What Makes Up Your FICO Score?

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I just stumbled upon this article at Bankrate.com titled ‘How credit scores work‘. It seems a little old, but it’s new to me. The credit score powerhouse Fair Isaac (think FICO), is interviewed in the article, so that gives it some credibility. Here’s the skinny on what makes up your credit score, from most important to least:

35% – How you pay your bills (on time or not) – I don’t really have to worry about this one.

30% – Amount of money you owe and the amount of available credit – It’s not just how much debt you’re carrying, it’s how much of your available debt you’re taking advantage of. Another reason why it may not be a good idea to cancel unused credit cards.

15% – Length of credit history – Can’t really do much about this either. I thank my mom for letting me be an authorized user of her card in college. I stayed away from those credit card vultures at the bookstore – they can keep their cheap t-shirts. Although I guess it may have helped my credit.

10% – Mix of credit – Interesting, having both car loans, mortgages, and credit cards will help you. Well, I don’t have either of the first two. Shrug.

10% – New credit applications – Yep, gotta watch out for this one. I feel if you’ve got 3 or less in the last six months, the credit hit isn’t that bad at all. More, and credit card companies start to get nervous.

Some things that don’t count in your credit score surprised me: income, whether you’ve been turned down for credit, length of time at your current address, whether you own a home or rent. I guess that’s why they ask you all this on credit card appliation? Check out the article, I definitely learned some things.

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  1. This was new to me, too?thanks for posting it. What I would like to know in a more concrete form is how negative items affect your credit rating, and how much it changes the more time that passes. I?m looking for more than ?Paying all your bills on time is good. Paying them late on a consistent basis is bad.? Is there someone sitting at the bureau who says, ?She paid late this month; dock her score five points,? or is there some mathematical equation applied?if so, what?

    I pay all my bills on time, have different types of loans, etc., etc., and generally could be considered a poster child for financial responsibility. My credit scores from the three bureaus average 722. BUT it wasn?t always this way. I declared bankruptcy 8 years ago, and had two tax liens that were later released upon payment. The tax liens will come off next July, but the bankruptcy will stay on a couple of more years. I wonder how much higher my credit rating would be without these negative items on my reports?

  2. possibly a dumb question but….

    What’s the best way to find out your credit score?

    I’ve only found out my score once a few years ago when my credit card company included an offer with their bill to get a “Free” credit report. I foolishly didn’t read the small print and the “Free” report turned into a year-long “subscription” charged to my card, and I’ve avoided learning about my credit ever since.

    Is there a real free way?

  3. somebody told me if you BT a large amount of money and pay them back immediately would help your FICO score increase. It seems not going to work by the FICO score’s definition?

  4. SMB – The specific FICO score equation is kept very secret, so I don’t know about that.

    DSC – Well you can get a free report at annualcreditreport.com. But to get a score you’ll either need to pay or get it free by signing up for a free trial. Like you said, just be sure to cancel right after you get the report and score.

    One of this site’s sponsors on the right “Choose Your Free Credit Report & Score”, offers a free credit report and score from any of the three credit bureaus with a free 30-day trial. Instead of a large annual fee, they charge a $9.95 a month if you want to keep it. So even if you forget for a month, you’re only charged ten bucks, which the same price as if you paid for the report. But just cancel right away and it’ll be free. I do it within 24 hours so I don’t forget!

    Sillycat – That may be true for some cards, which report your highest balance as your credit limit. Doing what you said may increase what recorded as your credit limit, thereby reducing the % of credit you are using at any given time. But I’ve never bothered.

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