The 5 parts of your FICO Score

Lenders, employers, insurance companies, and many others use The Fair Isaac Credit Organization, or FICO® score, the industry standard for determining a consumer’s credit rating, to judge a person’s credit record.

Understanding the five fundamental factors used to create that FICO® score will help you stay informed and find the best solutions and methods to manage your credit rating.

Here are the FICO® Scores 5 Basic Categories; each category carries a percentage of importance in determining your FICO score.

Your Payment History

This would include how you have paid on your credit cards, installment loans, mortgage, retail accounts, etc. It will also include any adverse public records such as bankruptcy, judgments, past due items, collections, liens, and the severity of your delinquency. How many items do you have past due and the amounts past due on those accounts? The number of good accounts paid as agreed.

Amounts Owed-30%
The next largest component is the amount you currently owe relative to your available credit. Lenders typically like to see credit utilization ratios—the percentage of available credit that you use—below 30%. Though this credit score component focuses on your current amount of debt, it also looks at the number of different accounts you have open and the specific types of accounts you hold. A large total amount of debt from many sources will have an adverse effect on your score.

Length of Your Credit History-15%

When you think of credit history, think of “trust” because that’s what it is. The longer your credit accounts have been open and in good standing, the better. Common sense dictates that someone who has never been late with a payment in 20 years is a safer bet than someone who has been on time for two years.

New Credit, Recent Credit Activity-10%
Every time you apply for credit, your score gets slightly dinged. Too frequent applications for new credit indicate financial pressure. Before opening a new credit account, it’s wise to consider whether having that extra credit is worth the drop in your credit score.

Types of Credit Used or Credit Categories-10%
What types of credit accounts and the number of various accounts a person has had, including mortgages, car loans, credit cards, retail store cards, gas station cards, utilities, etc. To have a good credit score, you must manage these accounts successfully.

Remember, your credit score is determined by positive and negative information in your credit report. Many factors and a combination of data assess your credit score.

Prevention is the best solution for credit maintenance. If you or someone you know has questions about their credit history and how to correct inaccurate, unverifiable, or incomplete items on their credit report. 

Or, if you would like to learn more about credit improvement and repair services, Real Credit Deal is here to help you.