By: Jeffrey Lapin

Anyone who has borrowed money, obtained a credit card or incurred any type of debt from a commercial or financial entity has a credit score. Credit scores, which are calculated from information on your credit report, are simply numbers used to gauge the risk a person poses if they are lent money or issued credit. These numbers play a very important role in almost everyone’s life.


Credit scores play a very important role in most people lives as they are used by lenders and, in certain instances, employers. The word “lenders” applies to any person or entity who lends money, issues a credit card or similar activity. Lenders consider credit scores as one of the best ways to gauge the risk of the lender receiving its money back. Your credit score can determine whether a person receives a loan or credit and the terms of the loan or credit. The common theory used by lenders is “the higher the credit score, the lower the risk.” Credit scores generally range from 300 to 850.


In the United States, most credit scores are calculated using software developed by the Fair Isaac and Company and are commonly referred to as “FICO scores.” According to the FICO website, its scores are calculated based on five categories of information, each of which has a different percentage of importance. (Source: The percentage of importance of individual items may differ depending on the information available. The FICO website,, lists these categories, what they include, and their general percentage in determining your FICO score:

Payment History (35% of total score)

Account payment information on specific types of accounts;
Presence of adverse public records, collection items, and/or delinquency (past due items);
Severity of delinquency (how long past due);
Amount past due on delinquent accounts or collection items;
Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any);
Number of past due items on file; and
Number of accounts paid as agreed.

Amounts Owed (30% of total score)

Amount owing on accounts;
Amount owing on specific types of accounts;
Lack of a specific type of balance, in some cases;
Number of accounts with balances;
Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts); and
Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans).

Length of Credit History (15% of total score)

Time since accounts opened;
Time since accounts opened, by specific type of account; and
Time since account activity.

New Credit (10% of total score)

Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account;
Number of recent credit inquiries;
Time since recent account opening(s), by type of account;
Time since credit inquiry(s); and
Re-establishment of positive credit history following past payment problems.

Types of Credit Used (10% of total score)

Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.).

Each of the three major credit reporting agencies, Equifax, Experian and TransUnion, each use FICO-based software in calculating your credit score. However, the information and computations is different between these companies. In addition, each company may not have the same credit information, which would affect your score. The companies have different names for the credit scores they issue:

Equifax: BEACON Score
Experian: Experian/Fair Isaac Risk Model
TransUnion: EMPIRICA

Again, credit scores are simply a number, generated using complex mathematically formulas, from credit reports. Everyone has multiple credit scores all of which are constantly changing.


People are entitled to a free credit report each year from the three major credit reporting bureaus as a part of the Fair and Accurate Credit Transactions Act (FACTA), which was a 2003 amendment to the Fair Credit Reporting Act (FCRA). You can obtain a free copy of your credit report from the three major credit bureaus, Equifax, Experian and TransUnion, once every 12 months. These companies maintain a website that makes it easy to request your credit reports:


As credit scores play such an important role in most people’s lives, it is important to try and obtain as high of score as possible. According to a number of experts the best ways to achieve a high credit score are:

  • Pay all your bills on time;
  • Stay well under your credit limit;
  • Keep your accounts in good standing for a long time; and
  • Make sure to get a copies of your free credit report from the three major credit bureaus each year to ensure the information is accurate.


However, it is important to remember that your credit score is just a number, which constantly changes and may not accurately represent the risk you post. In addition, no score says whether a specific individual will be a “good” or “bad” customer. And while many lenders use FICO scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable.


If you have incorrect information on your credit report and the company or credit bureau refuses to correct it, contact Lapin Law Offices for a free consultation to learn about your rights. You can contact us at 402-421-8033 (Lincoln, 888-525-8819 (Toll Free) or through our the Contact forms on our websites: or We represent clients in FCRA claims on a contingency fee basis meaning we only get paid if we collect money for you.

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NOTE: Lapin Law Offices does not offer the following services regarding debt: financial planning; money management; debt consolidation; credit counseling; or bankruptcy representation.