FICO Scores

Understanding the Crossroads that Lead to Explaining the Score

What is a FICO Score? 

A FICO Score is the most commonly used credit score model throughout the United States.  It began being used in 1989 and has grown to be used by the majority of bank and credit grantors.  

Your FICO score is based on the credit files by the three largest credit bureaus, Experiena, Equifax and TransUnion.  Each of these bureaus may contain different information, your FICO score is calculated by the information received from the bureau.  The FICO score helps the creditors predict how likely you will be make your payments on time  The higher your FICO score, the higher line of credit you may be given.  

What makes up the score? 

Your FICO Score is made up of several factors: 

  • 35% - Payment History
  • 30% - Capacity (debt to income ratio)
  • 15% - Length of Credit
  • 10% - Searches and Inquiries
  • 10% - Type of Credit (Installment, Revolving, Consumer Finance, Mortgage)

What actions will hurt your score? 

There are actions that can hurt your score including:

  • Missing payments - Missing just one payment, regardless of the amount can effect your score for 24 months.  
  • Credit cards at capacity
  • Closing credit cards - This will lower your capacity.
  • Opening up numerous accounts in a short period
  • Having more revolving accounts in relation to installment loans.
  • Opening loans at finance companies

What will NOT affect your score? 

  • Debt ratios
  • Income
  • Length at residence
  • Length at employment

Approximate Credit Weight for each Year

  • 40% - Current to 12 months
  • 30% - 13 - 24 months
  • 20% - 25 - 36 months 
  • 10% - 37+ months

How to Improve your Score. 

There are several things you can do to help improve your credit score, including: 

  • Pay down your credit cards.
  • Do not close your credit cards because this will decrease your capacity.  
  • Continue to make payments on time.  
  • Do not apply for new loans.
  • Acquire a solid credit history with a year of experience.  
  • Move your revolving debt to installment debt.