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Calculating a FICO Score

The breakdown of factors that make up a FICO Score looks like this:

  • Payment History – 35%
  • Amounts Owed – 30%
  • Length of Credit History – 15%
  • Credit Mix – 10%
  • New Credit – 10%

It's important to know that the percentages above are based on the importance of the five categories for the general population. For particular groups, for example: people who have not been using credit long, the relative importance of these categories may be different.

Payment History – 35%

As one might expect, the repayment of past debt is a major factor in the calculation of credit scores because it helps to determine future long-term payment behavior. Both revolving credit (i.e. credit cards) and installment loans (i.e. mortgage) are included in payment history calculations, with the latter taking a bit more precedence over the former. That's why one of the best ways to improve or maintain a good score is to make consistent, on-time payments.

Amounts Owed – 30%

This category is basically credit utilization or the percentage of available credit being used/borrowed. Credit score formulas "see" borrowers who constantly reach or exceed their credit limit as a potential risk which is why it's a good idea to keep low credit card balances – and not over extend their credit utilization ratio.

Length of Credit History – 15%

This factor is based on the length of time all credit accounts have been open and the timeframe since an account's most recent transaction. Newer credit users could have a more difficult time achieving a high score than those who have a credit history providing more data on which to base their payment history.

Credit Mix – 10%

FICO Scores consider the combination of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Credit mix is not a crucial factor in determining your FICO Score unless there's very little other information from which to base a score.

New Credit – 10%

Today's higher use of credit is factored into FICO Score calculations. Still, opening several new credit accounts in a short period of time can signify greater risk – especially for borrowers with a short credit history. So how one shops for credit and within what time frame can affect a FICO Score in a number of ways.