 TITLE: How Does a Credit Score Simulator Work? CONTENT: How Your Credit Score Is Calculated\n-----------------------------------\nCredit scoring models use sophisticated mathematical algorithms to calculate credit scores based on a credit report from one of the three national credit bureaus (Experian, TransUnion or Equifax). Each credit report reflects your credit history as reported by the creditors you've worked with, including your current and past debts and our record of making payments on them. FICO® and VantageScore®, which produce the most widely used consumer credit scores, generate most scores using a scale of 300 to 850. In this range, higher scores indicate lower risk of missing debt payments.\nCredit scores from different sources can vary considerably for a number of reasons:\n*   The contents of your credit reports change as you use credit cards, make payments and open new accounts.\n*   Various scoring models calculate scores differently. A 650 FICO® Score 8 is not the same as a 650 VantageScore 3.0, for instance, so it's important to know which scoring system is being used to determine (or simulate) your credit score.\n*   Different versions of the same credit scoring model can generate different scores. Lenders (and simulators) may use any of multiple versions of a scoring model, each of which yields somewhat different scores.\nWhile the specific calculations used to determine (or simulate) your credit score vary, the FICO® Score and the VantageScore systems look for patterns of credit behavior, and similar good habits promote higher scores on both systems.\nWhile credit scores are calculated somewhat differently, there are some basic credit factors that can reliably help you improve your scores, and score simulators can help you understand how those factors interact. According to both FICO® and VantageScore, those factors are:\n*   **Timely payments**: Paying your credit bills on time, every month, is the single most important thing you can do to build a good credit score. Conversely, going more than 30 days overdue on just one loan or credit card payment can have a major negative effect on your credit score. Payment history is responsible for about 35% of your FICO® Score.\n*   **Moderate balances**: Your debt balances have the potential to affect your credit scores, so it's important to keep a close eye on them. The percentage of revolving credit (such as credit cards) you're using compared with your credit limits is known as your credit utilization ratio. If that figure exceeds about 30%—on any individual card or when you divide the sum of all your balances by the sum of all your borrowing limits—the negative effect it could have on your credit score is more exaggerated. The amounts you owe on your accounts is responsible for about 30% of your FICO® Score.\n*   **Track record**: Lenders believe experience counts, so people with longer credit histories tend to have a higher credit score than more recent arrivals to the credit marketplace (all other factors being equal). Age of your credit accounts contributes about 15% of your FICO® Score.\n*   **Variety of credit**: A combination of credit cards and one or more installment loans, such as a student loan, car loan or home mortgage, shows lenders that you can handle a variety of credit types responsibly, and could help you credit scores. Credit mix is responsible for about 10% of your FICO® Score.\n*   **Responsible borrowing**: Your credit scores may take a hit whenever you apply for or accept a new loan or credit account. If you keep up with your bills after assuming new debt, however, scores tend to rebound within a few months. New credit accounts make up about 10% of your FICO® Score.\nCredit scores can take a major hit if severe negative information is added to your credit reports, including a bankruptcy, foreclosure or repossession of a financed vehicle. These events remain on your credit reports for seven to 10 years, although their negative impact on your credit scores lessen over time. END