Factors influencing your FICO score

fico_score.gifMost lenders use FICO (Fair Isaac Corporation, they developed the FICO, a measure of credit risk, that are the most used credit users in the world) credit scores to get an objective measure of your creditworthiness. By understanding the factors that affect your score, you’ll get an in depth understanding of how creditors view your credit application and how you can bump up your credit standing.

1. Payment history

The factor that has the biggest impact on your score is whether you have paid off the past credit accounts on time or not. It counts for approximately 35% of your score. It should be noted that the recent late payments or missed payments hurt your score more. It will be reflected on your report whether you are 30, 60, or 90 days or more late with a bill payment. A record of late or missed payments on several accounts will hamper your score more than late payments on a single account. So, pay off your bills on time, it will definitely have a positive impact on your overall score.

2. Amount owed

It counts for approximately 30% of your total FICO score. It shows how well you can manage your credit. However, it is not just the amount you owe already that influences your FICO score. Also taken into consideration is the amount of credit available to you. So, total up all the outstanding balances you have and compare it with the amount of credit that is available to you. If you are reaching or exceeding the available credit then it will negatively impact your score.


3. Length of credit history

The third factor that makes up 15% of your total FICO score is the duration of your credit history. The longer your credit history, you will be considered more creditworthy by the creditors. Also taken into consideration is how long it has been since you used the credit accounts. For instance having an idle card for 15 years won’t bump your score. Also remember not to open multiple accounts at once to build a credit history.

4. Types of credit

Another vital factor that influences your score is the type of credit mix that you have. Your score will reflect your mix of retail accounts, credit cards, and installment loans like car loans and home loans. Consumers who have a healthy mix of credit have a higher FICO score.

5. Number of new credit applications

The fifth factor that influences your FICO score is the total number of recent credit applications that you fill out. For instance, if you have recently made multiple credit inquiries then it will negatively influence your score because it will suggest to the creditors that you are financially burdened and might be late on your payments.

There are other factors like employment, salary, duration of stay at current residence, and marital status that lenders look into. However, these factors do not affect your FICO score.

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4 Responses

  1. Aaron Stroud says:

    Charls, the amount one pays each month also affects the score. Simply making the minimum payments each month negatively affects the score.

    I don’t think it has a large impact, but carrying large 0% balances might not be a good idea if one is going to be mortgage shopping for instance.

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  1. March 14, 2010

    […] The best place to understand the FICO, myfico.com.  Another good post on the topic is at Fortune Watch. […]

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