What FICO Score Considers

Listed on the next few pages are the five main categories of information that FICO scores evaluate, along with their general level of importance. Within these categories is a complete list of the information that goes into a FICO score. Please note that:

• A score takes into consideration all these categories of information, not just one or two. No one piece of information or factor alone will determine your score.
• The importance of any factor depends on the overall information in your credit report. For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. Thus, it’s impossible to say exactly how important any single factor is in determining your score—even the levels of importance shown here are for the general population, and will be different for different credit profiles.
• Your FICO score only looks at information in your credit report. Lenders often look at other things when making a credit decision, however, including your income, how long you have worked at your present job and the kind of credit you are requesting.
• Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.

1. Payment History
What is your track record?
Approximately 35% of your score is based on this category.

The first thing any lender would want to know is whether you have paid past credit accounts on time. This is also one of the most important factors in a credit score.

Late payments are not an automatic “score-killer.” An overall good credit picture can outweigh one or two instances of, say, late credit card payments. But having no late payments in your credit report doesn’t mean you will get a “perfect score.” Some 60%–65% of credit reports show no late payments at all. Your payment history is just one piece of information used in calculating your score.

Your score takes into account:

• Payment information on many types of accounts. These will include credit cards (such as Visa, MasterCard, American Express and Discover), retail accounts (credit from stores where you do business,
  such as department store credit cards), installment loans (loans where you make regular payments, such as car loans), finance company accounts and mortgage loans.
• Public record and collection items—reports of events such as bankruptcies, foreclosures, suits, wage
  attachments, liens and judgments. These are considered quite serious, although older items and items with small amounts will count less than more recent items or those with larger amounts. Bankruptcies will stay on your credit report for 7–10 years, depending on the type.
• Details on late or missed payments (“delinquencies”) and public record and collection items. The score considers how late they were, how much was owed, how recently they occurred and how many there are. A 60-day late payment is not as risky as a 90-day late payment, in and of itself. But recency and frequency count too. A 60-day late payment made just a month ago will affect a score more than a 90-day late payment from five years ago.
• How many accounts show no late payments. A good track record on most of your credit accounts will increase your credit score.

2. Amounts Owed
How much is too much?
Approximately 30% of your score is based on this category.

Having credit accounts and owing money on them does not mean you are a high-risk borrower with a low score. However, owing a great deal of money on many accounts can indicate that a person is overextended, and is more likely to make some payments late or not at all. Part of the science of scoring is determining how much is too much for a given credit profile.

Your score takes into account:

• The amount owed on all accounts. Note that even if you pay off your credit cards in full every month,
  your credit report may show a balance on those cards. The total balance on your last statement is generally the amount that will show in your credit report.
• The amount owed on all accounts, and on different types of accounts. In addition to the overall amount you owe, the score considers the amount you owe on specific types of accounts, such as credit cards and installment loans.
• Whether you are showing a balance on certain types of accounts. In some cases, having a very small balance without missing a payment shows that you have managed credit responsibly, and may be slightly better than carrying no balance at all. On the other hand, closing unused credit accounts that show zero balances and that are in good standing will not raise your score.
• How many accounts have balances. A large number can indicate higher risk of over-extension.
• How much of the total credit line is being used on credit cards and other “revolving credit” accounts. Someone closer to “maxing out” on many credit cards may have trouble making payments in the future.
• How much of installment loan accounts is still owed, compared with the original loan amounts. For example, if you borrowed $10,000 to buy a car and you have paid back $2,000, you owe (with interest) more than 80% of the original loan. Paying down installment loans is a good sign that you are able and willing to manage and repay debt.

3. Length of Credit History
How established is yours?
Approximately 15% of your score is based on this category.

In general, a longer credit history will increase your score. However, even people who have not been using credit long may get high scores, depending on how the rest of the credit report looks.
Your score takes into account:

• How long your credit accounts have been established, in general. The score considers both the age of your oldest account and an average age of all your accounts.
• How long specific credit accounts have been established.
• How long it has been since you used certain accounts.

4. New Credit
Are you taking on more debt?
Approximately 10% of your score is based on this category.

People tend to have more credit today and to shop for credit—via the Internet and other channels—more
frequently than ever. Fair Isaac scores reflect this fact. However, research shows that opening several credit accounts in a short period of time does represent greater risk—especially for people who do not have a longestablished credit history. Multiple credit requests also represent greater credit risk. However, FICO scores do a good job of distinguishing between a search for many new credit accounts and rate shopping for one new account. Your score takes into account:

• How many new accounts you have. The score looks at how many new accounts there are by type of account (for example, how many newly opened credit cards you have). It also may look at how many of your accounts are new accounts.
• How long it has been since you opened a new account. Again, the score looks at this by type of ccount.
• How many recent requests for credit you have made, as indicated by inquiries to the credit reporting
  agencies. Inquiries remain on your credit report for two years, although FICO scores only consider inquiries from the last 12 months. The scores have been carefully designed to count only those inquiries that truly impact credit risk—see page 14 for details.
• Length of time since credit report inquiries were
  made by lenders.
• Whether you have a good recent credit history, following past payment problems. Re-establishing credit and making payments on time after a period of late payment behavior will help to raise a score over time.

5. Types of Credit in Use
Is it a “healthy” mix?
Approximately 10% of your score is based on this category.

The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. It is not necessary to have one of each, and it is not a good idea to open credit accounts you don’t intend to use. The credit mix usually won’t be a key factor in determining your score—but it will be more important if your credit report does not have a lot of other information on which to base a score. Your score takes into account:

• What kinds of credit accounts you have, and how many of each. The score also looks at the total number of accounts you have. For different credit profiles, how many is too many will vary.