Keith Riley's Blog

The Five Factors Behind Your FICO Score

A FICO score is a type of credit score that is the industry standard for determining a person’s credit risk. While many lenders rely on FICO Scores to make faster, fairer, and more accurate lending decisions, it’s important to note that not all credit scores are FICO Scores.

Five different categories play into your FICO credit score. To keep your credit in good standing, you’ll first want to understand how your score is measured to maintain it effectively. We have listed the five categories and how much each contributes to your score.

Payment History (35%)

Your payment history reflects if you have paid your accounts consistently and on time over the length of your credit. It also accounts for bankruptcies, collections, and delinquencies.

Amounts Owed (30%)

All accounts you currently owe will be visible here, including how many accounts you owe and how many you have balances on.

Length of Credit History (15%)

Generally, the longer your credit accounts are open and paid on time, the better.

Types of Credit (10%)

This includes your number of credit cards, mortgages, installment loans, retail accounts, etc.

• Revolving credit examples: credit cards, retail store cards, gas station cards, etc.
• Installment credit examples: mortgages, auto loans, student loans, etc.

New Credit (10%)

Each new credit inquiry, including time between inquiries, is accounted for. Be sure to consider the impacts when opening a new credit account.

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Tips for Establishing and Maintaining Healthy Credit

1. Only borrow what you can afford to repay.
2. Make all your payments on time.
3. Avoid excessive credit requests or inquiries.
4. Have an emergency account to pay for unexpected expenses.
5. Check your credit report annually to contest and remove any erroneous information.
6. Keep a high credit line and a low balance. Credit utilization ratios measure this relationship, and lower is better.
7. Do not open new store credit cards just to save on a purchase. New accounts can lower your score, and too many payments can be difficult to manage. Saving 10% on a $300 lawnmower means little if it costs you even fractionally more on a $300,000 home loan.
8. Do not be afraid to use credit. Without credit, you will have no score, which can be just as bad as a low one.
9. Maintain a variety of account types. A combination of revolving, installment, secured financing, and excellent payment records will yield a higher score. Still, don’t just open an account to have diversity, as this is the least influential factor.