Are you confused about how credit scores are calculated? If so, you're not the only one. In my past experience working as a credit counselor and financial educator, I discovered that this topic perplexed most consumers, and for good reason.

Credit scores are not calculated using simple mathematical formulas. Instead, they're calculated using algorithms that weigh many data points, including your length of credit history, the amount of debt you owe, and more.

So, it makes sense that credit scores are difficult to understand. That said, there are basic principles anyone can learn to help them understand their scores better.

A credit score is your credit history represented as a number. It's a three-digit figure you can look at to tell you whether your credit history, as recorded in your credit reports, is mostly positive or negative. The more positive history you have in your reports, the higher your scores will be.

One helpful way to understand credit scores is to imagine you're a student who just turned in a writing assignment.

Think of your essay as a credit report, since it's a document that shows the work you've done. And the grade you receive is your credit score. If I want to quickly determine how good your writing is, I can simply look at your grade or even compare it to other students' grades.

Similar to grades, credit scores give you a quick way to evaluate what's in your credit reports and see how you're doing compared to other consumers — and they allow lenders and credit card issuers to do the same.

Read more: Average credit score by age: How do your scores compare?

One of the most common misconceptions I've heard people repeat about credit scores is that each person only has one score.

The truth is that each person has multiple credit scores. On top of that, there can be a lot of variation from one of your scores to the next, and your scores can even change from day to day.

Why do you have so many different scores? Several elements go into creating a score, including:

• The scoring company: Multiple companies calculate credit scores. FICO is the most common scoring model used by most lenders, but VantageScore is another popular option.

• The algorithm: FICO alone offers dozens of different scores that can be used in specific scenarios. For example, there are FICO scores made specifically for approving auto loan applications.

• The credit report: Each credit score is based on the information in just one of your credit reports, but you have three different reports to choose from (Equifax, Experian, or TransUnion), and there might be different information in each one.

• The scoring range: Traditional credit scores use a range from 300 to 850, but some variations score you anywhere from 250 to 990.

This leaves a lot of room for variation in your credit scores. For this reason, lenders typically want to look at several of your credit scores before approving you for a major lending decision like a new car loan or mortgage.

Credit scores are based on a few specific categories of information listed in your credit reports. When it comes to FICO scores, five categories go into your calculation.

In my experience, people often mistakenly assume that each factor is equally important, or they fixate on the categories that have minimal impact on their scores. But if you want to build great credit, you'll need to put more focus on the categories with the most weight.

Here's a breakdown of each of the five categories used to calculate your FICO scores:

For VantageScore, the categories used to calculate your credit scores are a bit different. However, VantageScore models essentially use the same information as FICO, but they break it down into more specific categories.

Read more: VantageScore vs. FICO: How these two major credit scoring models compare

If you're hoping to improve your credit scores, it's important to know both what is and is not included in your score calculations.

For instance, nondebt accounts are not included in your credit scores unless you use an alternative scoring service such as Experian Boost or TruVIsion. The following types of accounts do not impact your traditional credit scores unless your payment is overdue and the account goes to collections:

• Rent

• Utility payments

• Medical bills

• Parking tickets

• Bank accounts

• Insurance payments

• Rent-to-own agreements

• Subscriptions and memberships

As for buy now, pay later (BNPL) loans, the impact on your credit scores varies by company. In 2025, Affirm announced it would begin reporting users' payment information to Experian. With Sezzle, on the other hand, you have to opt in to Sezzle Up if you want your loan to impact your credit. Klarna loans do not currently impact credit scores.

Credit scores are typically recalculated once a month. However, if you're tracking your scores, you might notice credit score updates more or less frequently. That's because your lenders and credit card companies usually report your account information to the credit bureaus on a monthly basis, but they don't all do it on the same date. For that reason, you may see your credit scores shift, even if nothing has changed on your end.