The first thing you should know about your credit score is that you just don’t have one score, but over 100 of them. Companies take whatever factual data that they can collect on you, and use an algorithm to calculate a credit score on you. These credit scores are always evolving and constantly changing. The market leader credit score is what is called “FICO,” and is done by the Fair Isaac Company. They command about 75% of the market share of credit scores. For example: When applying for a home loan, the mortgage lender will use your FICO score to determine credit worthiness to obtain the loan and to establish your loan rate.

While there is no way to tell you exactly what goes into your credit score, after years and years of working with FICO and the other agencies that set your credit score, the industry has figured out several things about how your score is determined. These factors allow you to control your own credit score.



Your payment history makes up about 35% of your credit score. Your history of paying your bills shows your attitude towards your creditors. According to FICO, only 3 out of 10 people have ever been late more than 60 days. In terms of payments, your credit score focuses on these three factors:

a. RECENCY: The more recently you have been late with a payment, the bigger the hit you take on your score. It’s even worse for people with higher credit scores because when they are late with a payment, their credit score can drop several points more than someone who with a mild history of late payments.

b. FREQUENCY: More late payments on a credit report than fewer may appear to be a pattern.

c. SEVERITY: A 30 day late payment is not as bad as a 60 or 90 day late payment. The more severe the late payment, the greater the damage to your credit score and report.

This part of the score not only looks at how much you owe, but what percentage of your available credit that you use. Most Americans only use 30% of their available credit. According to FICO, only 1 in 7 people use 80% or more of their available credit. You should know that many creditors such as credit card companies report the outstanding balance due to the credit reporting agencies every month at around th same date. Even if you pay your credit card balances in full at the end of the month, if on the reporting date your balance is close to the maximum of your available credit, you can and probably are getting penalized.

The longer you have had credit, the better. The average American’s oldest account has been established for about 14 years according to FICO.


Opening new accounts in a short period of time can penalize your credit score.


This is a small factor in creating your credit score. FICO likes to see a mix of different kinds of credit such as: Revolving (such as credit card), Closed End (like a car loan), and Mortgage Loans.

To achieve the highest score, you need a mix of all sorts of credit.

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