Understanding Your Credit Score
You know how important your credit score is to your financial health, but do you know how your credit score gets calculated?
There are five categories that make up your FICO® Score, the model that most lenders use. Knowing what gets calculated - and how - will help you understand how to keep your credit score healthy.
Understanding Your FICO® Score
FICO® Score
- 10% for new credit
- 10% of your credit score is made up of any new credit that you’ve recently taken on. Too much new credit could lower your credit score.
- 10% for credit mix currently in use
- The different types of credit (installment loans and/or revolving credit) that you are using makes up 10% of your FICO Score.
- 15% for length of credit history
- The length of time your accounts have been open and how long since the most recent action determines your credit history length. If you don’t have a credit history, you should begin using credit card - and never miss a payment.
- 30% amount owned
- The amount of debt you owe represents 30% of your credit score. Less debt is better, in terms of a higher credit score.
- 35% payment history
- Your payment history is the most important part of your credit score, comprising more than 1/3 your total credit score.
The 3 Major Credit Bureaus
There are 3 major credit bureaus and each calculates their own score using FICO software. Your score may vary slightly from based on the information each bureau has.
- TransUnion scores range 300-850
- Experian scores range 300-850
- Equifax scores range 340-820
Credit Score Ranges
- Worst is <520
- Very Poor is 520-579
- Poor is 580-619
- Below Average is 680-719
- Above Average is 720-739
- Very Good is 740-779
- Excellent is 780-850
Credit Score Fast Facts
- Married couples have separateFICO scores
- You need a credit history before you have a credit score.
- It’s against the law to consider age, race, religion, and national origin when determining credit score.
What Damages Your Credit Score?
- Missed Payments
- Overspending using credit
- Closing credit cards that have a positive credit history
- Applying for credit too frequently
- Relying only on one form of credit to build credit history
Negative Credit Score Items
How long do negative items impact your credit score?
- Up to 2 years for Inquiries, Credit Checks
- Up to 7 years for Charge-off Accounts, Closed Accounts, Collection Accounts, Judgements, Late Payments, Tax Liens
- Up to 10 years for Bankruptcy
FREE Annual Report
All Americans are entitled to one free credit report in every 12-month period from each of the three credit bureaus.
Visit AnnualCreditReport.com to access your free report. Requesting your credit score can also be requested - but for a fee.
TransUnion, Equifax and Experian logos is are registered trademarks of TransUnion, Equifax and Experian respectively.
Visit www.go2fbt.com for more information.
