How Your Credit Score is Calculated

Our FICO credit score is made up of five elements, as indicated by Fair, Isaac Corp., for the general population.

  1. 35% – this score is about how bills are handled. Are the bills paid by or before the due date? What is your history on paying on time? The consumer gets points added to their score if they are paying their bills on time, but if your are late or missing your monthly payment then the opposite occurs and those points will instead be deducted. You will see that this is a big percentage of your total FICO score. This is the first and most important aspect of your score that should be meticulously monitored. If bills have not been being paid on time, this is your first task to get under control.
  2. 30% – this score is determined by the proportion of your credit used. This score simply weighs the percentage of total money owed against the total amount of credit you have available to you at the present time. Ideally you want to keep this below 5% or as low as possible. If your credit cards are maxed out this is another area that you can improve and control.
  3. 15% – This portion of your overall credit score stems from your credit history and the length of time you have been establishing it. This starts from the moment you first open a credit account (such as a credit card or loan) and how long was this account running or when did it close. This history is kept for each and every credit account you open no matter how brief or long.
  4. 10% – This score refers to the type of credit you acquired. One such type of credit is called a revolving credit which is typically our credit cards (ongoing available credit line for use as needed). A second familiar credit type is called an installment credit which would be your home mortgage or a vehicle loan (credit given for a specified time period).
  5. 10% – This last slice of the FICO score pie is regarding the number of new credit applications submitted over the last couple years and what type are they. Preferrably, you want to keep this as few as possible; say, not more than 1-2 per year or even less if you can. If you are getting turned down on your applications this signals that you may be a higher risk for lenders.

Be aware that your credit score is constantly fluctuating up and down depending on how your handling the aforementioned five elements.

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