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FICO Score Resource Guide

What Your FICO Score is and How It Is Determined

Your FICO Score is a rating about your credit worthiness developed by Fair Issac Corporation hence the name FICO Score. These scores are used by just about all lenders to determine the amount of risk you pose to them, should they lend you money or provide their services to you.

FICO scores range from 300 to 900 and are made up of many different facets from your credit data found in your credit report. MyFico.com has reported that the population usually falls within this distribution:

20 percent below 620
20 percent between 620 and 690
20 percent between 690 and 745
20 percent between 745 and 780
20 percent above 780

It has been generally agreed that an average to good FICO score is around 720 FICO has broken down the criteria used to determine the score into 5 parts and then applied a certain level of importance to each category.

The Categories and Percentage of Importance in your FICO Score

Payment History 35%
Your ability to pay back your debt and doing so within the terms of your agreements is of the utmost importance. Payment information on specific types of accounts are used such as: credit cards, retail accounts, installment loans, financing companies and mortgages. Factors will include how long past due (the severity of the delinquency) the account is and how much is past due, as well as how recent the past due items are, in other words how long has this been going on for. The score will also factor how many accounts you have that are paid by the terms.

Amounts Owed 30%
This section focuses on how much you actually owe as compared to how much credit you have available. You may think that it is better to have one credit card with a $5000 limit paid in full versus having 3 credit cards with total credit available of $15,000 paid in full. But the FICO score formula places more importance on people with more AVAILABLE credit that is NOT USED. This is one reason you may not want to close out available lines of credit that you do not use. The trick here is to have the credit available but not to use it!

Length Of Credit History 15%
Nothing too tricky here. FICO, likes to see how long you've been using credit and how long your accounts have been open and in good standing. This is yet another reason to leave accounts open, even if you do not plan to use the credit available.

New Credit - 10%
This area of the report takes a few things into account. First they look at the number of recently opened accounts versus the total number of accounts you have. So its not in your best interest to have just opened 5 credit card accounts in a short period of time. FICO looks at how many recent credit inquiries there have been on your account. This is one reason why you do not want to shop around for mortgages more than a few times. Each time you go for a pre-approval from a new company, they will be checking and inquiring on your credit, which will impact your FICO score. The last few factors in this section are related to the times since the accounts have been opened, the time since the last inquiries on your account and how long its been since you've regained your positive credit history after past problems.

Types of Credit Used - 10%
Here FICO will be looking at the relationship of different types of credit you use. Are they all the same or is there a good mix of product types like: credit cards, retail accounts, installment loans, mortgage and consumer finance accounts. What is important here is not clear to us, but we can only speculate that FICO would like to see a spread of credit types versus one type only.

In Conclusion

The importance of these factors will depend on what information is reported in your credit report, making it extremely important to check your credit report regularly and keep it accurate and up to date. Your FICO score will consider good and bad information on your credit report. It is obvious that late payments are the biggest single factor for a lower score, but by simply paying on time to re-establish a track record you will raise your FICO score. The lesson here is to at least make your minimum payment each month to maintain the biggest portion of your FICO score - Payment History.

How to get your FICO Score

The best place to obtain your fico score is where it's computed in the first place. www.myfico.com is the site run by Fair Isaac. They have a variety of FICO reports and credit products to help you check your score, monitor and maintain your credit, and even help protect you from identity theft. Their products range from $4.95 to $95.40 depending on the type of product you purchase