Credit scores can be important for many reasons, but how a score is calculated is often a mystery to some people.

That’s according to Rebecca Lobina with the Northwest Missouri State University Small Business and Technology Development Center.

A credit score is used by banks for loans, but also by insurance companies, landlords and some employers. 

Lobina said there are three credit bureaus and FICO is a consolidation of the three bureau’s scores along with an algorithm FICO uses. With FICO, the credit scores range from 300 to 850. Under 650 is considered poor and above 740 is considered excellent. According to Lobina, the national average is 695.

Lobina said to find out your credit score, you can contact one of the three credit bureaus or you can go through some place such as Credit Karma. Lobina adds it does not affect your score if you pull your own credit report.

Lobina said, no matter what your score is, to keep in mind that you can influence your credit score considerably. There are five main things that all the credit bureaus and your FICO score look at when calculating your score.

“For FICO, 35% of your credit score is based on your payment history, 30% is based upon how much you owe versus how much you could be in debt with, it’s called your utilization ratio,” Lobina said. “Fifteen percent is the length of history, 10% is how much new credit you have and 10% is the types of credit used.”

Lobina said everyone should look at their credit reports a couple times a year.

“It’s so important to so many other aspects of your life when you are looking for a loan or insurance or whatever the case may be or even potentially changing employers,” Lobina said. “You want to make sure that, in this day and age, with identity theft, that the things that are on your credit report are accurate, that they should be on there.”

For more details and information on credit score, contact the Small Business and Technology Development Center at (816) 364-4105 or click here.