A Quick Breakdown of the 5 Categories of Your FICO Score

A better understanding of the most used credit scoring model

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FICO Score is the most used credit scoring model using by issuers when you are applying for a credit card or loan. How do I know this? As stated on the FICO Score website, “FICO Scores are used in over 90% of U.S. lending decisions.”

FICO stands for Fair Isaac Corporation, which is a leading data analytics company focused on credit scoring services. FICO Score was first introduced in 1989 and has become a standard credit scoring model since then. FICO Scores range from 300 to 850. Generally, scores ranging from 300 to 579 are poor, 580 to 669 are fair, 670 to 739 are good, 740 to 799 are very good, and 800 to 850 are exceptional.

FICO Score is currently on its 9th version, with the 10th version expected to be released later this year. Even though the 9th version of FICO Score is the latest, the 8th version is still the most widely used by Experian, Equifax, and TransUnion. With each update to FICO Score, factors and categories are adjusted to reflect consumer demand and use of credit better.

When it comes to your FICO Score 8, your data is calculated using many different pieces of your credit report and grouped into 5 categories. The following are the 5 categories: payment history, amounts owed, length of credit history, credit mix, and new credit. The 5 categories make up different percentages of your FICO Score.

1. Payment History

Payment history is whether you pay your credit accounts on time or not. With paying your credit accounts on time all the time, that will positively reflect in your FICO Score. Payment history makes up 35% of your FICO Score. It is the highest impact out of any of the categories, so make sure that you always pay your accounts on time.

2. Amounts Owed

Amounts owed is the amount of money you owe. Owing money is not a bad thing, but when it is clear you are over-utilizing your credit cards, that will negatively reflect in your FICO Score. When it comes to revolving lines of credit like credit cards, your usage of credit should be 30% or less. Amounts owed is the second most impactful category of your FICO score because it makes up 30% of your FICO Score. Be smart with your credit usage so that you continue to see positive movements in your FICO Score.

3. Length of Credit History

The length of your credit history is the amount of time you have had your oldest credit account. When it comes to this category, FICO also considers the age of loans, the age of your newest credit accounts, and an average age of all your accounts. The longer your overall credit history is, the better it is for your FICO Score. Length of credit history has a medium impact. It makes up 15% of your FICO Score.

4. Credit Mix

Credit mix is the mix of different credit accounts you may have, such as credit cards, personal loans, mortgages, and retail accounts. Having a decent credit mix is good to have, but it will not make or break your FICO Score. Credit mix has a low impact. It makes up 10% of your FICO Score.

5. New Credit

New credit refers to accounts that have been recently opened. When it comes to this category, the focus is on how many accounts you have opened in a short amount of time. If you open 5 credit card accounts in 3 months, that shows you are a greater risk when it comes to lending. Even though new credit has a low impact of 10% on your FICO Score, it is recommended to space out how often you open new credit accounts.

In the past, I wrote about VantageScore, which is typically more readily available for your free viewing through websites such as CreditKarma, Mint, and NerdWallet. With FICO Score, you can easily view your score through Discover Credit Scorecard. Also, if you are a Navy Federal, Citibank, Bank of America, or Ally Bank credit account holder, you can view your FICO Score through those institutions.

It is important to remember that different places you view your FICO Score may have different scores. That is due to them using different FICO scoring models, and also due to them collecting slightly different data. For example, Discover uses FICO Score 8 based on TransUnion Data, while Navy Federal uses FICO Score 9 based on Equifax data. In understanding your FICO Score, you will be able to better position yourself for opportunities to leverage your money.

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