What Makes Up Your FICO Score?

It’s important to be aware of the components of your FICO score, so you can make wiser decisions. 

Here is a brief overview:

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 CardOweLimitCredit Ratio Per CC
CC1$500$2,00025%
CC2$2,500$4,00063%
Total$3,000$6,00050%

                                Credit Ratio = $3,000 / $6,000 = 50% 

 

To calculate: Add up the amount owed to all credit cards and divide it by the credit limit. 

Example:

Credit CardOweLimitCredit Ratio per CC
CC1$500$2,00025%
CC2$2,500$4,00063%
Total$3,000$6,00050%

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 FICO scores is your attachment to them. Examining if you are basing your self-worth on your score.

Questions to examine:

How do you feel when your score is low vs high? 

Where in your bodies 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.

References

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