less expensive for many consumers.

Taking the time to familiarize yourself with how credit scores are calculated is the first step in getting a strong score. Each credit bureau uses a slightly different calculation, but the basic breakdown goes like this:

  • 02_F_Social_03_US.jpg35% is based on payment history. Making payments on time boosts your score.
  • 30% is based on capacity. This is one of the areas where the less you use of your total available credit, the better. If you get close to maxing out all your credit cards or lines of credit, it tanks your score, even if you’re making your payments on time. 
  • 15% is based on length of credit. Good credit habits over a long period of time raise your score.
  • 10% is based on new credit. Opening new credit cards (this includes retail credit cards) has a short-term negative effect on your score, so don’t open a whole bunch at once!
  • 10% is based on mix of credit. Having a combination of different types of credit (like revolving credit and installment loans) boosts this part of your score. Credit cards are considered revolving credit, and things like car loans and mortgages are installment loans.

Curious about your credit report? You are entitled to one free credit report per year from each of the major credit bureaus. Spacing out your credit report requests allows you to check on your credit every four months or so. Request yours online by visiting annualcreditreport.com.

When you receive your credit report, you’ll notice that it does not list your three-digit credit score. Despite this, it’s still a helpful reference because it serves as the basis of your credit score. If you know how a credit score is calculated, then you know how to look for factors on your credit report that might be influencing your score for better or for worse. It’s also an easy way to look at account openings, account closings and what your repayment history looks like.

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