Many people ask me, “Joe, does the method for calculating credit scores seem fair to you? Why or why not?” This isn’t just a personal question—it’s one that touches a system impacting millions.
Credit scores have a massive impact on your financial life. Most Americans use credit cards, take out loans, or pay mortgages. Behind these activities is a three-digit number that affects your ability to borrow money and the interest rates you'll pay: your credit score.
In this article, I want to really explain how credit scores work—beyond the basics and the usual advice. I've spent over 17 years in the credit and finance industry, working closely with people who are trying to rebuild after setbacks or just understand the system better.
Over the years, I’ve seen what actually makes a difference and what’s just noise. The truth is, credit can either be a tool or a trap, depending on how you approach it—and that’s exactly what we’ll break down here.
Disclaimer: This article on credit score calculation fairness is written through research and expert experience but is provided for general informational purposes only. While based on professional knowledge, this analysis should not be considered personalized financial advice. Credit situations vary widely, and readers should consider their individual circumstances when applying this information to their own credit management decisions.
What Is a Credit Score and Why Does It Matter?
A credit score is a number that represents your creditworthiness.
In simple terms, it shows how risky you are to lenders. The most widely used model is the FICO score, ranging from 300 to 850. The higher the score, the better you look to lenders.
According to the Consumer Financial Protection Bureau, your credit score affects:
- Whether you qualify for loans or credit cards
- The interest rates you'll pay (which can mean thousands of dollars difference over time)
- Your ability to rent an apartment
- Sometimes even job opportunities, as some employers check credit history
Experian notes that someone with a score above 760 qualifies for the best rates, while a person below 620 pays much more or gets denied altogether.
What Are the Main Ways to View Your Credit Score?
“If that number is very important, how can I see it?”
You can view your credit score in at least four common ways:
- Through credit card providers – Many banks offer free access to your score.
- Credit bureaus – Experian, Equifax, and TransUnion offer free yearly reports.
- Free monitoring sites – Sites like Credit Karma, Credit Sesame, and NerdWallet.
- Loan providers – Many lenders show you your score when you apply.
Checking your score regularly can help you spot fraud, correct mistakes, and track your progress.
Do Americans Check Their Credit Scores Regularly?
Despite its importance, many Americans don't regularly monitor their credit. A survey by lending tree found that only 33% of Americans checked their credit score in the past year.
Are you in that group? Regularly checking your score can help you spot errors or identity theft early.
How Are Credit Scores Calculated?
FICO and VantageScore are the two main credit scoring models used in the United States. While they have some differences, they generally consider these factors:
- Payment history (35%): Have you paid your bills on time?
- Credit utilization (30%): How much of your available credit are you using?
- Length of credit history (15%): How long have you had credit accounts?
- Credit mix (10%): Do you have different types of credit?
- New credit (10%): Have you recently applied for new credit?
Let's look at a real example to understand how these factors affect someone's score:
Maria's Credit Profile:
- She has three credit cards and a student loan
- She's never missed a payment in 7 years (excellent payment history)
- She uses about 40% of her available credit (fair utilization)
- She's had credit for 7 years (good length)
- She has two types of credit (fair mix)
- She applied for a store card last month (recent inquiry)
Maria's payment history boosts her score significantly, but her somewhat high utilization (ideally should be under 30%) and limited credit mix prevent her from reaching the "excellent" range. She currently has a score of 720, which is considered "good" but not "excellent."
If Maria paid down her balances to use only 10% of her available credit, her score could jump 20-30 points. This shows how heavily the system weighs certain factors and how small changes can make big differences.
Is the Method for Calculating Credit Score Fair?
Honestly, it depends on how you look at it. On one hand, the system rewards consistent, responsible behavior over time—which makes sense. But on the other hand, it doesn’t always account for real-life situations that can damage a score through no fault of your own.
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Let’s go through examples of both—when the system seems fair, and when it clearly misses the mark.
Why Credit Scoring May Not Be Fair
Many argue that the credit scoring system is deeply flawed. Here’s why:
Limited Financial History Recognition
Credit scores only measure formal banking relationships. According to the FDIC, about 5.4% of American households are "unbanked" - meaning they don't use traditional banking services. These consumers might pay their rent, utilities, and phone bills perfectly on time, but these payments typically don't appear in credit reports.
Age Bias
The relationship between age and credit scores reveals potential unfairness. Experian reports that Americans under 25 have an average FICO score of 679, while those over 60 average above 740. New credit users face a catch-22: they need credit to build credit, but struggle to get approved without existing credit.
How Would You Describe the Relationship Between Age and Credit Scores?
Age and credit scores are strongly related. According to Experian data:
- Ages 18–25: average score = 679
- Ages 26–41: average score = 687
- Ages 42–57: average score = 707
- Ages 58–76: average score = 742
Why the jump? Older people have had more time to build credit history and fewer new accounts. Younger people are just starting out and often carry more debt, like Rise credit payday loans and student loans.
This shows that credit scores are not always about financial behavior—they’re partly about time.
Racial and Income Disparities
According to a 2021 Federal Reserve report, Black and Hispanic Americans have average credit scores significantly lower than white Americans - not because of different behaviors, but often due to historical barriers to financial services and wealth-building opportunities.
Medical Debt Penalties
Until recent changes in 2022, medical debts heavily impacted credit scores. According to the Consumer Financial Protection Bureau, medical debts are fundamentally different from other debts - they're often unexpected and don't reflect spending habits or financial responsibility.
Examples of Credit Scoring Unfairness
Example 1: The Recent Graduate
Sarah graduated college with minimal debt thanks to scholarships and working part-time. She paid her rent on time for four years and never missed a utility payment. Yet when she applied for her first credit card, she was denied due to "insufficient credit history." Despite demonstrating financial responsibility, she couldn't access credit because she hadn't used credit before.
Example 2: The Medical Emergency Victim
James had excellent credit (780) until he had an emergency appendectomy. Despite having insurance, a billing error sent a $3,200 charge to collections before he even received the bill. His score dropped 150 points overnight, and he was denied a mortgage he'd been working toward for years. It took him seven months to resolve the error, during which time he lost his chance at buying a home in his price range.
Example 3: The Immigrant Professional
Elena moved to the U.S. as a successful accountant with 15 years of perfect credit history in her home country. In America, she essentially started at zero. Despite having sufficient income and savings, she had to pay double security deposits, get a secured credit card with high fees, and pay significantly higher insurance premiums all because her foreign credit history wasn't recognized.
Here are more concerns about fairness in credit scoring:
- It penalizes the poor: If you don’t use credit, you’re seen as a risk—even if you pay rent and bills on time.
- Mistakes can cost you: One wrong report can slash your score and take months to fix.
- It doesn't include all responsible behavior: Paying rent, utilities, or phone bills doesn’t always count.
- It’s biased against those without access: Immigrants, young adults, and low-income individuals start at a disadvantage.
- They're regulated: Laws like the Fair Credit Reporting Act provide some consumer protections
According to a Consumer Financial Protection Bureau study, 26 million Americans are “credit invisible,” and another 19 million have unscored credit records.
The Case For Credit Score Fairness
On the other hand, some say the system is fair because it rewards responsible financial behavior. Pay on time, keep balances low, and you’ll be rewarded.
Many also believed credit scores are fair because:
- They're objective data-driven tools: Scores are calculated using statistical models based on millions of credit records
- They predict risk accurately: Research shows correlations between score factors and likelihood of repayment
- They don't consider discriminatory factors: Race, gender, religion, marital status, and nationality are excluded from calculations
- They're transparent: You can access your score and the factors affecting it
- They can be improved: Anyone can raise their score through consistent positive behavior
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Real-Life Examples Supporting Credit Score Fairness
Example 1: The Second Chance
Marcus filed bankruptcy after a job loss in 2018. By starting with a secured credit card, making all payments on time, and keeping his credit utilization low, he raised his score from 520 to 680 in two years. This allowed him to qualify for an auto loan at a reasonable rate, demonstrating the system rewards improvement.
Example 2: The First-Time Homebuyer
Jasmine had no credit history at 23, but built her score to 750 over three years by following credit-building strategies. She qualified for a first-time homebuyer program with favorable terms, showing that the system can work for young people who understand it.
Does the Method for Calculating Credit Scores Seem Fair to You? Why or Why Not?
Your answer might depend on your case. Those who've been hurt by the system's blind spots or errors often see it as unfair, while those who've benefited from its structure or recovered from setbacks may view it more positively.
The reality is that credit scoring systems were designed primarily for lenders' benefit—to minimize their risk—not necessarily to be fair to consumers. While the system does reward responsible financial behavior, it fails to account for many realities of modern financial life:
- Income volatility affecting payment timing
- Medical emergencies and their resulting debt
- Regional economic inequalities
- Historical financial exclusion of certain communities
- Different cultural approaches to debt and credit
So, does the method for calculating credit scores seem fair to you? Why or why not? Your answer might depend on your experience.
Why Is It Better to Have a High Credit Score?
Having a high credit score versus a low one makes a huge difference in your financial life:
Example: $250,000 30-Year Mortgage
- Excellent credit (760+): 6.5% interest rate = $1,580 monthly payment
- Poor credit (620): 8.1% interest rate = $1,856 monthly payment
That's $276 more every month - or $99,360 more over the life of the loan - just because of your credit score!
Making Credit Scoring More Fair: Recent Changes
The good news is that credit scoring is evolving to become more inclusive:
- In 2022, the three major credit bureaus (Experian, TransUnion, and Equifax) removed paid medical collections from credit reports. Learn more about medical debts and your credit score.
- New scoring models like UltraFICO and Experian Boost now consider banking data and utility payments
- According to TransUnion, rent payment reporting programs help renters build credit through on-time payments
What Can You Do If You Think Credit Scoring Is Unfair?
Even if you believe the system has flaws, you can take steps to protect yourself:
- Check your credit reports regularly for errors (about 20% of reports contain mistakes according to the FTC)
- Build credit strategically with secured cards or credit-builder loans
- Dispute inaccurate information with the credit bureaus
- Contact your representatives about credit reform legislation
Working Within an Imperfect System
Rebuilding credit isn’t always a straight path—especially for single parents juggling financial stress, childcare, and everyday bills. But real-life stories show it can be done, even within a system that feels stacked against you. Take Lisa, for example.
It wasn’t much, but Lisa used it wisely. She set up a small monthly subscription and made sure auto-pay handled the bill every month. No missed payments. No stress.
Eight months later, her efforts paid off. She was approved for an unsecured card. Lisa kept the momentum going—using credit monitoring apps, keeping her spending under 20% of her limit, and always paying on time.
In just 18 months, her score jumped from 580 to 670.
Today, Lisa continues building toward her financial goals—not because the system became easier, but because she found a way to work within it, one smart step at a time.
The Bottom Line: Is Credit Scoring Fair?
The method for calculating credit scores has both strengths and weaknesses. While it provides an objective measure of credit risk, it doesn't fully account for all financial behaviors and can disadvantage certain groups.
What's clear is that understanding how credit scores work is essential in today's financial world. Whether the system is completely fair or not, knowing how to navigate it can help you achieve better financial outcomes.
What do you think? Is the method for calculating credit scores fair? Share your thoughts in the comments below!