Fair, Isaac & Co. says FICO scores are based on the following factors:
- What is your payment history? Roughly 35 percent of your score.
Have you paid your bills on time? Your score reflects payment information
on credit cards, retail accounts, installment loans (loans with regular
payments, such as car loans), finance company accounts and mortgage loans.
Generally, a payment that's 30 days late is not as bad as a payment that is
90 days late. But a 30-day late payment made a month ago will count against
you more than a 90-day-late payment from five years ago. How frequently you're
late also counts.
- Do you owe too much? 30 percent of your score.
Owing money on various credit accounts doesn't automatically lead to a low score, but some borrowing patterns can hurt. Fair Isaac's model weighs what is owed against the initial balances on installment loans and the lending limits
on credit cards and other "revolving" accounts. The weight given to any factor may vary, depending on other aspects of your credit profile. Also, although
scores are based only on the information in your credit report, lenders may look at other factors when making a credit decision, such as your income and the kind of credit you are applying for.
- How established is your credit? 15 percent of your score.
"In general, a longer credit history will increase your score," Fair Isaac
says. "However, even people with short credit histories may get high scores,
depending on how the rest of the credit report looks."
- Do you have a "healthy" mix of credit? 10 percent of your score.
The score considers 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
intend to use," Fair Isaac says.
- Are you taking on more debt? 10 percent of your score.
"Research shows that opening several credit accounts in a short period of
time does represent greater risk," Fair Isaac says.
Your score also may be affected by repeated applications for credit, though
the model treats multiple inquiries in a short period of time as a single
inquiry, to avoid penalizing consumers for shopping for the best rate.
