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Your credit score plays a crucial role in your financial life—affecting everything from loan approvals to interest rates and job opportunities. But how exactly is that three-digit number determined? This guide will analyze the key factors influencing this score and determine how credit scores are calculated. Let’s explore how each component is weighted and uncover what goes on behind the numbers. Whether you aim to improve your score or understand it better, this breakdown will give you the clarity you need to take control of your credit.
Understanding how credit scores are calculated can remove fear from the process and give you the power to improve it. Whether starting from scratch, trying to recover from financial setbacks, or just aiming to move from ‘good’ to ‘excellent,’ this guide breaks down how the system works and how Beem can help you navigate it confidently.
Why Your Credit Score Matters in Everyday Life
Your credit score affects much more than just loan approvals. It can influence your insurance rates, the deposit required for utilities, your rental application, and your ability to qualify for specific jobs. A higher credit score generally means better interest rates and more favorable terms, while a lower score might mean higher costs or outright denial.
That’s why knowing how it works isn’t just interesting — it’s essential.
Lenders and other financial institutions rely on your credit score to predict one thing: how likely you are to pay back borrowed money. While different lenders use different scoring models, over 90% of major decisions are made using the FICO® Score, which ranges from 300 to 850. This is the score Beem provides you — directly from Experian, one of the three major credit bureaus.
Read related blog: Improve Your Credit Score Today: Simple Loan Solutions That Work
The Basics: FICO® Score vs. Other Scoring Models
Before we dive into the formula, let’s clear something up. You don’t just have one credit score. There are several scoring models, but two are most commonly used:
FICO® Score
Created by the Fair Isaac Corporation, this score is used by most banks, credit card companies, and lenders. It’s based on your credit report from one of the three bureaus: Experian, Equifax, or TransUnion. Each bureau can show slightly different data depending on what’s reported to them.
VantageScore
Developed jointly by the three credit bureaus, this score is often used in free credit apps. While it’s valid, it may not be what a lender sees when making a credit decision. Beem shows your FICO® Score from Experian, giving you the most relevant and actionable score.
The Five Core Factors That Make Up Your FICO® Score
The FICO® Score is calculated based on five main categories. Each category has a different weight, meaning not all actions affect your score equally.
1. Payment History (35%)
This is the most critical part of your score. It tracks whether you’ve paid past credit accounts on time. A single missed payment can cause your score to drop — and the more recent or severe the delinquency, the greater the impact. Consistent, on-time payments help build trust with lenders. They show that you’re reliable and can manage debt responsibly.
Tip: Set up auto-pay or calendar reminders to ensure you never miss a due date. Even paying the minimum amount due on time protects your score.
2. Amounts Owed / Credit Utilization (30%)
Credit utilization refers to how much of your available credit you use. For example, if you have a $1,000 limit and carry a $300 balance, your utilization is 30%. High utilization can signal that you’re overextended — even if you pay on time. Keeping your usage low, especially under 30%, helps boost your score.
Pro Tip: Pay your card before the statement closing date. Many people don’t realize the balance reported to the bureaus isn’t after your due date — it’s often at the end of the billing cycle.
Beem helps you track your utilization and make adjustments before affecting your score.
3. Length of Credit History (15%)
The longer you’ve had credit, the better. Lenders like to see a well-established credit profile. This factor includes:
- The age of your oldest account
- The age of your newest account
- The average age of all accounts
- How long it’s been since you used each account
Even if you don’t use an old credit card, being open might help your score.
Tip: Avoid closing your oldest accounts unless there’s a strong reason, like high fees.
4. Credit Mix (10%)
This measures the variety of credit accounts you have. A healthy mix could include:
- Credit cards
- Auto loans
- Mortgages
- Student loans
- Personal loans
Lenders like to see that you can responsibly handle different types of credit. That doesn’t mean you should open new accounts just for diversity, but it’s good to have both revolving (cards) and installment (loans) accounts, if possible.
5. New Credit / Hard Inquiries (10%)
A hard inquiry is placed on your report whenever you apply for a new credit card or loan. One or two won’t hurt you much, but too many can look risky to lenders in a short period. Hard inquiries can lower your score by a few points and stay on your report for two years (though the impact fades after a year).
Good news: Checking your score with Beem is a soft inquiry. It won’t affect your credit so that you can monitor your score regularly without worry.
Read related blog: How to Quickly Fix Credit Report Errors That Are Hurting Your Credit Score
What Doesn’t Affect Your Credit Score
It’s just as important to know what isn’t factored into your score:
- Your salary or income level
- Your checking or savings account balances
- Rent payments (unless reported via a service)
- Employment status
- Marital status or age
- Debit card use
These may influence your ability to qualify for certain products, but they don’t play a role in your FICO® score directly.
How Often Is Your Score Updated?
Most credit scores update once a month, based on new data reported by your creditors to the credit bureaus. However, not all creditors report on the same day. That’s why your score may shift up or down depending on when payments are processed and posted. Beem keeps you informed with real-time alerts any time there’s a change to your score or report.
How Beem Helps You Track and Improve Your Credit
Beem offers more than just a score. It’s a complete credit management tool designed for people who want control and clarity over their financial future. Here’s what you get:
- FICO® Score Monitoring: Real-time access to your score from Experian.
- Credit Alerts: You will be notified when your score changes, a new account is added, or something negative shows up.
- Score Simulator: See how financial actions — like paying off a loan or opening a new card — could affect your score before you do them.
- Debt Analysis: Understand your total debt, payments, and income-to-debt ratio to make smarter credit decisions.
You can view your complete credit profile and track what’s helping or hurting your score in one app.
Read related blog: How Personal Loans Can Help Tackle Credit Score Challenges and Boost Your Credit
Looking to Build or Rebuild? Simulate First, Act Smart
If you’re unsure whether to apply for a new credit card, pay off a loan, or keep a small balance — the Score Simulator can guide your decisions. Simulating before taking action helps you avoid credit missteps and sets you up for long-term growth.
For example, simulate:
- How paying off $500 in credit card debt could improve your score
- The impact of a hard inquiry
- What happens if you miss a payment
Beem lets you learn, plan, and act — in that order.
Struggling with Expenses While Rebuilding Credit?
Sometimes, life hits you with unexpected costs. If you’re focused on improving your credit, you may not want to open new credit lines or rack up balances. That’s where Beem’s Everdraft™ comes in. It gives you quick access to emergency funds without a hard credit pull, so your score stays protected.
Your Score is More Than a Number, It’s a Tool
Credit scores can feel intimidating until you understand them. Once you break down the numbers, you start to see patterns — and, more importantly, opportunities.
Improving your score doesn’t require a financial overhaul. It’s about consistency:
- Pay on time
- Keep balances low
- Avoid unnecessary applications
- Track your progress regularly.
With Beem, you’re not just watching your score — you’re learning what drives it and how to make it work. This isn’t about chasing perfection, it’s about building credit you can count on. Download the app now.
FAQs on How Credit Scores Are Calculated: Behind the Numbers
How is my credit score calculated?
Your score is calculated based on five factors: payment history (35%), credit utilization (30%), length of credit history (15%), credit mix (10%), and new credit inquiries (10%).
What’s the most essential part of my score?
Payment history, which typically makes up 35% of your FICO credit score—the most commonly used scoring model. Making on-time payments is the single most impactful action you can take.
Will checking my score lower it?
Not with Beem. All credit checks in the app are soft inquiries and do not affect your score. Soft inquiries occur when you review your score or when companies perform background checks, and they’re completely safe.
How often does my credit score change?
Typically, every 30–45 days, depending on when your creditors report to the bureaus. Since different creditors report at different times, your score may fluctuate multiple times within a month, reflecting recent payments, new accounts, or changes in your credit usage.
How does Beem help with credit management?
Beem offers FICO® score monitoring, real-time alerts, a score simulator, and debt insights — all in one place. Its smart wallet app, Everdraft™, offers quick access to emergency funds without credit checks or interest, helping you avoid costly credit pitfalls and maintain financial stability.
