Credit scores are the hype of the 21st century. With more and more people using credit cards and loans in their everyday life, a good credit score has become more of a necessity than a luxury.

Hence, it is very important for you to know what a credit score is and where these scores are headed no matter where you begin your credit life.


Credit Score


What is a credit score?

A credit score is an analytical score that indicates the credit health and habits of an individual. It also depicts an individual’s credit sustainability depending on how the person has handled credit before. This might be related to credit cards, loans, or mortgages. This credit score is used by lenders to accurately determine how likely the concerned person is to default on their loan or their credit card and, in the same way, how likely they are to return their payments on time. The higher the credit score is, the better your image as a creditor is in front of your lenders. This also increases your chances of availing credit because you have proved yourself to be a good handler of credit in the past through your credit history and habits.

What are the various factors that go into determining credit score?

There are, as you can presume, many factors that go into deciding and calculating the credit score of an individual. Here are the most important ones.

  • Credit usage

Credit usage refers to the usage of (typically) a credit card that is issued to a customer by a bank or a financial institution. Credit usage consists of the credit that is available to an individual. Credit usage simply refers to the amount of credit the individual has used out of the total credit available to him. The key here is to stay well beneath your credit limits and not go over the top. This will help maintain a healthy balance.

  • Payment history

Payment history is another one of the most important factors that is considered while calculating the credit score of an individual. It takes into account all the payments the individual has made in the past with relation to their credit. These may include personal loans, student loans, credit cards and mortgages. An examination is also made on the payment’s track record to see whether all payments were made on time. If you’re regular with your payments, you need not worry about this factor.

  • Duration of credit history

This mostly refers to the amount of time for which the account has been opened with a connection to an individual. This is one of the most important factors in the calculation of credit card history. An account with a great credit age and a good payments track record is very likely to have an excellent credit score

  • New credit

This refers to the number of credit lines that an individual has access to. If an individual has multiple credit cards or loans tied to their name, this speaks badly of the individual. Hence, one must try to refrain from availing multiple credit sources at once and stick with their basics.

  • Mix of credit

This is connected to the above factor. If an individual has several credit accounts under their name, the ability of the person to pay back all that credit is counted under this head.

What is the future of credit scoring?

This method of credit scoring has been used by banks and credit card companies for a long, long time. However, this system has been known to have a few fatal flaws. It is due to these flaws that this system is not considered the best system to measure the creditworthiness of an individual accurately.

There are several companies around the world who have devised new and better ways to establish credit scores of people. A Hong Kong-based company Lenddo has been known to use a person’s social media footprints to calculate their creditworthiness. Similarly, another company based in the UK focuses on the calculation of credit score based on the input presented to them through social media scorecards.


There are major potential changes in the field of credit scores. The focus has started to shift from the traditional and conventional components of credit scores to the others. Digital footprints and social media handles are now being used proactively to determine a person’s creditworthiness. Breaching the gap between raw data and actual virtues is very pertinent in today’s day and age. Hence, by using methods like these we establish a new form of trust between the customer and the bank or financial institution, giving both parties a sense of security and justice.


These methods of assessing credit scores are not only more transparent but also more insightful. These can be used to provide the borrowers more exposure and scope and, at the same time, provides lenders with worthy borrowers, thus increasing their conversion rate.

There are several other places in which these components may be used. They are lifestyle and spending habits, online shopping habits, employment status and history, qualification, family size, personal accessories, stock reading habits, and accommodation status. Most of this information that is usually collected from online sources can be collected from customers by asking them to fill up forms. In this day and age, big data is more useful to companies than old traditional sales tactics. Perhaps the future of credit is big data too.