What’s In a FICO Score ®?
Your FICO ® score is used by banks and other financial institutions to at least partially determine your credit worthiness. FICO ® scores run between 300-850 ®, with those above 700 considered good credit risks.
Named for the Fair Isaac Corporation, which pioneered the first credit-scoring system in 1958, your FICO score ® is calculated through a statistical analysis of credit reports from the three major U.S. credit bureaus: Equifax, Experian, and TransUnion.
Video: What Makes the New FICO Score Better?
Each bureau has its own method of deriving credit scores, though they are all based on a model called the Fair Isaac Risk Model.
Though the exact mechanisms of calculating a credit score are closely guarded, Fair Isaac has disclosed a rough breakdown:
- Payment history counts for 35 percent of your score
- Debt-to-credit ratio counts for 30 percent
- Length of credit history counts for 15 percent
- Types of credit used count for 10 percent
- Recent search for credit and/or the amount of credit recently obtained, as well as other factors, count for the remaining 10 percent.
Video: Is it Possible to get a Free FICO Score?
What’s Not in Your Score?
Though lenders use your FICO score to analyze whether you are a potential credit risk, this number is far from a comprehensive portrait of your financial situation. Your score does not include:
- Your race, ethnicity, religion, national origin, sex, or marital status
- Your age
Your salary, occupation, professional title, employer, date employed, or employment history - Where you live
- Specific interest rates charged on credit cards or other accounts
- Child or family support obligations
- Rental agreements
- Any information not found in your credit report
- Whether you are currently participating in credit counseling.
How Can I Improve My Credit?
If your credit is less positive than you’d like, there are ways to improve it. CreditMagic.org offers the following tips:
- Avoid late or missed payments. Even a 30-day late payment can slice points off your score. Pay off accounts in collection and have the status reported as “pay for delete” or “paid collection.”
Don’t transfer debt – pay it down. By maintaining low balances of around 10 percent of your available credit, you will increase your credit score. - Shop for new credit or loans within a short period of time, since lenders will often pull your credit report and generate inquiries, which in turn affect your score. Also, opening too many accounts at once will negatively affect your credit.
- If you add an authorized user to an account, make sure that user is a good credit risk.
- Avoid store cards and small debts, which can be considered risky by credit bureaus.
- Notify credit bureaus of any name changes.
Improving your credit also means fixing any errors on your report. ConsumersUnion.org provides the following contact information:
-
Equifax
- The company’s online dispute form is here.
- To dispute by phone: (800) 685-1111.
- To dispute by mail:
- Equifax Information Services LLC
P.O. Box 740256
Atlanta, GA 30374 -
Experian
- The company’s online dispute form is here.
- To dispute by phone: (888) 397-3742.
- To dispute by mail:
- Experian
P.O. Box 2002
Allen, Texas 75013 -
TransUnion
- The company’s online dispute form is here. To dispute by phone: (800) 916-8800.
- To dispute by mail, find the proper form for your state here and mail the completed form to:
- TransUnion Consumer Solutions
P.O. Box 2000
Chester, PA 19022-2000