FICO

FICO® scores help lenders make accurate and reliable credit risk decisions based on our credit profile. The credit risk score ranks consumers by how likely we are to pay our credit obligations. Scores ranging from 300-850, are the indicators in which granting credit is made. Here’s the anatomy of our FICO scores:

 

Payment history (35%)

Paying your bills on time monthly is the largest factor in assessing risk. This action attributes to more than one-third of your score (as seen above). Consistency is key! Any financial obligation (mortgage, auto loan, credit card, personal loan, etc.) that reports to the 3 major bureaus must be paid on time monthly to maintain high credit scores.

Amounts owed (30%)

Maintaining a low utilization rate (%) on your revolving (credit cards) accounts is vital to high FICO scores. A high utilization rate expresses a high risk as you are extended with your current financial obligations. Thus, making it difficult to secure new credit. Paying your balances off in full monthly will yield the highest scores.

 

Length of credit history (15%)

Your average age of accounts are heavily considered when lenders approve requests that involves credit. Lenders consider the age of specific accounts and how often they’re used. Credit isn’t built overnight and the longer the history the higher the scores (potentially).

Credit mix (10%)

Credit mix refers to the type of accounts that are on your credit reports. The types of credit that produces high scores are a mix of installment & revolving accounts. Installment accounts are mortgages, auto loans, and personal/student loans. These accounts have a fixed payment amount with a specific end date. Revolving accounts are credit cards and other lines of credit where your payment amount fluctuates by your spending.

 

New Credit (10%)

New credit makes up 10% of your FICO® Score. When applying for new credit, inquiries remain on your credit report for two years. FICO Scores only consider inquiries from the last 12 months. Although this only comprises a tenth of your score, requesting too much credit at once will decrease your score and potentially lead you to a denial.