What Is FICO®?
The FICO® Score was developed in 1989 by Fair, Isaac and Company. Like VantageScore®, FICO® exists to help lenders determine the level of risk associated with giving a consumer a loan. In most cases, lenders use FICO® as an official barometer of creditworthiness when you apply and to determine terms of your loan.
FICO® Credit Factors
The following factors and respective weights are what make up your FICO® credit score:
- Payment history (35%): Payment history is based on your past payment behavior. It’s one the biggest factors that goes into your FICO® Score and can include other remarks like collections and charge-offs.
- Amounts owed (30%): This takes a look at the percentage of the revolving credit accounts you use.
- Length of credit history (15%): Your credit history shows your past and current credit behavior and is a way for lenders to see how you’ve handled loans and debt. The longer your credit history is, the more lenders will be able to get a sense of your repayment behavior. However, it’s not weighted as highly as other factors, so people who are new to credit shouldn’t be discouraged.
- New credit (10%): Each time you apply for or open a new credit account, it will show up on your credit report if it’s a hard inquiry. Lenders look at whether you’re applying for a lot of new accounts as an indicator of whether you’re extended financially beyond your means.
- Credit mix (10%): Having a mix of revolving and installment loans can show lenders how you handle different types of debt. However, it’s not a major factor when it comes to calculating your credit score.
Factors That Don’t Impact Your FICO® Score
Factors that don’t impact your FICO® Score are the same as with VantageScore®. These factors include any bills that aren’t reported to the credit bureaus, and anything that could prove discriminatory like your age and race.
Why Your FICO® Score Is Lower Than Other Credit Scores
Your FICO® Score is a type of credit score. However, your FICO® Score and other credit scores can vary depending on the version of the scoring model your lender uses (for example, FICO® 8 versus FICO® 9), what information lenders have access to and how they weigh that information.]
One key thing to be aware of is that not every lender or creditor reports to every bureau, so you may have some loans or accounts that show up on one report and not others. The score for each bureau is only based on the information it’s able to collect, so it’s possible your score will be different between the three bureaus.
