Understanding Your FICO Score

With FICO Scores having such a huge impact on your life you think the actual formula of how it is created would be well known.  Unfortunately, it is a closely guarded secret.  However, I will try to give you a brief preview to understand a little bit of how it is created.  

FICO Scores are calculated from 5 basic categories and broken down to percentages (outlined below) of credit data that can be found in your credit report.  Your FICO Scores take both positive and negative information into account when determining your FICO Score.  Obviously, negative information (collections, late payments, public records, etc.) will bring down your score while positive information (making payments on time, not maxing out your credit cards, etc.) will help improve your FICO Scores.  

Payment History  

One of the most critical factors into a FICO Score.  It was created to for lenders to know whether or not you have paid your past accounts and on time.  

Balances Carried/Available Credit

This portion is used to determine the capacity at which how much credit is given or if non shall be given.  When available credit has been used, it can indicate that a person is overextended themselves and likely to make late payments or possibly miss payments all together.  

Credit History (length)

It considers how many accounts that you have opened, how long they have been established and how often you use the accounts.  

Mix of Acounts

Your FICO Score takes into consideration the types of account that you have open or have had opened in the past such as:

• Mortgage loans 
• Installment loans
• Credit Cards
• Finance companies
• Retail accounts 

Inquiries

Every time that you apply for credit or a loan, a mark is made on your credit report.  If several are made within a short time frame, research as show a higher risk pattern.  There are also two different types of inquiries.  Hard (effect your credit score) and soft pulls (do not effect your credit score).    

To learn more about FICO Scores or for a free evaluation of your Credit Report please contact us at (866) 969-7372 or [email protected].