FICO Score – the 5 components

The FICO score .  Yes, that 3 digit number that reflects our credit worthiness and more importantly, the rates and terms that lenders will offer us on various loans (mortgages, car loans, etc).   But what goes into it?  How is our FICO score calculated?  What should we be paying attention to? 

While I’m not one of those guys that thinks my FICO score is something I need to guard on a daily basis and watch hawkishly with each and every financial step I take, I do think it’s important to have a general sense of what helps and what hurts my credit score. 

Here’s a quick graphical look at the “5 components” that make up your FICO score and the relative importance or ‘weight’ of each. 


And for the sake of clarity –  here’s a breakdown of these 5 components (straight from the “I’ve got a deal with Fair Issac Corporation” (FICO) High Priestess herself).  

  • Payment history (35%)-Aside from extreme events, like bankruptcy or tax liens, late payments have the greatest negative impact on your score. Recency and frequency of late payments count too. In other words, even though a 60-day late payment is not as risky as a 90-day late payment in and of itself, a 60-day late payment made just a month ago will count more than a 90-day late payment from five years ago.
  • Outstanding balances (30%)-Evaluation of your total balances in relation to your total available credit on revolving accounts is one of the most important factors in the FICO score. Owing a great deal of money on many accounts or “maxing out” on various credit cards can indicate that a person is overextended, and is more likely to make some payments late or not at all.
  • Length of credit history (15%)-Your score takes into account how long your credit accounts have been established in general, how long specific credit accounts have been established, and how long it has been since you used certain accounts.
  • New Credit (10%)-Research shows that opening several credit accounts in a short period of time does represent greater risk-especially for people who do not have a long-established credit history. Multiple requests will reduce your score because it looks like you are either trying to get a high amount of credit (possibly because of a cash flow problem) or that you are being rejected by lenders and having to apply elsewhere.
  • Types of credit (10%)-The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Your score takes into account what kinds of credit accounts you have, and how many of each. The score also looks at the total number of accounts you have
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