Categories

Score Advice

The FICO® Score Powered by Experian and You: Understanding Key Factors

Financial blogger Ash Cash joins to share information on the major factors that can shape a FICO® Score.

As many people may know, having a low credit score can prevent you from getting loans, renting or buying a home, purchasing a car, and possibly even opening a bank account. But knowledge is a great place to start when planning a brighter future for your credit. Your FICO® Score powered by Experian is a lender score, so when you consult it, you're seeing the same type of information that banks and lenders see. Understanding FICO Scores is easier once you know how they're calculated.

FICO Scores consider five types of information in their calculation:

  • Your payment history (35 percent)
  • Your debt usage ratio: how much you owe in relation to your credit limit (30 percent)
  • How far back your credit history goes (15 percent)
  • New credit (10 percent)
  • Your mix of various types of credit (10 percent)

Your payment history includes recent payment record of car loans, mortgages, retail accounts, installment loans, credit cards and more. Making sure you pay your bills on time is critical, because recent late payments and accounts in collection can have a significant negative impact on your Score.

Your debt usage ratio calculates the total amount owed on revolving accounts in relation to the total credit limit. It's important to keep your balances low on credit cards and other revolving accounts. A general rule of thumb is to keep your balance below 30 percent of the total credit available. By this logic, you wouldn't want to spend more than $300 with a $1,000 credit limit.

Length of credit history looks at the age of your accounts, number of recently opened accounts, time since account activity, proportion of new credit vs. established credit, and the re-establishment of new credit following any adverse payment problems. If you're just establishing your credit history, carefully consider opening any new accounts. New accounts may bring down your Score temporarily, especially if you're just starting out.

Rapid account buildup can be seen as a risk to potential creditors. If you have past payment history problems, work to get back on track as soon as you can. Opening new accounts you can afford to pay off on time can positively impact your credit scores in the long term.

Additionally, new credit/inquiries are considered. The calculation considers the number of recent inquiries, the time since an inquiry, the number of recently opened accounts, and the time since opening an account. A credit inquiry appears on your report if your credit report was requested and delivered while you were seeking new credit. If you or your current lenders request your credit report, this is not usually considered in your credit score calculation.

Lastly, a balanced credit mix is important when managing your finances. Your credit mix refers to the different types of accounts — credit cards, retail accounts, installment loans, mortgages and consumer finance accounts — that can impact your credit scores. In general, a varied mix of credit types can have a more positive impact on your credit scores than a credit report that shows only one type of credit.

Ultimately, your understanding of how FICO Scores are calculated helps you identify the most important elements of your Experian credit report. Your credit report shows your credit behaviors. Now that you know how your behavior impacts the calculation of your credit score, you'll be able to see how your actions are reflected in the FICO Score powered by Experian data.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

FICO is a registered trademark of the Fair Isaac Corporation.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Experian.


Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.

How Good Is Your Credit Score?

300 credit score301 credit score302 credit score303 credit score304 credit score305 credit score306 credit score307 credit score308 credit score309 credit score310 credit score311 credit score312 credit score313 credit score314 credit score315 credit score316 credit score317 credit score318 credit score319 credit score320 credit score321 credit score322 credit score323 credit score324 credit score325 credit score326 credit score327 credit score328 credit score329 credit score330 credit score331 credit score332 credit score333 credit score334 credit score335 credit score336 credit score337 credit score338 credit score339 credit score340 credit score341 credit score342 credit score343 credit score344 credit score345 credit score346 credit score347 credit score348 credit score349 credit score350 credit score351 credit score352 credit score353 credit score354 credit score355 credit score356 credit score357 credit score358 credit score359 credit score360 credit score361 credit score362 credit score363 credit score364 credit score365 credit score366 credit score367 credit score368 credit score369 credit score370 credit score371 credit score372 credit score373 credit score374 credit score375 credit score376 credit score377 credit score378 credit score379 credit score380 credit score381 credit score382 credit score383 credit score384 credit score385 credit score386 credit score387 credit score388 credit score389 credit score390 credit score391 credit score392 credit score393 credit score394 credit score395 credit score396 credit score397 credit score398 credit score399 credit score400 credit score401 credit score402 credit score403 credit score404 credit score405 credit score406 credit score407 credit score408 credit score409 credit score410 credit score411 credit score412 credit score413 credit score414 credit score415 credit score416 credit score417 credit score418 credit score419 credit score420 credit score421 credit score422 credit score423 credit score424 credit score425 credit score426 credit score427 credit score428 credit score429 credit score430 credit score431 credit score432 credit score433 credit score434 credit score435 credit score436 credit score437 credit score438 credit score439 credit score440 credit score441 credit score442 credit score443 credit score444 credit score445 credit score446 credit score447 credit score448 credit score449 credit score450 credit score451 credit score452 credit score453 credit score454 credit score455 credit score456 credit score457 credit score458 credit score459 credit score460 credit score461 credit score462 credit score463 credit score464 credit score465 credit score466 credit score467 credit score468 credit score469 credit score470 credit score471 credit score472 credit score473 credit score474 credit score475 credit score476 credit score477 credit score478 credit score479 credit score480 credit score481 credit score482 credit score483 credit score484 credit score485 credit score486 credit score487 credit score488 credit score489 credit score490 credit score491 credit score492 credit score493 credit score494 credit score495 credit score496 credit score497 credit score498 credit score499 credit score500 credit score501 credit score502 credit score503 credit score504 credit score505 credit score506 credit score507 credit score508 credit score509 credit score510 credit score511 credit score512 credit score513 credit score514 credit score515 credit score516 credit score517 credit score518 credit score519 credit score520 credit score521 credit score522 credit score523 credit score524 credit score525 credit score526 credit score527 credit score528 credit score529 credit score530 credit score531 credit score532 credit score533 credit score534 credit score535 credit score536 credit score537 credit score538 credit score539 credit score540 credit score541 credit score542 credit score543 credit score544 credit score545 credit score546 credit score547 credit score548 credit score549 credit score550 credit score551 credit score552 credit score553 credit score554 credit score555 credit score556 credit score557 credit score558 credit score559 credit score560 credit score561 credit score562 credit score563 credit score564 credit score565 credit score566 credit score567 credit score568 credit score569 credit score570 credit score571 credit score572 credit score573 credit score574 credit score575 credit score576 credit score577 credit score578 credit score579 credit score
Sign up for helpful tips, special offers and more!
You're signed up!
Our system is undergoing maintenance and will be available again soon.