Your FICO® score – or lack thereof – impacts your ability to rent an apartment, buy a home or car, open a credit card, and can even influence whether you receive the licenses required for certain jobs. How high your score is affects the pricing you’re offered – the better the score, the lower your interest rate. Yet most of us have little or no idea what makes up the almighty FICO®. That changes now.
These five factors make up your FICO score:
- 35%: Payment History: How much and how fast you pay.
- 30%: Utilization rate (Amounts owed): this is the percentage of your credit you use – the closer you are to your credit limit – per line of credit – the lower your score.
- 15%: Account Age: How long you’ve had your accounts open. Never use that credit card you got in 2000? Closing it may still do more harm than good.
- 10%: Account Mix: How many and what kind of accounts you have. A mix (think home loan and credit card) shows how you handle different types of debt.
- 10%: New Credit. New credit will always drive your credit score down because it’s a big question mark. Until there’s a history of use, new credit is a risk factor. Generally, it takes 4 months, or 3 on-time payments for that new line of credit to start helping your score.
See What is a FICO® Score, How is It Calculated | Equifax