Knowing what goes into your FICO credit score can help you improve and protect it. Named for the data analytics company—Fair, Isaac and Company—that came up with the score as a way to measure consumer credit risk, the FICO is the standard in consumer lending in the United States.
That three-digit number between 300 and 850 can influence your ability to get a loan for large purchases such as a home or car. Some employers even use credit scores in making hiring decisions. The higher the number, the better the score. So let’s look at a percentage breakdown of what determines your FICO credit score.
Payment history – 35 percent of your FICO score. Whether you pay bills on time is the biggest factor that influences your FICO score. To maintain a good score, it’s important to keep up with payments. Late payments can stay on your credit report up to seven years.
If your situation limits you from paying off your credit card balance, safeguard your credit score by making the minimum monthly payments on time if you can. Not paying the full balance will likely result in eventually paying more in interest fees.
If you find yourself in a pinch, contact your creditors (your lender or credit card company) to see if they can make accommodations such as refinancing. During the coronavirus pandemic, for example, many mortgage lenders have offered forbearance, which allows borrowers to delay payments for a period of time without penalties. Use caution here as payments will eventually come due. Forbearance should not affect your credit score, but talk to your lender to be sure. And seek credit counseling to help you set priorities, and consolidate and pay down debt.
The amount you owe – 30 percent of your credit score. This piece also assesses the amount you owe in relation to your available credit. Think of it as a ratio that compares the balance you owe on a credit card to your card limit. The closer the amount you owe gets to your account limit, the more it may lower your credit score. Since your FICO score looks at the amount you owe on individual accounts as well as all of your accounts, a good practice is to keep all your balances at 30 percent or less than the credit limit for each account. And always avoid maxing out your accounts.
Length of your credit history – 15 percent of your credit score. This piece of the credit score pie looks at how long your credit has been established as well has how long it’s been since you used certain credit.
Mix of credit in use – 10 percent of your credit score. The mix refers to the different kinds of credit you use. Examples include installment loans which have a set number of scheduled payments over time, revolving credit such as credit cards or lines of credit, home loans and auto loans. Being able to successfully obtain and manage a diverse mix of credit can raise this aspect of your credit score.
New credit – 10 percent of your FICO score. Research shows opening several new accounts in a short time represents greater risk, especially for people who don’t have a long credit history. When you apply for new credit, a lender requests your credit report or score. Those inquiries remain on your credit report for two years, but your FICO score only considers inquiries from the past 12 months. So applying for new accounts or loans could lower your credit score. But checking your own credit report won’t affect your FICO scores when you request a report directly from the credit reporting agency or an organization authorized to provide reports to consumers.
For more information, see these blogs on our site: Four Steps to Improve Your Credit Scoreand Six Steps to Get Your Debt under Control. If you have questions, your banker is a good source of information and can refer you to other experts.
FAQs
The 5 C's of credit are character, capacity, capital, collateral and conditions. When you apply for a loan, mortgage or credit card, the lender will want to know you can pay back the money as agreed. Lenders will look at your creditworthiness, or how you've managed debt and whether you can take on more.
What are the 5 C's of credit score? ›
The 5 C's of credit are character, capacity, capital, collateral and conditions. When you apply for a loan, mortgage or credit card, the lender will want to know you can pay back the money as agreed. Lenders will look at your creditworthiness, or how you've managed debt and whether you can take on more.
What are 5 things found on a credit report? ›
These five categories are: identifying information, credit accounts, credit inquiries, bankruptcy public records, and collections.
What are the 5 ways credit scores are calculated? ›
A FICO credit score is calculated based on five factors: your payment history, amount owed, new credit, length of credit history, and credit mix. Your record of on-time payments and amount of credit you've used are the two top factors. Applying for new credit can temporarily lower your score.
What are the 5 elements of a credit score? ›
What's in my FICO® Scores? FICO Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).
What are the 5 credit rating factors? ›
The five biggest factors that affect your credit score are payment history, amounts owed, length of credit history, new credit, and types of credit. To improve your credit, it's important to understand how these factors impact your credit and what a credit score means when you apply for a loan.
What are the 5 P's of credit? ›
Different models such as the 5C's of credit (Character, Capacity, Capital, Collateral and Conditions); the 5P's (Person, Payment, Principal, Purpose and Protection), the LAPP (Liquidity, Activity, Profitability and Potential), the CAMPARI (Character, Ability, Margin, Purpose, Amount, Repayment and Insurance) model and ...
Is a 900 credit score possible? ›
Ans. While achieving a 900 credit score is technically possible with the CIBIL model, it's highly uncommon. A score above 760 is considered very good or exceptional and offers significant benefits like lower interest rates and improved loan approval odds.
How to get 800 credit score? ›
Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.
What 5 things make up your credit score? ›
Five things that make up your credit score
- Payment history – 35 percent of your FICO score. ...
- The amount you owe – 30 percent of your credit score. ...
- Length of your credit history – 15 percent of your credit score. ...
- Mix of credit in use – 10 percent of your credit score. ...
- New credit – 10 percent of your FICO score.
- Character. Character, the first C, more specifically refers to credit history, which is a borrower's reputation or track record for repaying debts. ...
- Capacity. ...
- Capital. ...
- Collateral. ...
- Conditions.
5 Things That May Hurt Your Credit Scores
- Making a late payment.
- Having a high debt to credit utilization ratio.
- Applying for a lot of credit at once.
- Closing a credit card account.
- Stopping your credit-related activities for an extended period.
The primary factors that affect your credit score include payment history, the amount of debt you owe, how long you've been using credit, new or recent credit, and types of credit used. Each factor is weighted differently in your score.
How to get 5 points on credit score? ›
To raise your credit score by 5 points, you can dispute errors on your credit report, pay your bills on time and lower your credit utilization. Credit scores rise and fall based on the contents of your credit report, so adding positive information to your report will offset negative entries and increase your score.
What are the 5 factors that affect a borrower's credit worthiness? ›
Each lender has its own method for analyzing a borrower's creditworthiness. Most lenders use the five Cs—character, capacity, capital, collateral, and conditions—when analyzing individual or business credit applications.
What are the 5 factors taken into account when calculating a credit score quizlet? ›
What are the 5 factors taken into account when calculating a credit score? Payment history, amounts owed, length of credit history, new credit, and types of credit.
What brings down your credit score? ›
There are lots of reasons why your credit score could have gone down, including a recent late or missed payment, an application for new credit or a change to your credit limit or usage. The most important information to understand about credit is the factors that go into your scores.
How do I find out what factors affect my credit score? ›
The main factors involved in calculating a credit score are:
- Your payment history.
- Your used credit vs. your available credit.
- The length of your credit history.
- Public records.
- Number of inquiries into your credit file.
