It’s important to be aware of the components of your FICO score, so you can make wiser decisions.
Payment History 35%
Making timely payments is important for your FICO scores because it demonstrates you are responsible with your debt.
Amount Owed 30%
Maintaining a low credit ratio, credit utilization rate, less than 30% indicates you are in control of your spending and not a risk. The ratio per credit card also matters.
To calculate: Add up the amount owed to all credit cards and divide it by the credit limit.
Example:
| Credit Card | Owe | Limit | Credit Ratio per CC |
| CC1 | $500 | $2,000 | 25% |
| CC2 | $2,500 | $4,000 | 63% |
| Total | $3,000 | $6,000 | 50% |
Credit Ratio = $3,000 / $6,000 = 50%
Length of Credit History 15%
Your longest debt contributes to your credit age and indicates to your lenders you have experience with debt.
Here’s how to calculate your credit age:
The length of time your accounts (credit cards, car loans, mortgage etc.) have been open divided by the total number of accounts.
Credit Mix 10%
While credit diversity does not impact your FICO score substantially, it can make the difference if you are aiming towards an exceptional one.
A healthy credit mix may consist of credit cards, car loans, mortgage loans, and retail accounts.
New Inquiries 10%
Keeping inquiries to your credit at a minimum displays low risk. There are two types of inquiries: soft and hard. Soft inquiries, you look at your credit score and have no impact. Hard inquiries, lenders pull your credit score and affect your score minimally.
Mindful Reminder
One thing to consider with your FICO score is your attachment to it. Examine if you are basing your self-worth on your score.
Questions to consider:
- How do you feel when your score is low vs high?
- Where in your body do you feel the change?
- Why do you feel this way?
Once you have determined your reactions, explore some more and see if you can find a way to detach your “self” from your score.
Seeking Help
If you are depressed, anxious, or have panic attacks, find a health professional who can help you.
Substance Abuse and Mental Health Services Administration (SAMHSA) National can provide free referrals. They are open 24/7, 365 days a year.
If you are experiencing suicidal thoughts, please contact 988 for help. The calls are free, confidential, and they are open 24/7 to help you navigate difficult emotions.
Attend a Workshop
If you are interested in attending a live webinar on improving your FICO score, please visit my events.
Related Posts
Lexington Law. (2021). What affects your credit score? Retrieved from: https://www.lexingtonlaw.com/education/what-affects-credit-score
MyFICO. (n.d.). What’s in my fico scores? Retrieved from: https://www.myfico.com/credit-education/whats-in-your-credit-score
Steele, Jason, Investopedia. (2021). How fico scores are calculated? Retrieved from: https://www.investopedia.com/financial-edge/0212/how-is-fico-calculated.aspx
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