A FICO score is a number that rates a borrowers credit record. The score is based on a number of factors, including how well debts have been paid off, current levels of debt, types of credit, and length of credit history. Scores generally range from 350 to 900.

The are five main categories of information that the FICO score evaluates: 1. Credit Payment History: 35% 2. Credit Balances: 30% 3. Credit History: 15% 4. Credit Inquiries: 10% 5. Credit Types: 10%

Credit Payment History: 35% At 35% Credit Payment History weighs the most. While events such as a bankruptcy, foreclosure or tax liens will have the greatest negative impact on your score, multiple and/or recent late payments have a tremendous impact as well.

The Fair, Isaac Corporation,(FICO) developed the formula for credit scoring. In general, the higher the score, the more creditworthy a borrower is in the eyes of the lender. A score of at least 680 indicates the borrower is very creditworthy.

Credit Balances:

30% What is your credit balance to your credit limit? The Outstanding Credit Balance ratio has the second highest weight on your credit score. High balances on your credit cards can be viewed as a red flag since it’s an indication that you may be overextended. If you have multiple credit cards, you may want to spread the wealth to keep the credit balances to credit limit ratio low.

Credit Inquiries:

10% Opening a new credit account doesn’t harm your credit score dramatically especially after you make the first payment. However, credit inquiries can negatively impact your score. Generating many credit inquiries exudes that you are trying to secure a large amount of credit or you are being turned down by lenders and have to apply elsewhere.

Credit History:

15% Credit History is a reflection the length of time that you’ve had accounts open. You’re rewarded for keeping long term debt. Older credit accounts that have been used more frequently will have more weight than those that are newly opened or used with less frequency.

Credit Types:

10% This percentage of your FICO score is based on your mix of credit. Do you have a good mix of credit cards, retail accounts, installment loans, finance company accounts or mortgage loans? It looks at the whole picture and totals how much of each type of account that you have.

I want to thank you for reading the information above. If you would like to continue this conversation than please contact me so you and I can discuss your financial situation.