How Your FICO Score is Calculated

How Your FICO Score is Calculated

August 9, 2016
FICO Score
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Your credit score is extremely important. It represents your creditworthiness, how likely it is that you will pay your debts. Banks and credit card companies always look at your credit score to evaluate the potential risk of loaning you money. The higher the credit score, the better it is for you.

Most banks and credit card companies use the FICO model to calculate the credit scores of their customers. The FICO score was first introduced in 1989. At that time it was called Fair, Isaac, and Company. It uses the information found in consumer credit from the three national credit bureaus: Experian, Equifax, and TransUnion.

Because these files can contain different information, the FICO scores can vary depending on which bureau provides the information. But all the information into five different categories, each with its own level of importance, shown here as a percentage of the overall score.

FICO score

Payment history

Your payment history comprises 35% of your FICO score, making it the most important of the five factors. It’s because this is the first thing that any lender wants to know before going into business with you. A person’s payment history shows which accounts were paid on time, how much is owed and the length of any delinquencies, but also any adverse public records such as bankruptcies, judgements or liens.

Amounts Owed

At 30%, this is the second most important factor. It includes the number of accounts you owe money on, what kind of debt you have, the total amount and the credit utilization rate. Although you might be tempted to think that having many credit accounts and owing money on them makes you a high-risk borrower with a low FICO score, this is not necessarily so.

Length of credit history

Your length of credit history makes up 15% of your score. Even though a longer credit history will increase your FICO score, it doesn’t mean that people who haven’t been using plastic for very long can’t have high scores. It all depends on the rest of the credit report.

This factor includes the following information:

  • The age of the consumer’s oldest and newest credit accounts;
  • The average age of all of the consumer’s credit accounts;
  • How long has it been since the consumer used certain accounts;
  • How long different types of credit accounts, such as mortgages or credit cards, have been established.

Credit mix in use

The types of credit used comprise another 10% of your FICO score. These include credit cards, retail accounts, installment loans, finance company accounts or mortgage loans. Having many different types of accounts is a lot better than having fewer.

New credit

New credit comprises the final 10% of your FICO score. It is made up of information such as the number of recent credit inquiries or how many new accounts have been opened. Opening too many accounts in a short period of time will lower your score, as it can be seen as a sign of risk.


While your FICO score will always include the information from these five categories, the percentages won’t necessarily stay the same. They are based on the importance of the five categories to the general population, and can be different for particular groups, such as people who have just started using credit cards.


Thomas Hookton

Thomas Hookton is a finance journalist, history buff and science fiction connoisseur. Hit him up via email.

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