How is the Credit Score Calculated?

Dec 14, 2022 at 7:00am
How is the Credit Score Calculated?

Have you ever found yourself thinking: What is a Credit Score, and how is it calculated? Your Credit Score confirms that you are in good standing financially, and therefore, it is an expression of your credit worthiness. Your loan application for a major project, like a home loan or a car, starts with a Credit Score.

What is a Credit Score based on?

Your Credit Score is based on your continuous personal financial spending track record or how you pay your retail accounts, credit cards, your mortgage, etc, over an extended period. Lenders use Credit Scores to determine who qualifies for a loan, at what interest rate, and what credit limits. Credit scoring is not limited to lenders and banks - mobile phone, and insurance companies, landlords, and government departments use the same method to determine your credit worthiness.

What does a Credit Score look like and how is it calculated?

It is usually a three-digit number ranging between 300 to 850. The five key categories used to calculate or determine your Credit Score, according to an article by Wells Fargo, are:

  • Payment history = 35%,

  • Amount owed = 30%,

  • Length of credit history = 15%

  • Credit mix = 10%,

  • New credit = 10%

When you understand what impacts your Credit Score, you can take steps to improve it. In the previous blog we discussed the importance of Financial Literacy. A good Credit Score starts with having great Financial Literacy Skills.

Author: Mpume Nyandu - Director: Stakeholder Relations at HPP Cares (CDE)

For more information on homebuyer finances visit:

Look out for our next Blog on: How to Improve Your Credit Score

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As a social enterprise, HPP CARES CDE has achieved significant and wide-ranging accomplishments in recent years. Working under the National Coalition for Equities' (NCFE) umbrella, our focus has been on advocating for a strong community voice among federal and state regulators and major private sector corporations. We've dedicated ourselves to addressing public policy issues, particularly those related to wealth and income inequality impacting affordable homeownership and small business growth.

Through collaborative efforts with NCFE, HPP CARES CDE has expanded outreach initiatives, leading to increased corporate social responsibility and consumer protection awareness. Our endeavors have enabled us to engage with a broader audience, forge partnerships with numerous companies, and engage with regulators, all with the goal of supporting deserving individuals in achieving sustainable homeownership, fostering successful small businesses, protecting consumers, and empowering California communities.

At HPP CARES CDE, we are committed to championing opportunities for people of color to become integral partners in our mission to reduce income and wealth inequality, thereby contributing to the creation of stronger futures for all minority groups.