According to Fair Isaac Corporation (the company that produces the FICO® score), there are 5 primary factors used to compute a credit score:

  • payment history
  • amounts owed
  • length of history
  • new credit
  • types of credit used

Payment History - 35%

"Payment history" is comprised of your current and past financial obligations (such as credit cards and mortgage payments) with a record of every on-time, late, and missed payments. Payment history is the single largest factor to compute your credit score — which means: paying your financial obligations on-time is incredibly important. In addition, a credit builder account, can give you the opportunity to establish payment history with the credit bureaus.

Amount Owed - 30%

"Amounts owed" describes the outstanding balance of your financial obligations on your credit report, such as loans and credit card balances.

Length of Credit History - 15%

"Length of credit history" is the length of time that you have been making payments. This applies only to institutions that report your payment data to the credit bureaus, such as credit card companies and lenders. The longer your credit history, the more information credit bureaus have. A credit builder account can give you opportunity to establish payment history with the credit bureaus over the course of a year.

New Credit - 10%

"New credit" is the number of new credit accounts that you have recently opened, such as credit cards and loans. New accounts illustrate you are financially active and therefore, can have a positive effect on your credit score. Often times, when you apply for new credit, a “hard credit inquiry” is used to determine your eligibility. Too many hard inquiries may signal that you're in financial trouble. We do not perform a "hard" credit inquiry to determine your eligibility for credit builder account. Instead we use ChexSystems, a database of past retail banking history, to determine eligibility for credit builder account.

Types of Credit Used - 10%

"Types of credit used" describes whether the obligation is an “installment loan” or “revolving line of credit.” Having a mix of both is considered healthier than several of one type. For example, having an auto loan and a credit card could be considered better than having just several credit cards.The credit builder account is an "installment loan”, which means there is a fixed monthly payment over a fixed amount of time. Credit cards are "revolving", because each month has a variable amount of debt and there is no “end date” in sight. If you currently only have credit cards or "revolving" credit, you may want to consider diversifying your “types of credit used” with a credit builder account.


FICO® is a registered trademark of Fair Isaac Corporation