Understanding Credit Reports
How Are Credit Scores Calculated?
Payment History - 35%
The timely manner in which a consumer did or did not repay the debt. This includes all types of credit accounts, late or missed payments, and public records and collection items.
Outstanding Debt- 30%
The total dollar amount of debt currently owed. For credit cards, this means the total amount owed across all accounts in relation to the total credit limit. When a high percentage of the credit limit is already used, this can indicate overextension and a greater likelihood of future missed payments. Keeping credit card balances well below the limits can help this part of the score.
Length of Credit History - 15%
The amount of time the consumer has held credit accounts. This includes how long ago your accounts were established. A longer history helps your credit score.
Pursuit of New Credit - 10%
Opening many new accounts in a short period may hurt a credit score.
Types of Credit in Use - 10%
Analysis of the types of credit a person has in use comparing installment loans, credit cards, retail accounts, mortgage loans, charge cards, etc.
Information NOT Calculated in a FICO Credit Score
- Race, color, religion, national origin
- Sex, marital status
- Salary, occupation, title, employer, employment history
- Where you live
- Overall wealth (assets an individual may have)
A person’s credit score is not the only variable that may be considered by a lender when applying for a loan. Although not included in the credit score, some of the variables noted here may still be considered when a lender reviews a loan application.