Understanding the FICO Score Calculation and Your Credit



The FICO score calculation is complex. So what I will do is give you the high points then share with you some of the intricacies to help you on your credit repair journey.

The FICO score is calculated from a mathematical formula that includes information based on several factors.




These factors include:

  1. 35% on your payment history

  2. 30% on the amount you currently owe lenders

  3. 15% on the length of your credit history

  4. 10% on the number of new credit accounts you’ve opened or applied for (fewer is better)

  5. 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)

So lets review each of these in a little more detail.

  1. 35% on your payment history: The formula not only looks at you current payment history but also old payment history--- up to 10 years worth. Although they do give more weight to your current past. The credit bureau's look at if you have had late payments. By the way, a late payment isn't reported to the credit bureaus until about 30 days after it is late. For example, if your house payment is due on the first, and you pay it on the 20th, although your bank may charge you a late fee. The credit reporting companies, don't see that late payment until its about 30 days past due.
  2. 30% on the amount you currently owe lenders
: This factor is not just the total of all balances, it includes the total of all balances as well as how much you have available in total as well as for each individual lender. So if you have 3 credit cards in which you owe $1500:Card 1 400 balance/1000 limitCard 2 600 balance/1000 limitCard 3 500 balance/1000 limitThe balances on card 1 & 3 are below 50% of the limit so you get a good mark there but card 2 is above 50% of the limit so your score gets a bad mark. Where if you had all the balances under 50%, even though you might still owe the same amount total $1500 - your score would be a little higher. A little confusing here but the moral of this lesson is to keep all of your balances under 50% of the total available credit you have.
  3. 15% on the length of your credit history: 
One of the biggest mistakes I hear about from people who are trying to repair credit is that they close accounts. The longer your credit history for an account, the better your score. So if you are using your credit cards too much, cut up the cards but don't close the account. Did you hear me, cut up the card, leave the account open.
  4. 10% on the number of new credit accounts you’ve opened or applied for (fewer is better): 
If you are applying for credit- whether or not you get the loan or credit card, it shows bad. and you lose marks for it.
  5. 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)
: Everything in moderation here. No more than 3 revolving credit accounts like credit cards and not more that a couple installment loans.


More on the FICO Score Calculation:

Installment loans are given more weight that revolving accounts so make sure to pay them on time each month.

Installment loans are where you borrow a set amount for items like furniture, appliances, autos or house. The payment is due on the same day each month for a certain amount.

Revolving accounts are credit cards, department store cards and give you the option of paying a minimum amount each month.

Other factors also affect yourscore, such as having a mortgage loan, which raises it, and moving frequently, which will lower it. Learn to manage your credit.

As your circumstances change, the FICO score calculations will fluctuate based on your credit activity. Understand that when you are applying for credit, you want the fluctuation to be to your advantage.

If you know you are buying a car next month, understanding the FICO score calculation can help you get a better interest rate. Get all of your credit card balances under 50% of your total credit for at least one billing cycle.

Even start planning for it a year before and be sure all of your bills are paid in a timely manner, so your FICO® score has time to increase. A higher score equals a lower interest rate.

Knowledge is Power and understanding the FICO score calculation is the first step in gaining that knowledge.



Read more about What is FICO® Score?

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