What is my credit score made up of?

FICO Scores are made up of the five categories outlined below. You will see the different impacts of various actions on your credit score.



What is Payment History?

Payment history encompasses many factors. Your basic account payment information on all of your accounts, the presence of adverse public records, delinquency on any accounts, the amount past due, how long ago your payment was past due, and how many times it was past due all make up this section of your credit score.

What is Amounts Owed?

There are a number of factors in amounts owed, but a very large one is how much debt you hold as a percentage of the limit of the line of credit. For instance, let's say you have a $100,000 limit on your favorite Visa, and you owe $24,000 on it. Once you borrow another $1,001 on it, your credit will take a hit because you are now above 25%. This is true again at 50%, and at 75%. Keep your balances below 50%, and really try to keep them below 25% when you are looking to purchase your home. Your credit score will thank you for it!

How does the length of credit history affect me?

Credit history is 15% of your score, and easy to mess up. Let's say you have 1 credit card you have had for 10 years, and you decide you get another one because they are offering you're a free t-shirt. Now you have 1 card at 10 years, and 1 card at 0 years. Now your credit history is 5 years, not 10! (0+10/2=5).

What is New Credit?

New credit is the number of recently opened accounts, and how long ago you opened them. Each company that you apply with to get credit makes an inquiry into your credit report/score, which lowers your score. New credit can also be good, as when did you re-establish some positive credit history following past payment problems?

How do I know what good types of credit I should use?

This information is taken into account to determine your credit score, although it is in an unknown algorithm. The number of various types of accounts, however, is the definition.

What is the algorithm used to determine my credit score?

Although the credit bureaus tell us the information above, and how different things affect our credit differently, they will not disclose the formula they use to come up with the actual score. A score takes into consideration all of the aforementioned pieces of information, not just one or two of them.