Removing the Mystery from ...
Factors that Determine Your Credit Score


Fair Isaac Corporation (FICO) created the algorithm that is most frequently used in credit scoring.  Several variations of the basic model are used and not all credit bureaus use the same variation.  The basic model is generally shrouded in mystery, though FICO does make several general assertions:


Factor 1. Payment History (35%)

-Track record with various lenders

-Length of positive credit history

-Length of time passed since most recent negative item

-Severe unpaid debts like bankruptcy, foreclosure, court judgments

-Severity and quantity of delinquencies.  A 30-day late more than two years ago is less severe than a 90-day late within the last year.  Collections and charge-offs can be very damaging.


Factor 2. Outstanding Debt (30%)

-Quantity of Credit Accounts.  There is no optimal number, a couple of accounts is better than none, and probably better than many.

-Ratio of credit balance to credit limit.  Keep this as low as possible, though “0” balance is not necessarily better than having a small balance that is paid regularly.  35% or less seems to be optimal.

-Amount owed on all accounts.  Keeping an old card with “0” balance may be better than closing the account.

-Amount owed on each type of account. 

-Portion of installment loans paid off


Factor 3. Length of Credit History (15%)

-Longer is better


Factor 4. Types of Credit (10%)

-A couple of revolving cards (credit cards) and an installment loan or two is ideal.


Factor 5. Inquiries for New Credit (10%)

-Recent requests for credit may count against you




What is not considered?

-race, color, religion, national origin, sex, marital status


-salary, occupation, title, employer, date employed, employment history

-place of residence

-any interest rate being charged on your accounts

-child/family support obligations or rental agreements

-certain types of inquiries

-any information not found on your credit report