Credit & Banking
How Credit Scores Are Calculated: The 5 FICO Factors Explained
Educational content, not personalized financial advice. Read the disclaimer.
A credit score is a number that summarizes how likely you are to repay borrowed money, based on your credit report. FICO doesn't publish its exact formula, but it does explain the five categories that go into it and how much weight each carries.
The five factors
According to FICO, its scores are built from data in your credit report, grouped into five categories:
| Factor | Weight | What it looks at |
|---|---|---|
| Payment history | 35% | Whether you paid past accounts on time |
| Amounts owed | 30% | How much you owe, including how much of your available credit you use (utilization) |
| Length of credit history | 15% | How long you've had credit |
| New credit | 10% | Recent applications and newly opened accounts |
| Credit mix | 10% | The variety of credit you use, such as cards and installment loans |
FICO stresses that these percentages reflect the general population. The importance of each category can vary from person to person. FICO scores generally range from 300 to 850. There are also other scoring models, such as VantageScore, and lenders may use different versions, so the score you see in an app may not be the one a lender pulls.
Payment history (35%)
This is the biggest factor. A record of paying on time is the strongest evidence you will repay, so late payments, accounts sent to collections and bankruptcies hurt. A single payment that is 30 days or more late can do significant damage, and the effect grows if you fall further behind. FICO also notes that a couple of late payments don't automatically ruin an otherwise good history.
Amounts owed (30%)
A key piece here is credit utilization: how much of your available revolving credit you're using.
Utilization = card balance ÷ credit limit × 100For example, a $1,500 balance on a $5,000 limit is 30% utilization. FICO says there is no single utilization percentage that earns the most points. In general, lower utilization means lower risk and a better effect on your score. Paying down cards is one of the quicker ways to move this factor. See debt snowball vs. avalanche for a method to pay balances down.
Length of credit history (15%)
A longer history generally helps, all else equal. This factor is one reason that closing your oldest account isn't automatically a good move: it can shorten your credit history over time.
New credit (10%)
Applying for a new account usually creates a "hard inquiry" on your report. Most of the time, one hard inquiry has a small effect. Many applications in a short period can look risky, so apply when you need the credit rather than for a small promotion.
Credit mix (10%)
Having different types of credit, such as a card and an installment loan, can help a little. It's a small factor and a byproduct of ordinary borrowing. It's rarely a reason to take on debt you don't need.
What you can do
- Pay every bill on time. Consider automatic payments for at least the minimum, so a busy month doesn't cost you.
- Keep balances low compared with your limits.
- Be patient. Age of credit only improves with time.
- Apply for new credit only when you need it.
- Check your credit reports for errors. You can get free reports from Equifax, Experian and TransUnion once a week at AnnualCreditReport.com, the only site authorized by federal law for free reports. Credit reports usually don't include your score. If you find a mistake, you can dispute it with the credit bureau.
Sources
- myFICO: How are FICO Scores calculated?
- FICO: FAQs about FICO Scores in the US
- FTC: Free credit reports
Educational content, not personalized advice. Scoring models change, and FICO doesn't disclose its exact formula.