Knowing what goes into your FICO credit score can help you improve and protect it. Named for the data analytics company—Fair, Isaac and Company—that came up with the score as a way to measure consumer credit risk, the FICO is the standard in consumer lending in the United States.
That three-digit number between 300 and 850 can influence your ability to get a loan for large purchases such as a home or car. Some employers even use credit scores in making hiring decisions. The higher the number, the better the score. So let’s look at a percentage breakdown of what determines your FICO credit score.
Payment history – 35 percent of your FICO score. Whether you pay bills on time is the biggest factor that influences your FICO score. To maintain a good score, it’s important to keep up with payments. Late payments can stay on your credit report up to seven years.
If your situation limits you from paying off your credit card balance, safeguard your credit score by making the minimum monthly payments on time if you can. Not paying the full balance will likely result in eventually paying more in interest fees.
If you find yourself in a pinch, contact your creditors (your lender or credit card company) to see if they can make accommodations such as refinancing. During the coronavirus pandemic, for example, many mortgage lenders have offered forbearance, which allows borrowers to delay payments for a period of time without penalties. Use caution here as payments will eventually come due. Forbearance should not affect your credit score, but talk to your lender to be sure. And seek credit counseling to help you set priorities, and consolidate and pay down debt.
The amount you owe – 30 percent of your credit score. This piece also assesses the amount you owe in relation to your available credit. Think of it as a ratio that compares the balance you owe on a credit card to your card limit. The closer the amount you owe gets to your account limit, the more it may lower your credit score. Since your FICO score looks at the amount you owe on individual accounts as well as all of your accounts, a good practice is to keep all your balances at 30 percent or less than the credit limit for each account. And always avoid maxing out your accounts.
Length of your credit history – 15 percent of your credit score. This piece of the credit score pie looks at how long your credit has been established as well has how long it’s been since you used certain credit.
Mix of credit in use – 10 percent of your credit score. The mix refers to the different kinds of credit you use. Examples include installment loans which have a set number of scheduled payments over time, revolving credit such as credit cards or lines of credit, home loans and auto loans. Being able to successfully obtain and manage a diverse mix of credit can raise this aspect of your credit score.
New credit – 10 percent of your FICO score. Research shows opening several new accounts in a short time represents greater risk, especially for people who don’t have a long credit history. When you apply for new credit, a lender requests your credit report or score. Those inquiries remain on your credit report for two years, but your FICO score only considers inquiries from the past 12 months. So applying for new accounts or loans could lower your credit score. But checking your own credit report won’t affect your FICO scores when you request a report directly from the credit reporting agency or an organization authorized to provide reports to consumers.
For more information, see these blogs on our site: Four Steps to Improve Your Credit Scoreand Six Steps to Get Your Debt under Control. If you have questions, your banker is a good source of information and can refer you to other experts.
FAQs
A FICO credit score is calculated based on five factors: your payment history, amount owed, new credit, length of credit history, and credit mix. Your record of on-time payments and amount of credit you've used are the two top factors. Applying for new credit can temporarily lower your score.
What are the 5 ways credit scores are calculated? ›
A FICO credit score is calculated based on five factors: your payment history, amount owed, new credit, length of credit history, and credit mix. Your record of on-time payments and amount of credit you've used are the two top factors. Applying for new credit can temporarily lower your score.
What are the 5 biggest factors that affect your credit score investopedia? ›
Five major things can raise or lower credit scores: your payment history, the amounts you owe, credit mix, new credit, and length of credit history. Not paying your bills on time or using most of your available credit are things that can lower your credit score.
What are 5 things that can hurt your credit score? ›
5 Things That May Hurt Your Credit Scores
- Making a late payment.
- Having a high debt to credit utilization ratio.
- Applying for a lot of credit at once.
- Closing a credit card account.
- Stopping your credit-related activities for an extended period.
What's in my FICO® Scores? FICO Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).
What are the 5 C's of credit score? ›
Lenders also use these five Cs—character, capacity, capital, collateral, and conditions—to set your loan rates and loan terms.
What 5 things is your credit score based on? ›
The primary factors that affect your credit score include payment history, the amount of debt you owe, how long you've been using credit, new or recent credit, and types of credit used. Each factor is weighted differently in your score.
What is the 5 typical credit score range? ›
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2023, the average FICO® Score☉ in the U.S. reached 715.
What are the 4 C's of credit score? ›
Character, capital, capacity, and collateral – purpose isn't tied entirely to any one of the four Cs of credit worthiness. If your business is lacking in one of the Cs, it doesn't mean it has a weak purpose, and vice versa.
What are the 5 factors that affect a borrower's credit worthiness? ›
The five Cs of credit are character, capacity, collateral, capital, and conditions.
They focus on factors such as your payment history, your total debt, usage of available credit, length of credit history, credit mix and new credit. Credit scoring systems such as the FICO® Score☉ and VantageScore® analyze credit report information to predict whether you'll pay your debts as agreed.
Is a 900 credit score possible? ›
Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
What are the 5 factors that make up a credit score? ›
Five things that make up your credit score
- Payment history – 35 percent of your FICO score. ...
- The amount you owe – 30 percent of your credit score. ...
- Length of your credit history – 15 percent of your credit score. ...
- Mix of credit in use – 10 percent of your credit score. ...
- New credit – 10 percent of your FICO score.
The factors that determine your credit score are called The Three C's of Credit – Character, Capital and Capacity.
What determines credit score? ›
Credit scoring models generally look at how late your payments were, how much was owed, and how recently and how often you missed a payment. Your credit history will also detail how many of your credit accounts have been delinquent in relation to all of your accounts on file.
What hurts your credit score? ›
Making debt payments on time every month benefits your credit scores more than any other single factor—and just one payment made 30 days late can do significant harm to your scores. An account sent to collections, a foreclosure or a bankruptcy can have even deeper, longer-lasting consequences.
What habit lowers your credit score? ›
Making a Late Payment
Every late payment shows up on your credit score and having a history of late payments combined with closed accounts will negatively impact your credit for quite some time. All you have to do to break this habit is make your payments on time.
