Once you understand what a credit score is, how it affects your life, and why it is important to build and maintain good credit, you may also want to know how, exactly, a credit score is calculated. The process is not simple, and each of the three major companies in the United States that reports credit score and history uses a slightly different method, so your credit score will probably vary slightly from one report to the next. However, there are some factors you can take into consideration if you want to roughly estimate your own credit score.

First, if you have never owned a credit card, had bills in your name, or borrowed money of any sort, your credit score is zero. While this is not considered bad credit, it is almost as hard to get a loan with no credit as it is with bad credit. Some companies may be willing to take a chance on someone with a zero score, but it is much better to build up a little credit by owning cards, and living a stable life.

Credit history is about 35% of your total credit score, so this is very important. Bills that have gone unpaid or debts that have defaulted will hurt your credit score for 7 to 10 years before they are erased, so remember that the bad choices you make today can hurt you in the future. Even if you repay these past debts, they will still show up on you credit history as bills that were late. Another 15% of your credit score is length of credit history. Therefore, it is important to start building credit as soon as possible. Your credit score will improve with age as long as you maintain bank accounts. Information such as length of employment or residence can also fall under this category, so if you have a very stable life, you'll have a better score than someone who moves around often.

About 30% of your score depends on what you currently owe. Even if you are not late on bills, if you have many loans out already, it may be possible that you are denied another. Therefore, it is important to only take out the loans you really need and to repay them on time or early if at all possible. By paying off your loans early, you will not only see a jump in your credit score, but you will also save money on interest. This shows up as good credit on your history. However, try to keep your money in one place if possible. 10% of your credit score is based on new accounts. They will look at how many different loans you've applied for in the past and how many different accounts you have open. Opening and closing accounts quickly is not recommended.

Overall, use common sense. By knowing how your credit score is calculated you can easily spot mistakes, which may hurt your credit now or in the future. You are entitled to see your credit report annually for free, so review this, as well as your credit score, to be sure that you are being treated fairly.