You hear a lot about your credit score being a strong factor behind your eligibility for credit cards, car loans or mortgages, but do you know how the Fair Isaac Corp., the company that calculates your FICO credit score, determines this number?
Here are the basics:
Your FICO credit score ranges from 300 to 850 points; the higher your score the better.
A high FICO score means you’ll get the best rates and terms on all kinds of loans.
You’ll also save a bundle on expenses like auto insurance and life insurance.
The 5 factors that determine your FICO score
Under Fair Isaac’s credit scoring model, your FICO score is based on five primary factors:
- 35% of your FICO score is based on your payment history
- 30% of your FICO score is based on the amount of credit you have used
- 15% of your FICO score is based on the length of your credit history
- 10% of yourFICO score is based on your mix of credit and income
- 10% of your FICO score is based on inquiries and new credit you’ve taken on
Learning how to “work” the FICO credit scoring system can work in your favor. Read 6 Guidelines to Help You Maximize Your Credit Score.
Related reading: Perfect Credit: 7 Steps to a Great Credit Rating