How is Your Credit Score Determined?
Published On January 25th, 2012

•A FICO Score takes into consideration 5 categories, not just one or two. The importance of any factor depends on the information in your entire credit report.

•Your FICO Score looks only at the credit-related information contained in your credit reports.
•Your FICO Score considers both positive and negative information from your credit reports.


1. Payment History

Approximately 35% of your FICO Score is based on this information, which includes:
•Payment information on many types of accounts:
-Credit cards – such as Visa, MasterCard, American Express and Discover.
-Retail accounts – credit from stores where you do business, such as department store credit cards.
-Installment loans – loans where you make regular payment amounts, such as car loans and mortgage loans.
-Finance company accounts.
•Public record and collection items – reports of events such as bankruptcies, foreclosures, suits, wage attachments, liens and judgments.
•Details on late or missed payments (“delinquencies”) and public record and collection items.
•The number of accounts that show no late payments.

2. The Amounts You Owe

Approximately 30% of your FICO Score is based on this information.
Credit utilization, one of the factors evaluated in this category, considers the amount you owe compared to how much credit you have available. You can control how much you use and lenders determine how much credit they are willing to provide. FICO’s research shows that people using a high percentage of their available credit limits, compared to people using a lower level of credit, are more likely to have trouble making some payments now or in the near future.

Having credit accounts with an outstanding balance does not necessarily mean you are a high-risk borrower with a low FICO Score. A long history of demonstrating consistent payments on credit accounts is a good way to show lenders you can responsibly manage additional credit.

In this category, your FICO Score takes into account:
•The amount owed on all accounts.
•The amount owed on different types of accounts.
•Whether you are showing a balance on certain types of accounts.
•The number of accounts where you carry a balance.
•How much of the total credit line is being used on credit cards and other revolving credit accounts.
•How much is still owed on installment loan accounts, compared with the original loan amounts.

3. Length of Credit History

Approximately 15% of your FICO Score is based on this information.
In general, all else being equal, a longer credit history will increase your FICO Score. However, even people who have not been using credit long could get a fairly high FICO Score, depending on how their credit report looks in terms of the other four categories of information, particularly the first two. In this category your FICO Score takes into account:
•How long your credit accounts have been established. Your FICO Score considers the age of your oldest account, the age of your newest account and the average age of all your accounts.
•How long specific credit accounts have been established.
•How long it has been since you used certain accounts.

4. New Credit

Approximately 10% of your FICO Score is based on this information.
FICO’s research shows that opening several credit accounts in a short period of time represents greater risk – especially for people who do not have a long credit history. In this category your FICO Score takes into account:
•How many new accounts you have.
•How long it has been since you opened a new account.
•How many recent requests for credit you have made, as indicated by inquiries to the credit reporting agencies.
•Length of time since credit report inquiries were made by lenders.
•Whether you have a good recent credit history, following past payment problems.
FICO Scores do not penalize you for “rate shopping” when seeking a mortgage, auto loan or student loan. To enable you to shop for the best rate, the FICO Score ignores inquiries for similar financing types made in the 30 days prior to scoring. That means all inquiries made during your shopping period are counted as one inquiry when determining your score. This shopping period is 45 days on the newest versions of the FICO Score. Each lender chooses which version of FICO Score it wants to use.

5. Types of Credit in Use

Approximately 10% of your FICO Score is based on this information.
Your FICO Score considers your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. It is not necessary to have one of each, and it is not a good idea to open a credit account you don’t intend to use. In this category your FICO Score takes into account:
•What kinds of credit accounts you have. Do you have experience with both revolving (credit cards and lines) and installment (fixed loan amount and payment) accounts, or has your credit experience been limited to only one type?
•How many accounts you have of each type. Your FICO Score also looks at the total number of accounts you have. For different credit profiles, how many is too many will vary depending on your overall credit picture.
What a FICO Score Ignores
FICO Scores consider a wide range of information on your credit report. However, they do NOT consider:
•Your race, color, religion, national origin, sex and marital status. U.S. law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act.
•Your age. Other types of scores may consider your age, but FICO Scores don’t.
•Your salary, occupation, title, employer, date employed or employment history. Lenders may consider this information, however.
•Where you live.
•Any interest rate being charged on a particular credit card or other account.
•Any items reported as child/family support obligations or rental agreements.
•Certain types of inquiries (requests for your credit report or score). Your FICO Score does not count any inquiries you initiate, any inquiries from employers or insurance companies, or any inquiries lenders make without your knowledge.
-Checking your own credit report and score is not considered in scoring models such as the FICO Score.
-Asking your friend in the lending business to pull your credit report and score is not only prohibited by contract, it will also count as an inquiry in future scores – don’t do it!
•Any information not found in your credit report.
•Any information that is not proven to be predictive of future credit performance.

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