What Your FICO Score Is Made Up Of

As an adult, your credit score plays a huge role in your life. It can lead to better interest rates, can help you get approved for an apartment and mean the difference between getting a loan or not. The most common credit score is the FICO credit score. But what actually makes up your FICO credit score? Read on to learn more.

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Payment history

Your FICO credit score is made up of several factors that have different weight to them. The most significant part of your credit score is your payment history.

In fact, your payment history makes up 35 percent of your credit score. Lenders want to know that you can pay back your loans on time. They want to know that you’re a responsible borrower who can make payments on time. So if you want to boost your credit score, the key is to make your payments on time. Sign-up for reminders or create a Google calendar reminder so you never miss a payment.

Amounts owed

The second most influential factor is the amounts owed. This refers to your credit utilization or how much credit you are using at any given time.

While making your payments on time is a great way to stay on top of your credit, you also need to stay on top of how much credit you are using.

Let’s say you have a credit limit of $5,000. If you’re charging $4,000 out of $5,000 each month, you’re going to look like a risk to lenders. That’s the case even if you make payments on time.

Ideally, you want your credit utilization to be less than 30 percent of your credit limit. In this case, that would mean having $1,500 or less on your credit card.

It can seem counterintuitive — why give you a credit limit if technically you shouldn't use all of the available credit? But lenders want to know that you can responsibly manage the credit that is given to you. When you max out your credit cards it can look like a red flag for lenders who think you are a risk.

Credit utilization makes up 30% of your credit score so it’s pretty important. Keep the balances on all your cards low. If you are charging more than 30 percent, pay off your credit card before the statement date. That may help as many times credit card companies report balances on the statement date to the credit bureaus.

Length of credit history

Another factor that contributes to your credit score is the length of credit history. This aspect you have less control over as only time will help. Lenders like to see that you have a long credit history and that your accounts have been open a while and you’ve been able to manage it all.

When lenders look at your credit score, they’re getting a snapshot view of you as a borrower. In order to make a judgement, they need to look at your past. If you have limited credit history or haven’t had your accounts open very long, they have little to go off of.

The length of credit history makes up 15 percent of your credit score. The key for this part is to keep your accounts open so you have years of proof that you're a responsible borrower.

Credit mix

Not all loans are the same. Did you know that there are various types of loans? For example, credit cards are considered revolving credit and student loans and car loans are considered installment loans.

Lenders like to see diversification, so credit mix is another factor in your FICO credit score. You don’t want to take out more loans just to have a good credit mix. It only makes up 10 percent of your credit score, but if you have a credit card and a student loan, it will likely do more for your credit score if you’re in good standing than if you just had one loan.

New credit

When you apply for a loan, typically there’s a hard pull on your credit. Lenders check your credit score to see if you will get approved or not. Your credit score may drop slightly with each hard pull but can recover quickly. But if you’re opening many new credit accounts in a short period of time this can signal trouble for lenders. They may think you need too much credit and aren’t responsible. So be careful and make sure you’re not opening too many accounts all at once as it makes up 10 percent of your credit score.

Stay on top of your credit

In order to stay on top of your FICO credit score, follow two rules: pay balances on time, keep balances below 30 percent. Doing those two things will keep your credit score in good shape. Be mindful of opening new accounts. On top of that, you want to check your credit report at AnnualCreditReport.com to make sure your info is correct. The information in your credit report is related to your credit score, so if there are mistakes you want to dispute them quickly.

Doing all of this can keep your credit score healthy.

Caitlin Lyttle