What Factors Go Into Determining Your FICO Score?

You have probably heard the term “FICO score” before. FICO stands for Fair Isaac Corporation, the entity that created this concept.

Any person, bank, or other entity considering lending you money might look at your FICO score because it’s a way to determine how likely you are to pay back that loan. Someone like a landlord might look at your FICO score before agreeing to rent an apartment to you. When you consider how much of an impact these decisions can have in your life, it’s easy to understand why this score matters.

So, how is your FICO score determined? We’ll talk about the factors that impact this all-important number right now.

1. Payment History

Before continuing, we should mention that there’s a difference between a FICO score vs. credit score. Some people use them interchangeably, but companies other than FICO generate credit scores. The varying metrics they use mean another credit score might not be identical to your FICO score.

When determining your FICO score, the company will assess your payment history. This factor is worth 35% of your score. Payment history entails how consistently you make minimum monthly payments within 30 days of a due date.

If you make a late payment, a creditor will likely report it to the credit reporting bureaus, and your score will dip. Your creditor can also keep reporting late payments with each new 30-day cycle that passes, so your score will drop until you come up with the money to make your payments. Payment history also looks at additional factors, like how much you owe on delinquent accounts.

2. Amounts Owed

The balance you have on your credit cards and other revolving debt sources is your amounts owed. “Amounts owed” makes up 30% of your FICO score. This portion looks at how much debt you have and your credit utilization ratio.

Your credit utilization ratio refers to how much of your available credit you’re using. If you’re maxing out your credit cards, your utilization will be high. If you hardly spend on your credit card, your utilization will be low. FICO views a high utilization ratio negatively because it could indicate you’re experiencing financial difficulties. For this reason, it’s important to limit the amount of credit you use.

Luckily, if you have a high credit utilization rate, it’s relatively easy to change. You might consolidate your debt, for instance. Debt consolidation is a way to refinance your debt by taking out a single loan to pay off many debts.

3. Credit History Length

Credit history length is weighted at 15%. This metric looks at the average age of your credit accounts. If you have older accounts, that will impact your score positively. Having too many young accounts can cause your score to dip.

4. Credit Mix

Credit mix considers your revolving and installment debts. It’s worth 10% of your overall FICO score. Revolving debts might include retail store cards, lines of credit, or credit cards. Installment debts may include student loans, mortgages, or car loans. Having an even mix of these will positively impact your score.

5. New Credit

New credit is worth the remaining 10% of your FICO score. This factor entails how much new credit you’ve opened recently or are trying to open. You can’t do much to quickly change this part of your score, though you can try to limit inquiries that make a hard pull on your credit report, such as those that happen if you’re trying to secure a loan or open up a new credit card account. These inquiries will stay on your report for 2 years.


Dictate Your Score By Controlling These Factors

Since payment history and amounts owed have the biggest impact on your credit score, try to pay debts on time and limit how much of your available credit you use. Keep older accounts open since that helps your credit history length. Finally, try to have an even mix of revolving and installment debts and limit the new credit sources you open.

Probably the most vital thing to take away from this breakdown is that your FICO score is not something mysterious that you can never understand. Once you know the components that go into it and how to control them, you can usually raise your score.


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By Rebecca
Rebecca is an Independent content writer for breldigital, She writes content on any given topic. She loves to write a case study article or reviews on a brand, Be it any topic, she nails it
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