How Exactly Is My FICO Credit Score Calculated?

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The FICO Scoring Algorithm

Irrespective of the FICO model a lender or credit utilizes, five factors generally impact the FICO classic score they use to come up with your credit score. These are payment history, credit utilization, credit history, credit types, and new credit. Some categories also have sub-categories within them. We will go through each of these components next.

1. Payment History

Your payment history comprises 35 percent of your score, making it the most important single component in determining your credit score. By making your monthly payments in a timely fashion each month and not showing bad public records of lawsuits, foreclosure, or bankruptcy you will score well here. Late payments detract from your score.

Your score is more heavily penalized the later your payment is (two months penalizes worse than one month).

2. Credit Utilization

The second most important category with FICO scores is your credit utilization, amounting to 30 percent of your total score. The key here is to stay as far away from using all of your credit limit, regardless of whether you will pay the full bill when it arrives. FICO wants to see you with 30 percent or less of your available credit used.

This means that you should not spend over $150 each month on a $500 credit card limit.

3. Credit History

The next most important factor is credit history for 15 percent of your total score. By this FICO means the amount of time you have possessed your credit cards. The greater amount of time you have had your first one and the longer your average credit account history, the higher your score in this category will be.

4. Credit Types

Your credit mix amounts to 10 percent. FICO is interested in the different types of credit that you possess (including credit cards, mortgage, car loans, utilities, store accounts) and the way that you pay them on time. It will help you have a better score if you count a range of different loans and credit cards on your report.

The key is not to over-apply for these accounts in a short time frame. Credit bureaus interpret this as a warning sign that you could be desperate to get more credit.

5. New Credit

New credit is the final category with FICO, and it equates to 10 percent of their calculation. The more cards you apply for at once, the worse your score in this category will be. They see it as a possibility that you are attempting to juggle your debt using new credit cards, a definite negative.

It is better for your score to spread out your applications as much as possible.