Factors That Influence Your FICO Credit Score
Ever wonder how your credit score is determined? While Fair Isaac (the company responsible for FICO scores) holds the details of their calculation very close to the vest, there are some generalities out there that are good to know. Here’s a quick rundown, as well as an indicaiton of the relative importance of each component:
Payment History - 35%
Amounts Owed - 30%
Length of Credit History - 15%
New Credit - 10%
Types of Credit Used - 10%
So… If you want to maintain a high credit score, you’ll want to pay on time, keep your balances low relative to your credit limits, and keep your older accounts open if you don’t actively use them — this latter point increases average age and decrease utilization.
Obviously, cashing applying for a bevy of 0% credit card offers, or signing up for cards to snag free credit card miles or signup bonuses can have a negative impact on your score. However, things like new credit apps are a relatively small part of your credit score when compared to things like paying on time.
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Dear 5ยข:
Comment by Moqui — Apr 23rd 2008 @ 8:04 amI believe sex is a factor as well. I was once told by a credit-industry worker that, all else being equal, a woman will still have a lower credit score, because they get married, change their names, and disappear. I believe this to be true, if not optimistic, because I have earned 30-60% more than my husband for my entire married life (24 years) and his credit score is about 50 points higher than mine. All of our accounts are joint.
Go figure!
Interesting point, Moqui. Assuming this to be true, however, I would have to say that the difference is attributable to the name change, not to the sex difference. Yes, it’s typically women that change their names upon marriage, but that wouldn’t affect an unmarried woman or one who doesn’t change her name when she gets married.
In our case, my wife’s credit score is (I think) a few points higher than mine despite having taken my last name, stayed at home with the kids, etc. One difference that I can think of is that she’s two years older, and thus perhaps has a slightly longer credit record. Regardless, it’s all academic at this point since we both have very high credit scores.