The Complete Guide to Your FICO® Score


Your FICO® Score is a number that decides your financial fate in many ways. While a high FICO® Score opens a lot of doors, a low FICO® Score can make life more difficult for you in a number of ways. That includes having a harder time securing credit, encountering higher interest rates when you do, and even causing bigger challenges in securing a job or an apartment.

The bottom line is, it’s important and it’s something almost everyone has to deal with at some point in their lives. If you’ve ever had a loan or a credit card, you have a FICO® Score, and if you ever intend to use credit in the future, you need to understand what your score is and how it looks to lenders. Here’s a guide to everything you need to know about those three all-important numbers.

What is a FICO® Score?

A FICO® Score is a three-digit number that lenders use to assess your financial responsibility when deciding whether to work with you.You can think of it like a financial report card, but instead of determining whether you pass or fail a class, this report card determines whether you’re approved for loans or lines of credit and what interest rate you will get.

The score is based on the financial information that appears in your credit reports, which includes information on the types and average age of the accounts you hold, your payment history, and any negative actions like bankruptcies or accounts in collection. The FICO formula (discussed below) evaluates all of the information in your credit report and translates this into a three-digit number ranging from 300 to 850, with a higher number indicating a better score.  

It was invented back in 1989 by Fair Isaac Corporation, now known only as FICO, as a way to help lenders make decisions about borrowers more easily, without having to interpret the complexities of their credit reports. It was the first credit scoring model to arrive on the scene and it’s still the most widely used today, with over 90% of lenders using it to assess risk, according to FICO’s data.

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How is your FICO® Score calculated?

The FICO® Score has gone through several iterations since its introduction as the company continues to update its formula to better predict risk. The FICO® Score 9, which is the latest FICO® Score, and the FICO® Score 8 — the most widely used score — both weigh the following five factors: 

  • Payment history (35%)
  • Amounts owed (30%)
  • Length of credit history (15%)
  • Credit mix (10%)
  • New credit (10%)

Payment history

Your payment history is the single most important factor in your FICO® Score calculation, making up 35% of your score. It receives this honor because it’s such a good indicator of how you’ve managed your money in the past. Someone who always pays their bills on time is considered responsible and living within their means, while someone with late payments on their record may not have the necessary funds to pay back any new money they borrow. 

This portion of your FICO® Score looks at your payment history on your credit cards, including retail store cards, as well as mortgages and other types of installment loans, and other types of financial company accounts. Negative information from public records, like bankruptcies and lawsuits, also affect the payment history portion of your FICO® Score. If you have late payments on your record, the FICO model considers how late they were, how recent they were, how many of them you have across how many accounts, and how much you owed.

A single late payment may not seem like a big deal, but it can drop an excellent credit score by 100 points or more, according to FICO data, so paying on time is the best thing you can do if you’re trying to raise your FICO® Score or keep it high.

Amounts owed

This category looks at how much you owe on your current credit accounts and is almost as important as payment history, with the two combined making up 65% of your FICO® Score. For installment debt — loans with predictable monthly payments — the FICO scoring model looks at how much you owe and how that compares to the initial amount you borrowed. 

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For revolving debt, like credit cards, where the amount you owe changes from month to month, FICO looks at your credit utilization ratio. This is the ratio between the amount of credit you use each month and the amount you have available to you. So if you have a $10,000 limit on one card and your balance is $5,000, your credit utilization ratio would be 50%. Ideally, you want to keep this number below 30% and preferably as low as you can, as long as that amount is above zero.

Amounts owed is considered an important measure of your financial responsibility because a heavy reliance on credit indicates someone who’s living beyond his or her means. Adding another loan or credit card to that mix could make it impossible for the individual to keep up with his or her monthly payments.

Length of credit history

The third factor in your FICO® Score — length of credit history — is pretty straightforward. It gives lenders a more comprehensive view of how well you use credit, so a longer credit history typically translates to a higher score, assuming you’ve always paid on time and kept your credit utilization low. This category looks at the age of your oldest and newest credit accounts and the average age of your credit accounts, plus the length of time since each account has been used.

Closing an old credit card you no longer use may seem like a wise decision, but if it’s the oldest credit account you have, doing so will bring down your average credit age and your credit score could actually take a hit. Unless it has an annual fee you don’t want to pay anymore, you’re probably better off just keeping it in your wallet.

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Credit mix

Credit mix accounts for 10% of your FICO® Score and it measures the different types of credit accounts you have. You’ll have a better score if you have some revolving debt, like credit cards, and some installment debt, like a home, car, or personal loans, on your credit reports. Lenders like to see that you can responsibly manage both types of debt. Even if you have loans that are now paid off, they still count toward your credit mix.

New credit

The final category is new credit. Research has shown that applying for a lot of new credit accounts in a short time span indicates greater risk, so you don’t want to apply for a bunch of credit cards and loans within a single year. This category looks at the number of new accounts you have and the number of credit inquiries on your report.

Every time you apply for a loan or line of credit, your lender will do a hard inquiry, also known as a hard credit check, on your report which will lower your score by a few points. The FICO model takes into account normal comparison shopping behavior when applying for new credit, so it counts all credit inquiries that take place within 30 days as a single inquiry. If you are in the market for a new credit card or loan, get all your applications in within one month of each other to reduce the effect on your credit score. 

There’s a common misconception that checking your own credit also lowers your credit score, but this is not true. This is considered a soft inquiry and it has no effect on your credit score whatsoever.

What is a good FICO® Score?

There aren’t any hard and fast rules about what constitutes a good FICO score. Each lender will have its own definition of an acceptable score, but FICO itself defines the credit score ranges as follows:

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