You've probably heard a lot of
talk about FICO
®
Scores and
how they can impact your
future. But what is a FICO
Score, and how is
it determined?
UNDERSTANDING
YOUR FICO SCORE
15%
LENGTH
OF CREDIT
HISTORY
10%
CREDIT MIX
30%
HOW MUCH
YOU OWE
10%
NEW CREDIT
YOUR FICO SCORE ILLUSTRATED
FICO Scores are named for the Fair
Isaac Corporation, the company that
developed them. These scores are
an assessment of your credit risk,
and they can determine how much
you pay for car insurance, vehicle
loans, mortgages, credit cards
and more.
FICO Scores are calculated by
compiling different credit data,
including payment history, amount
owed, length of credit history,
new credit and types of credit.
Each of these components is given
a percentage, which is used to
calculate the total score.
Your calculated credit score is a
number between 300 and 800 or
more, and creditors use it to assess
your credit risk. The higher the
number, the less of a risk you are –
and the less you'll pay for credit. In
America, 85 percent of scores range
from 600 to 800 or more, with a
median score of 723.
Your credit score affects you just
about every time you apply for
credit, whether it is a new credit card
or a home loan. Take the example
of a $216,000 home purchase with a
30-year, fixed-rate mortgage. With
a credit score in the 760-850 range,
the monthly payment would be
$1,313 per month. But if your credit
score falls in the 620-639 range,
you'll pay $1,542 each month – that's
a difference of $2,748 every year!
Clearly, your FICO Score matters,
and keeping it in good health is
important. How can you improve
your credit score? The number one
thing you can do is to pay all of your
existing loans and accounts on time,
every time.
35%
YOUR
PAYMENT
HISTORY
