The FICO Score
The Fair Isaac Credit Bureau Score (FICO) is calculated by a system of scorecards. The five most important factors in determining the FICO score are:
The FICO Score takes into account all five of these categories of information. No single piece of information will determine your score.
The same factor can influence the FICO scores of different people in different ways. The importance of each factor is fluid and changes as the total credit picture changes. The percentages shown are given for the general population and may look very different for someone with no credit history as compared to someone with a long credit history.
The negative and the positive information in your credit record affect your score. By reestablishing positive credit after a period of adverse or delinquent accounts can raise your FICO score.
While your FICO score looks only at the information within your credit report, lenders and credit grantors may look at additional factors such as your job history and length of employment in your field and the type of credit for which you are applying.
Types of Credit You Use - 10%
- Travel & entertainment cards
- Department store cards
- Personal finance company references
- Installment loans
Your Payment History - 35%
- Presence of collections and/or delinquent accounts.
- Amount past due on delinquent accounts
- Number of past due accounts
- Presence of adverse public records including liens, judgments, or bankruptcy
- Number of accounts being paid as agreed
- Six out of ten Americans do not have any late pays.
How Much You Owe – 30%
- Number of balances recently reported
- Total amount owed on all accounts as well as how much you owe on different types of accounts: installment – open – revolving
- Average balances across all trade line section
- Balance to limit ratio
- Proportion of installment loan amounts still owed or balance to loan amount
Credit History – How Long You Have Had Credit – 15%
- The age of your oldest trade line
- The average age of all your accounts
- Number of new trade lines
- Time since account activity
- The longer you've had credit, the better. Close out new accounts, not old ones. Closed accounts will show on your credit report for ten years from the date of last activity.
Pursuit of New Credit – Your Last Application For Credit – 10%
- How many accounts you have applied for recently
- Number of inquiries and new accounts you have opened within the last year
- How much time has passed since you've applied for credit – recent inquiries
- How much time has passed since you have opened a new account
- Lenders like to see installment accounts
Q: Why did my credit file get the score it did?
A: to fully understand why a credit report scored a particular way, look at the four reason codes given with each score. These are the top reasons, in order of severity, why it did not score higher. Other factors may have contributed.
These factors help borrowers understand how to increase their score over time.
For score factors in the high range, the explanation codes merely point out why the file did not score even higher.
Reason codes for FICO risk scores
- Amount owed on accounts is too high
- Level of delinquency on accounts
- Too many bank or national revolving accounts
- Too many accounts carrying a balance
- Too many consumer finance company accounts
- Account payment history is too new to rate
- High number of inquiries in previous twelve months
- Too many accounts recently opened
- Proportion of balance to high credit on revolving accounts too high
- Amount owed on revolving accounts is too high
- Length of time since revolving account was established
- Time since delinquency too recent or not known
- Length of time since account was established
- Lack of recent bank revolving information
- Lack of recent revolving account information
- No recent non-mortgage balance information
- Number of accounts with a delinquency
- Too few accounts
- Length of time since derogatory public record or collection is too short
- Amount past due on accounts
- Serious delinquency, derogatory public record or collection filed
- Number of bank or national revolving accounts with balances
- No recent revolving balances
- Number of revolving accounts
- Number of established accounts
- No recent bankcard balances
- Time since most recent credit opening is too short
- Too few accounts with recent payment
- Lack of recent installment loan information
- Proportion of loan balances to loan amounts is too high
- Amount owed on delinquent accounts
- Serious delinquency, derogatory public record, or collection
- Serious delinquency
- Derogatory public record or collection filed