You may wonder why your FICO score has such an impact on your life. How does one number impact the interest rate on your mortgage or auto loan, whether or not you get approved for a new credit card or apartment, and if you get a job offer?
A quick glance at your FICO score can leave you with a lot of questions. For example, if you are looking for a car loan and the auto dealer runs your credit to find a FICO score of 600, you may wonder how FICO came to that number. In this post, we’ll explore what makes up your FICO score.
What Makes Up Your FICO Score?
FICO is the score that is associated with your credit bureau report. FICO scores can range from 350 to 850 and are used to not only determine if a lender will extend you credit, but at what rate that credit will be repaid. In addition to credit-extension, a FICO score is also used by insurance companies for underwriting, apartment companies to determine if you are eligible to rent, and more. Your FICO score is important, and it is imperative that you take the appropriate steps to ensure the best possible score given your circumstances.
Payment History – 35%
Payment history accounts for 35% of your FICO score and takes the following things into account:
- Number of late payments, how late, how much was owed
- Frequency and recency of lates
- Number of accounts where you are ‘paid as agreed’
- Number of accounts which have past-due and the amount past-due
- Public records or collections
Payment history is the number one cause for low FICO scores. A single late payment of 30 days or more can significantly drop your score. If you have a 680 FICO score, a single 30 day late payment can drop your score by 60 to 80 points. If you had a 780 FICO score, a single 30 day late payment can drop your score by 90 to 110 points. The bigger your score, the harder you fall—and the more you’ll need credit repair services.
The same is true with the length of a late payment. 90 day late payments can drop your FICO score 70 to 90 points if you had a 680 score, and 105 to 135 points on a 780 score.
A person with a 780 score does not have late payments, collections or other major derogatoriness like a bankruptcy, foreclosure or short sale. A person with a 680 score may have a 90 day late payment from 2 years ago, or a 30 day late payment from 1 year ago.
Amounts Owed – 30%
Amounts owed accounts for 30% of your FICO score and is made up of the following components:
- Your aggregate debt
- Amounts owed on all credit cards and all installment
- Number of accounts with balances
- Proportion of credit lines being used (keep balance / credit limit low)
- How much of installment loans are still owed vs. original loan amounts
- Whether there is a balance on credit card accounts
A maxed out credit card is a typical derogatory item in this category that negatively impacts your score. If you have a maxed out credit card, you may see a 10 to 30 point decrease effect on a 680 score, and a 25 to 45 point drop on a 780 score. A person with a 780 score will have between a 15%-25% balance compared to their credit limits, while a person with a 680 score will have a 40%-50% balance on credit limits.
Length of Credit History – 15%
The length of your credit history accounts for 15% of your FICO score and is made up of the following elements:
- How long accounts have been established; oldest account, average age of accounts, average age of open accounts
- How long specific types of accounts have been open
- Time since account activity (revolving)
Recent credit card activity and the average age of accounts typically is what is looked at on credit reports. A person with a 680 score typically has a 8 year history, while a person with a 780 score will have greater than a 15 year history.
Types of Credit – 10%
Types of credit typically accounts for 10% of your FICO score and looks at the following:
- What types of accounts you have
- How many of each type of account
Types of credit could include open and closed credit cards, an auto loan or an open mortgage account. A person with a 680 FICO score typically has about 6 credit accounts, while a person with a 780 score has more than 10 credit accounts.
New Credit – 10%
The final 10% of your FICO score looks at new credit.
- Number of recently opened accounts
- Time since recent account openings
- Number and recency of hard inquiries
No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.
We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.