I don't understand FICO - Page 2

hachaliah · 01-28-2008, 08:28 AM

There are five areas that can impact your credit score. Typically, at least one account needs to be open for six months or more and as well as an account with activity reported in the last six months.

35% of the score is attributed to payment history. This is for any type of account, mortgage, installment, or revolving.
30% of the score is attributed to balances owed. This factor comes in to play most commonly with credit cards. I have heard you should keep the balances on your credit card(s) at between 35-50% of the available credit limit for optimal FICO scoring.
15% of the score is attributed to length of credit history. The old adage of credit score maintanence "once you can get your credit card debt in control, pay each credit card off and cancel it!" isn't the most beneficial if improving your FICO is the goal. I'm not saying keep them all open, but having a long term credit card or two left open (whether they are used or not) makes a difference. Although Fair Isaac has never said what the age of choice is for scores reporting better, I have been told seven years and beyond is the best.
10% of the score is attributed to new credit. This also includes inquires to your credit. Keep in mind that mortgage and auto inquires that fall within a 30 day period of each other will not adversely affect your FICO. That means you do have room to do some shopping on car and house rates. Any inquiries done within 14 days will only count as one inquiry.
10% of the score is attributed to the mix of credit types. A little bit of each makes a difference, but remember that it's only 10% of the total package.

I hope this helps understanding things a little bit. Obviously the secret equations the credit bureaus use aren't readily available, but these factors are the truth.

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01-28-2008, 08:28 AM	#11
hachaliah Junior Member Join Date: Jan 2008 Posts: 2 Reputation: (10)	There are five areas that can impact your credit score. Typically, at least one account needs to be open for six months or more and as well as an account with activity reported in the last six months. 35% of the score is attributed to payment history. This is for any type of account, mortgage, installment, or revolving. 30% of the score is attributed to balances owed. This factor comes in to play most commonly with credit cards. I have heard you should keep the balances on your credit card(s) at between 35-50% of the available credit limit for optimal FICO scoring. 15% of the score is attributed to length of credit history. The old adage of credit score maintanence "once you can get your credit card debt in control, pay each credit card off and cancel it!" isn't the most beneficial if improving your FICO is the goal. I'm not saying keep them all open, but having a long term credit card or two left open (whether they are used or not) makes a difference. Although Fair Isaac has never said what the age of choice is for scores reporting better, I have been told seven years and beyond is the best. 10% of the score is attributed to new credit. This also includes inquires to your credit. Keep in mind that mortgage and auto inquires that fall within a 30 day period of each other will not adversely affect your FICO. That means you do have room to do some shopping on car and house rates. Any inquiries done within 14 days will only count as one inquiry. 10% of the score is attributed to the mix of credit types. A little bit of each makes a difference, but remember that it's only 10% of the total package. I hope this helps understanding things a little bit. Obviously the secret equations the credit bureaus use aren't readily available, but these factors are the truth.