How is Your FICO® Credit Score Calculated?
Your FICO® credit score is determined by information from a variety of information sources, but five elements constitute the bulk of your credit report. The weight assigned to each factor impacting your credit score varies depending on the length of your credit history. Plus, since the way you use credit varies over time (you pay off a loan, open a credit card account, etc.); the weight of any one factor can change as new data is reported.1
Payment History and Derogatory Marks
Your payment history is one of the most important factors that goes into calculating your credit score, so try to pay your bills by the payment due date.
Some of the negative factors that influence your credit score include:
- Wage Attachments
Late payments are not desirable, of course, but payment history is not the only factor that goes into calculating your score.
Another major category influencing your credit score is the amounts you owe in relation to the amount of credit you have available. Using a large percentage of the credit you have available raises a flag that it may be difficult for you to pay back what you owe.
Length of Credit History
Lenders like to see that you have experience using credit, so the length of your credit history is also a part of your score calculation. A longer credit history is more desirable. If you haven’t had accounts open for a long time, though, remember that it’s more important to pay your bills on time and to not let your accounts become delinquent, and that those factors are considered more strongly in the score calculation.2
Mix of Credit Accounts Used
A fourth factor affecting your credit score is the mix of credit accounts you have. For example, retail accounts, mortgage loans, credit cards and installment loans can all be a part of your credit mix, and that’s a good thing.5 This factor isn't as significant as some of the other factors affecting FICO® score calculation.
Whenever you apply for credit, it creates a “hard inquiry.” Applying for many new credit accounts within a short period of time can lower your score, especially if you’re apply for multiple credit cards (applications for some sources of credit such as student loans are not likely to negatively impact your score, according to FICO®.
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