What are the important parts that make up your FICO Credit Score?

Let’s face facts-your FICO Credit Score can be a bit of a mystery. How can one even begin to repair credit if they are unaware of the many components of the FICO Credit Score? Whether you pay an agency to repair your credit or you do it your self, you need to know what are the big fish to fry. Now you can know what FICO uses and this will help you from making mistakes in the present and the future.

1. Payment History

The most important factor in your credit score is your payment history. FICO watches your revolving loans, which are credit cards, and your installment loans, examples being mortgages and student loans. If you had to pick between defaulting on your home loan and a small loan, go for the small loan because the bigger loan will eat into your FICO score. Still, for either one sure you are making timely payments and that they are consistent. Some companies will even report you if you have a good payment history with them and some will be slow to take it away even after years of good payments.

This credit utilization category gets rated at 35% of your total score.

2. Credit utilization

Credit utilization or debt amounts are the next most important. Revolving lines of credit allow a consumer to borrow as little or as much as desired. Credit cards are an example of a revolving account. If you want the maximum benefits of having credit cards, do not max them out. As an easy to follow rule, keep your credit cards under 30 percent on each credit card you have and also keep your total revolving credit under 30 percent. On the flip side of this, it is also good to use a card once in a while to show it’s being used. We have all been in a crunch where we have been careless and loaded up on our credit credits, still if you are looking to get a home or car loan make sure your credit cards are paid down.

This credit utilization category gets rated at 30% of your total score.

3. Length of credit history

One of the biggest mistakes I have ever made was closing a credit card because they did not raise my limit. I did not learn until later that this tradeline was gold as far as your credit score goes. If you are new to credit your score will be lower until you have some aged. The longer your credit history is the easier the credit bureaus and lenders can evaluate your ability to pay back.

This credit utilization category gets rated at 15% of your total score.

4. New credit

Nothing hurts your credit like applying for a whole bunch of it in a short time period. To lenders, this looks like you are in trouble and need credit. If you are getting denied credit stop applying immediately until you do a good evaluation of your credit score. The good news if most hard credit inquiries will be off your report in 2 years, unlike other items.

This credit utilization category gets rated at 10% of your total score.

5. Credit mix

This category can be kind of esoteric at times but it basically breaks down it to showing that we have been paying a variety of debt products. FICO states their data shows that when borrowers have a variety of credit they are more likely to pay it back. This decreases your risk profile to lenders. Also don’t load up on say credit cards and then have no installment loans. This takes away from that mix.

This credit utilization category gets rated at 10% of your total score.

If you have any questions on how we can help with your FICO credit score check out our Contact Page and send us a message! Also, check our article about picking the right credit repair firm!