Life Stage
Building Credit

Explore Solutions

If you’ve applied for a car loan or a mortgage lately, you’ve probably heard someone mention your credit score.

By now, you might know that paying bills on time and keeping credit card balances and other debt under control can move the needle in the right direction. To figure out the best way to improve your credit score, it’s a good idea to have a basic understanding of how it’s calculated.

What Is A Credit Score? 

A credit score is a number assigned to all adult consumers. It’s compiled from several financial factors and attempts to measure how responsible you are financially and how likely you are to repay a loan.

The most widely used score is from a company called FICO, which rates consumers on a 300 to 850 scale. If your score is much below 680, you’ll probably pay higher rates on loans and credit cards. Once you reach the 680 to 700 level, you’ll get better interest rates. FICO scores aren’t just used by banks and other lenders. Insurance firms, landlords and even employers also use them.

Three credit bureaus provide scores to the public – Experian, Equifax and Transunion. You can get one free credit report per year from each credit bureau by visiting Although the credit reports are free, you may have to pay a fee to access your credit score.

Credit Score Criteria

Figuring out your credit score is more challenging than, say, computing a student’s grade point average or a car’s fuel mileage. By one estimate, about 36 billion pieces of data are used to create scores for 220 million American consumers. Here are some of the main factors:

Payment History

Weight: 35% of score
Explanation: It’s no secret that overdue bills, loans or credit card payments are score killers. But ratings firms dig even deeper and factor in how late your payments were, how much was owed, and how recently you missed a payment. Bankruptcies and foreclosures are also considered.
Tip: We all lead busy lives and it’s easy to forget payment due dates. At First American Bank, you can use Online and Mobile Banking tools to eliminate that worry by scheduling automatic bill payments ahead of time.

Amount Owed

Weight: 30% of score
Explanation: It’s not just as simple as keeping your debt in check. Credit agencies compare your total debt to the amount of borrowing power available to you. They examine how close you are to limits on credit cards and instruments like home equity lines of credit. If you have a cushion that allows you to quickly access money, you’re considered to be a better credit risk.
Tip: Don’t max out your credit cards. Aggressively pay down your balances. Consider applying for a card from First American Bank with a lower interest rate.

Length of Credit History

Weight: 15% of score
Explanation: Rating firms look at how long your accounts have been open. They want evidence you’ve made on-time payments over a substantial period. Young people – especially those with student loans – are often wary about adding debt. But avoiding it completely may not be the best alternative, either. Moderation is the key.
Tip: You can start to build your credit score by paying bills on time. But you should also look to allow yourself a modest and manageable amount of debt, perhaps with a credit card geared toward people building a credit history or a modest auto loan.

Current Credit Mix

Weight: 10% of score
Explanation: Not all debt is the same. Credit cards are known as revolving debt, since you draw on money as you need it, pay it back, and then use it again. Auto loans and mortgages are examples of installment loans, where you borrow once and then make monthly payments. Creditors like to see that you’re able to manage multiple types of loans.
Tip: If you want to improve your credit mix, a home equity line of credit is another revolving loan option. Similarly, a regular home equity loan is a solid installment loan choice. Either one can give you resources to renovate your house, buy new furniture, or take a special trip.

New Credit

Weight: 10% of score
Explanation: Rating agencies don’t look only at how many credit cards and outstanding loans you have. They also look at how many you’ve applied for recently. A flurry of new activity can be a sign of personal financial trouble.
Tip: At First American Bank, we certainly want to be your go-to destination for loans and credit cards. But we also care about your overall financial health. If you want to talk about your credit score or get financial counseling, just contact us or come to one of our branches.