Do you know what your income, your employment history and your age all have in common? NONE of them factor into your credit score.
Now it’s time to dig into your actual credit score – the number used to summarize your creditworthiness.
See how it’s calculated in the latest episode of Money Minute: What’s in a Credit Score? / What’s a FICO Score?
We know what credit is, why it matters and that it’s based on our credit history as shown on our credit reports. But how does that credit history translate into a credit score?
Here’s the breakdown on how the most popular credit scores, FICO scores, are calculated…
35% Payment History. Do you pay on time?
30% Debt to Credit Ratio. How much of your available credit are you currently using?
Tip, keep your balances below 30 percent of your total credit limit whenever possible
15% Length of Credit History. How long have you been a credit user?
10% Credit Mix. Are you using different kinds of credit responsibly? Installment loans, retail accounts, credit cards?
10% New Credit. If you’re trying to apply for a lot of new credit all at once, that could be a red flag.
That’s what makes up the FICO score most lenders use when determining your creditworthiness.
Some credit card companies offer a free FICO score as a perk, but you can also purchase your FICO score from each of the three credit bureaus for a nominal fee.
I’ve put together a FREE Credit Check Checklist to walk you through a complete review of each of your three credit reports so you can ensure that all the information being used to calculate your credit score is accurate.
Enter your name and email to get the step-by-step credit check guide delivered directly to your inbox!
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