How To Calculate Your FICO Score

Credit Score Calculation - Your FICO Score Calculated

Your FICO credit score is calculated using five categories of information. The relative importance of the different types of data will vary among certain groups of consumers. You should be aware of this information so that you can approach your credit decisions with better knowledge and strategy. The categories are listed in order of the percentage granted to each, from most to least.

Your payment history accounts for 35% of your credit score and your present or most recent history counts for more than your past record of payments. You should make your payments on time and for credit cards, pay more than the minimum balances due. If you see you are going to have problems making payments, contact your creditor and try to work things out so that negative information is not reported to the credit bureaus.

Next, comes the amounts you owe which represents 30% of your credit score. Your overall balances are looked at as well as certain categories of debt such as credit cards. If all of your credit cards are at or over their credit limits then you are most likely to be a greater risk than someone with lower or no balances. Another factor considered is how much of outstanding loan balances remain and for how long as this might show you are not making regular payments on these loans.

Third, length of credit history is evaluated which accounts for 15% of your score. "Your FICO score considers the age of your oldest account, the age of your newest account and an average age of all your accounts," according to Fair Isaac Corporation, which provides FICO scores to all three credit bureaus.

Fourth, new credit accounts for 10% of your FICO score. Suddenly taking on a lot of debt raises a red flag and could lower your score. In addition, credit inquiries will lower your score, although an adjustment is made for "rate shopping," which means five inquiries from car finance within a short period of time will most likely be counted as one inquiry rather than five.

Fifth, types of credit in use represents 10% of your FICO credit score calculation. Your credit report should show a healthy mix of debt.

The above information was culled from Fair Isaac's pamphlet, "Understanding Your FICO Score." This is a general treatment of the subjects stated in this article and if detailed information is required then one is directed to the publication noted herein or one should consult with a financial management counselor.

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