Home » Credit Scores » FICO Score Considers
What FICO Score Considers
Listed below are the five main categories of information that FICO scores evaluate, along with their general level of importance.
Within these categories is a complete list of the information that goes into a FICO score. Please note that::
- A FICO score takes into consideration all these categories
of information, not just one or two. No one piece of
information or factor alone will determine your FICO score.
- The importance of any factor depends on the overall
information in your credit report. For some people, a
given factor may be more important than for someone else with
a diferent credit history. In addtion, as the information in our
credit report changes, so does the importance of any factor in
determining your FICO score
Therefore, its impossible to measure the exact impact of a single factor without looking at your entire report – even the levels of importance showing in a diagram below are of the general population and will different for different credit profiles.
- Your FICO score looks only at information in your credit
report. Lenders often look at other information when
making decision however, including your income, how long you have
worked at your present job and what type of credit you are requesting.
- Your FICO score considers both positive and negative information in your credit report. Late payments will lower your FICO score, but establishing or re-establishing a good track record of making payments on time will raise your score.
How a FICO Score Breaks Down
These percentages are based on the importance of the five categories for the general population. For particular groups 0 for example, people who have not been using credit long – the relative importance of these categories may be different.
-
Payment History
What is your track record?
Approximately 35% of your FICO score is based on this category.
The first thing any lender would want to know is whether you have paid past credit accounts on time. This is also one of the most important factors in a credit score.
Late payments are not an automatic “score-killer”. An overall good credit picture can outweigh one or two instances of, say, late credit card payments. But having no late payments in your credit report doesn’t mean you will get a “perfect score”. Some 60% - 65% of credit reports show no late payments at all. Your payment history is just one piece of information used in calculating your FICO score. Your FICO score takes into account:
- Payment information on many types of accounts. These will include credit cards (such as VISA, MasterCard,
American Express and Discover), retail accounts (credit from
stores where you do business, such as department store credit
cards), installment loans (loans where you make regular payments,
such as car loans), finance company accounts and mortgage
loans.
- Public record and collection items – report
of event such as bankruptcies, foreclosures, suits, wage attachments,
liens and judgments. These are considered quite serious,
although older items and items with small acmounts will count
less than more recent items or those with larger amounts.
Bankruptcies will stay on credit report for 7-10 years, depending
on the type.
- Details on missed or late payments (“delinquencies”)
and public record and collection items. The FICO
score considers how late they were, how much was owed, how
recently they occurred and how many there are. A 60-day late
payment is not as significant as 90-day late payment, in and
of itself. But recency and frequency count too. A 60-day payment
made just a month ago will affect a score more than a 90-day
payument from five years ago.
- How many accounts show no late payments. A good track record on most of your credit accounts will increase
your FICO score.
- Payment information on many types of accounts. These will include credit cards (such as VISA, MasterCard,
American Express and Discover), retail accounts (credit from
stores where you do business, such as department store credit
cards), installment loans (loans where you make regular payments,
such as car loans), finance company accounts and mortgage
loans.
-
Amounts Owed
How much is too much?
Approximatly 30% of your FICO score is based on this category.
Having credit accounts and owning money on them does not mean you are a high-risk borrower with a low FICO score.However, when a high percentage of a person’s available credit has already been used, this can that a person is overextended, and is likely to make some payments late or not at all. Part of the science of scoring is determining how much is too much for a given credit profile. Your FICO score takes into account:
- The amount owed on all accounts. Note
that even if you pay off your credit cards in full every month,
your credit report may show a balance on those cards. The
total balance on your last statement is generally the amount
that will show in you credit report.
- The amount owed on all accounts, and on different
type of accounts. In addition to the overall amount
you owe, your FICO score considers the amount you owe on specific
type of accounts, auch as credit cards and installment loans.
- Whether you are showing a balance on certain type
of accounts. In some cases, having a very small balance
without missing a payment shows that you have managed credit
responsibly, and may be slightly better than carring a no
balance at all. On the other hand, closing unused credit accounts
that show zero balances and that are in good standing will
not raise your FICO score.
- How many accounts have balances. A larger
number can indicate higher risk of over-extension.
- How much of the total credit line being used on
credit cards and other “revlolving credit” accounts. Someone closer to “maxing out” on many credit
cards may have trouble making payments in the future.
- How much of installment loan accounts is still
owed, compared with origanl loan accounts. For example,
if you borrowed $10,000 to buy a car and you have paid back
$2,000, you owe (with interest) more than 80% of the original
loan, Paying down installment loan is good sign that you are
able and willing to manage and repay debt.
- The amount owed on all accounts. Note
that even if you pay off your credit cards in full every month,
your credit report may show a balance on those cards. The
total balance on your last statement is generally the amount
that will show in you credit report.
-
Length of Credit History
How established is yours?
Approximatley 15% of your FICO score is based on this category.
In genral, a longer credit history will increase your FICO score. However, even people who have not been using credit long may get high FICO scores, depending on how the rest of the credit report looks. Your FICO score takes into account:
- How long your credit accounts have been established,
in general. Your FICO score considers the age of
your oldest account, the age of your newest accoiunt and an
average age of all your accounts.
- How long specific credit accounts hace been established.
- How long it has been since you used certain accounts.
- How long your credit accounts have been established,
in general. Your FICO score considers the age of
your oldest account, the age of your newest accoiunt and an
average age of all your accounts.
-
New Credit
Are you taking on more debt?
Approximatly 10% of your FICO score is based on this category.
People tend to have more credit today and to shop for credit – via the internet and other channels – more frequently than ever. FICO scores refelect this reality. However research shows opening several credit accounts in a short period of time does represent greater risk – especially for people who do not have a long established credit history.
Muliple credit requests also represent greater credit risk. However, FICO scores do a good job of distinguishing between a search for many new credit accounts and rate shopping for one new account. FICO score takes into account:
- How many new accounts you have. Your FICO
score looks at how many new accounts you have by type of account
(for example, how many newly opened credit cards you have).
It also may look at how many of your accounts are new accounts.
- How long it has been since you opened a new account. Your FICO score may consider this information for specific
types of accounts.
- How many recent requests for credit you have made,
as indicated by inquiries to the credit reporting agencies. Inquiries remain on you rcredit report for two years, although
FICO scores only consider inquiries from the last 12 months.
FICO scores have been carefully designed to count only those
inquiries that truly impact credit risk. See How FICO Score
Count Inquiries.
- Length of time since credit report inquiries were
made by lenders.
- Whether you have a good recent credit history,
following past payment problems. Re-establishing
credit and making payments on time after a period of late
payment behavior will help to raise a FICO score over time.
- How many new accounts you have. Your FICO
score looks at how many new accounts you have by type of account
(for example, how many newly opened credit cards you have).
It also may look at how many of your accounts are new accounts.
-
Types of Credit in Use
Is it a “healthy” mix?
Approximately 10% of your FICO score is based on this category.
The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. It is not necessary to have one of each, and it is not a good idea to open credit accounts you don’t intent to use. The credit mix usually won’t be a key factor in determining your FICO score – but it will be more important if your credir reprt does not have a lot of other information on which to base a score. Your FICO score takes into account:
- What kind of credit accounts you have. Do you have experience with both revolving and installment
accounts, or has your credit experience been limited to only
one type?
- How many of each. Your FICO score also looks at the total number of accounts you have. For different credit profiles, how many is too many will vary depending on your overall credit picture.
- What kind of credit accounts you have. Do you have experience with both revolving and installment
accounts, or has your credit experience been limited to only
one type?