Five things that make up your credit score

Personal Credit
Student loans
Home loans
Auto loans
Written By:
Dawn Holden, SVP, Director of Mortgage Consumer Direct
Person budgeting and paying bills at home

Knowing what goes into your FICO credit score can help you improve and protect it. Named for the data analytics company—Fair, Isaac and Company—that came up with the score as a way to measure consumer credit risk, the FICO is the standard in consumer lending in the United States.

That three-digit number between 300 and 850 can influence your ability to get a loan for large purchases such as a home or car. Some employers even use credit scores in making hiring decisions. The higher the number, the better the score. So let’s look at a percentage breakdown of what determines your FICO credit score. 

Payment history – 35 percent of your FICO score. Whether you pay bills on time is the biggest factor that influences your FICO score. To maintain a good score, it’s important to keep up with payments. Late payments can stay on your credit report up to seven years.

If your situation limits you from paying off your credit card balance, safeguard your credit score by making the minimum monthly payments on time if you can. Not paying the full balance will likely result in eventually paying more in interest fees.

If you find yourself in a pinch, contact your creditors (your lender or credit card company) to see if they can make accommodations such as refinancing. During the coronavirus pandemic, for example, many mortgage lenders have offered forbearance, which allows borrowers to delay payments for a period of time without penalties. Use caution here as payments will eventually come due. Forbearance should not affect your credit score, but talk to your lender to be sure. And seek credit counseling to help you set priorities, and consolidate and pay down debt.

The amount you owe – 30 percent of your credit score. This piece also assesses the amount you owe in relation to your available credit. Think of it as a ratio that compares the balance you owe on a credit card to your card limit. The closer the amount you owe gets to your account limit, the more it may lower your credit score. Since your FICO score looks at the amount you owe on individual accounts as well as all of your accounts, a good practice is to keep all your balances at 30 percent or less than the credit limit for each account. And always avoid maxing out your accounts. 

Length of your credit history – 15 percent of your credit score. This piece of the credit score pie looks at how long your credit has been established as well has how long it’s been since you used certain credit.

Mix of credit in use – 10 percent of your credit score. The mix refers to the different kinds of credit you use. Examples include installment loans which have a set number of scheduled payments over time, revolving credit such as credit cards or lines of credit, home loans and auto loans. Being able to successfully obtain and manage a diverse mix of credit can raise this aspect of your credit score. 

New credit – 10 percent of your FICO score. Research shows opening several new accounts in a short time represents greater risk, especially for people who don’t have a long credit history. When you apply for new credit, a lender requests your credit report or score. Those inquiries remain on your credit report for two years, but your FICO score only considers inquiries from the past 12 months. So applying for new accounts or loans could lower your credit score. But checking your own credit report won’t affect your FICO scores when you request a report directly from the credit reporting agency or an organization authorized to provide reports to consumers. 

For more information, see these blogs on our site: Four Steps to Improve Your Credit Score and Six Steps to Get Your Debt under Control. If you have questions, your banker is a good source of information and can refer you to other experts.