How credit scoring works

One would never find the mathematical equation used to calculate your credit score, which evaluates the various types of information from your credit report at that agency. The exact formula is a mystery and protected by the Federal Trade Commission. You can think of it as a secret recipe.

Along with the credit report, lenders or issuers also buy a credit score based on the information in the report. By comparing this information to the patterns in hundreds of thousands of past credit reports, the score identifies your level of credit risk. However, FICO score can only be calculated on your credit report if your report contains at least one account, which has been open for six months or greater. In addition, the report must contain at least one account that has been updated in the past six months. This ensures that there is enough information and recent information in your report to base your score.