How Is Your FICO Credit Score Determined?
FICO used to stand for the Fair Isaac and Company. They are math wizards that assign a numerical value to your credit report that predicts the changes of you defaulting on your debt. The higher your numerical value, the lesser chance that you present. FICO scores range from 350-850 although we have never seen anyone that hit either the top or bottom score.
35% of your score is based on timely made payments. Each time you timely make a payment to a credit, it increases your credit score.
15% of your credit is based on the age of your individual accounts. Older accounts score higher.
30% of your credit score is comprised of the percentage of your available credit that you use. They call his “utilization.” How much of your available credit have you used at the time the score is calculated? A rule of thumb is to keep your credit card usage under 30%.
10% of your credit is based on your credit mix. Do you have different kinds of credit such as revolving credit (credit cards), closed ended credit (car loans), a mortgage loan. The bigger the mix, the better.
10% is based on new credit that you have obtained recently.
As you can see, to a great extent, your credit is based on your decision making. What the score does not account for are the things that hit us in real life such as a job loss, getting sick or having things that are outside of our control that affect our credit such as a mixed credit file.