How the FICO Credit Score Is Composed

One of the most commonly used credit scoring tools is the FICO credit score. It’s important to understand how the score is determined to help you improve your own FICO score.

Where the Score Comes From

Your FICO credit score is calculated by the Fair Isaac Corporation. Fair Isaac looks at information in your credit report and crunches the data using a proprietary formula.

Note that your score is only as good as the information that Fair Isaac has available. If there is incorrect or out-of-date information, it will affect your ​FICO credit score.

What Impacts the Score

To create its credit score, Fair Isaac looks at your information in a few different ways, using the following categorizations and percentage weights:

  • 35% payment history
  • 30% amounts owed
  • 15% length of credit
  • 10% new credit
  • 10% type of credit

If you’re trying to improve your score, you may need to focus on one or more of the components above.

Before you break your back trying to manage your FICO credit score, remember that lenders may look at factors besides just your FICO credit score. For example, you may be able to show the lender that you just got a better paying job that will allow you to cover all your debt payments.

Payment History Category

This is a simple record of how good you are at paying your bills on time. Every time you are late with a payment, it dings your score a bit, and being 60 days late is worse than being 30 days late, and so forth. To avoid damage to your credit score:

  • Pay your bills on time.
  • If you can’t pay on time, notify your lender that you need to work something out.
  • Get current on past due accounts.

Amounts Owed Category

For the most part, this refers to credit card debt and the percentage of available credit you are using. Divide the amount of the combined balances you owe on all of your accounts by the total amount of your combined credit limits. The lower the percentage the better. To help maintain a strong score:

  • Keep balances relative to your credit limit to 30% or less.
  • Don’t open new accounts just to lower your used credit capacity. Having too much capacity is a risk too.

Length of Credit Category

People with long credit histories are seen as safer bets than those with limited credit histories. In other words, someone with a decades-long history of taking out loans and paying them off on time will have a higher credit score than someone applying for credit for the first time. To help in this category:

  • Consider keeping old accounts open if you’ve been a good borrower.
  • Start building credit as soon as possible.

New Credit Category

Every time you apply for a loan or a credit card, the lender will run a credit check. These show up on your credit report, and borrowers who apply for a lot of loans or credit cards in a short period of time will see their credit score take a hit because they are viewed as risky. To avoid taking a hit when applying for credit:

  • When shopping for new credit, keep it all within a short time frame such as 14 days or less.
  • Borrowers with a bad history can improve credit scores by opening a new account and managing it responsibly.

Types of Credit Category

Lenders want to see borrowers with a varied credit history, so having multiple types of loans can help your credit score. However, not all loans are equal:

  • Installment debt (where you pay fixed monthly installments to eliminate the debt) is better ​than revolving debt (open-ended credit card debt).
  • Certain finance company debts (like buying a product with retailer financing) can lower your score.
  • You'll be seen as a seasoned borrower if you have a mortgage, an auto loan, a few credit cards, and a student loan. If all you have is credit card debt, you'll appear inexperienced.

In general, you need to know that it takes time and discipline to improve credit scores. The above rules should become second nature to you. Finally, don’t fall for any promises to improve credit scores overnight (or for a fee). In rare circumstances, you can get legitimate errors removed from your credit reports more quickly than normal (using rapid rescoring), but there's nothing you can do about accurate information.

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  1. myFICO. "What is a FICO Score?" Accessed March 4, 2021.

  2. myFICO. "What's in My FICO's Score?" Accessed March 4, 2021.

  3. myFICO. "What is Payment History?" Accessed March 4, 2021.

  4. myFICO. "What is Amounts Owed?" Accessed March 4, 2021.

  5. myFICO. "Credit Checks: What Are Credit Inquiries and How Do They Affect Your FICO Score?" Accessed March 4, 2021.

  6. myFICO. "What Does Credit Mix Mean?" Accessed March 4, 2021.

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