How is your FICO Credit Score Calculated?
Credit scores are one of the many nuances that come along with adulthood. Whether you’re looking to buy a house, finance a vehicle, or get approved for any other type of loan, your credit score will end up playing a big part in the amount you can borrow as well as interest rates. While it’s easy to say that you should pay attention to your credit score, you might not be aware of the different factors that are calculated by your credit score. Here, we’ll go over the different elements that make up your credit score, according to FICO.
The biggest indicator of your credit score is your payment history. If you make your payments regularly and don’t miss any, your credit score will slowly see improvement. Likewise, if you miss payments, or don’t make the minimum payment, you’re likely to see your score drop.
Your payment history makes up about 35% of your credit score.
The second largest factor in your FICO score is the amounts you owe. As you can expect, this goes hand and hand with your payment history. Making regular payments to your accounts and keeping a majority of your credit line free will have a positive impact on your score. On the other hand, borrowing large sums of money and keeping them on your accounts for a long time can have a negative impact.
The amounts you owe make up 35% of your FICO credit score.
Length of Credit History
Your credit score also takes into account the longevity of your accounts. While over time it will become more difficult to change your credit score, long-time accounts will be seen as more responsible than newer accounts.
The length of your credit history is about 15% of your credit score.
It’s important to keep building your credit to show that you are a reliable lender. Having New Credit shows that you are consistent with your spending and payments.
New credit counts towards about 10% of your credit score.
[Read more: Reasons to Build your Credit]
Having multiple types of well-maintained credit accounts – whether in the form of loans, credit cards or store cards – shows lenders that you can responsibly manage payments on a variety of accounts. Being able to juggle accounts responsibly will make you appear more reliable to creditors.
For more information about your credit score, contact us today here at Broadway Auto Credit!