The FICO Score Breakdown

Do you know exactly what goes into creating a FICO Score? Your score relies on five key pieces of information. Let’s break down each of these factors and their significance in determining that score.

35% Payment History

How you handle your bills is the most impactful component of your FICO Score. Financial institutions that consider you for a credit card, a mortgage, or any other kind of loan rely on this information that’s then reflected in a FICO Score. It tells them how likely you are to make your payments on time. Payment history includes late payments you’ve made, how long it took to make those payments, any current past due bills, and more.

30% Amount Owed

The amount of debt you owe makes up 30% of your FICO Score. Having a credit history is good, but it’s important to avoid a high percentage of debt that is near your credit limit. Lenders and creditors want to see someone have a responsible amount of debt that’s not too high. Maintaining a large percentage of debt will negatively affect your FICO Score.

15% Length of Credit History

If you want the trust of your lenders and the benefits that come with it, like low interest rates and larger loans, it’s essential to have a credit history that is established. Those new to credit will tend to have a lower score than those who have had a credit history for several years. Once you open a line of credit, it’s important to keep that account open even if it’s not in use anymore. Closing an account shortens the average age of your credit.

10% Credit Mix

Credit mix may not have the same impact as the other categories, but having a diverse portfolio of credit can give your score the boost it needs. Having different kinds of credit lines open shows you can manage a variety of credit. This includes mortgages, credit cards, student loans, and other consumer loans.

10% New Credit

New credit refers to any time you apply for a new credit line. From credit cards to loans, the FICO Score will incorporate the application for credit into your overall score. Credit is considered new during the first two years of opening the account and it gets reported the moment you apply. It’s then reported as a hard inquiry and if the application is denied, it can cause your score to take a dive. That being said, new credit can also help your score by diversifying your overall credit.

And Remember…

Because the FICO Score is a commonly used system, knowing which factors can influence your own FICO Score can help you make the best financial decisions for your life.