FICO Scores: Credit Basics

There are 5 major variables that impact your FICO® credit score.

Did you know 90% of top lenders use FICO scores when they are making lending decisions.

How FICO Scores Work

The FICO credit score has a range between 300-850, with 300 representing an extremely high credit risk and 850 representing an extremely low credit risk.

When a possible credit or cash lender receives a FICO score from an application or credit submission request, key “score factors” are delivered with the score. These key score factors are one of the top variables that affected the credit score.

FICO’s research has shown that persons’ with a high FICO score tend to:

  • Make all of their payments on time each month
  • Keep credit card balances below 30%
  • Apply for new credit only when needed
  • Establish a long credit history

The following is a more detailed description of each category provided by FICO, with a detailed breakdown of each category. As you review this information, keep in mind that:

  • FICO scores take into consideration all of these categories, not just one or two.
  • The importance of any factor (piece of information) depends on the information in your entire credit report.
  • FICO scores look only at the credit-related information on a credit report.
  • FICO scores consider both positive and negative information on a credit report.
Factor and WeightWhat it MeansHow Actions Help Your Credit Profile
Payment History
Payment History
The record of every on-time, late, or missed payment for extensions of credits you have received.
By making your monthly payments on time, will help you demonstrate a responsible pattern of on-time repayment that lenders look for when making credit decisions. Making on-time payments positively impacts your credit profile while missed or late payments negatively impact your credit profile.
Amounts Owed
Amounts Owed
How much you owe each creditor individually and in total. It includes your utilization rate for revolving lines of credit (e.g. credit cards).
When you initially open your accounts’ your amounts owed will increase which may cause a temporary small dip in your credit score. As you make regular on-time monthly payments your amounts owed will decrease and it will positively impact your credit profile.
Length of Credit History
Length of Credit History
The length and age of each trade line on your credit report individually and in total.
The longer the term of your tradeline account (e.g. 24 months vs. 12 months) the greater the potential positive impact on your credit profile.
Credit Mix
Credit Mix
The types of credit used; Revolving: Credit cards or revolving lines of credit and/or Installment: Fixed loan amount and payment.
Your credit trade accounts’ can include an installment loan. It is important to have both installment loans and revolving lines of credit on your credit report to maintain a well-rounded credit profile.
New Credit
New Credit
New account opening activity and any recent ‘hard’ credit inquiries from lenders on your credit report.
The potential small initial negative impact of adding a new loan to your credit profile will be far outweighed by the positive impact of demonstrating a pattern of on-time repayment.