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What is My FICO Score and How is it Calculated?

On Behalf of | Jan 26, 2013 | Consumer Protection

The FICO Score is a credit score most lenders use to determine your credit worthiness and whether you are a credit risk, so to speak.  Your FICO Score is a number that is calculated by combining pieces of your credit history from your report. This information is grouped into five different categories using percentages to reflect the importance of each piece of data.  Your FICO Score considers both positive and negative information contained in your credit report.  Obviously, late payments and other negative information will lower your FICO Score, but establishing or re-establishing a good track record of making timely payments will help raise your score over time.

FICO breaks down your score into Payment History, Amounts Owed, Length of Credit History, New Credit and Types of Credit Used.  The importance of each category varies depending on the consumer.  For example a consumer with a new credit history will be factored differently from a consumer who has been using credit for a long period of time.  The importance of any one factor in your credit score calculation depends on the overall information contained in your credit report.  For some people, one factor may have a larger impact than it would for someone with a much different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your FICO Score.

  • 1.  Payment History (35%) The first thing any lender wants to know is whether you’ve paid past credit accounts on time.  This is one of the most important factors used in determining your score.
  • 2.  Amounts Owed (30%) Having credit accounts and owing money on them does not necessarily mean you are a credit risk but instead your score is determined by reviewing how much is owed on each account in comparison to your credit limits.
  • 3.  Length of Credit History (15%) In general, a longer credit history will increase your score, however, even people who haven’t been using credit long may have a high FICO Score, depending on how the rest of their credit report compares.  For example your score looks at the length of time your old account has been established, the age of your newest account and an average age of all your accounts.
  • 4.  New Credit (10%) Research shows that opening several credit accounts in a short period of time represents a greater risk – especially for consumers with minimal credit history.
  • 5. Types of Credit in Use (10%) Your FICO Score takes into account a mixture of credit cards, store accounts, installment loans, finance company accounts and mortgage loans.

For information on viewing your credit report for accuracy and scores, review our blogs Reviewing Your Own Credit Reports and  What Qualifies as a “Good” Credit Score.

If you are having issues with your credit report and need the advice of experienced attorneys, contact SmithMarco P.C. for a free case review.