What goes into the FICO Score Calculation

A FICO score is not a regular credit score. It is a brand of score that is the most widely used. It was developed by Fair Isaac and company known for developing risk assessment models. It is a complex equation that is not fully disclosed. The information used to calculate your FICO score is found on your credit report and much of it is interdependent in the calculation. This makes it an extremely complex formula. Here is a list of the five main areas of the FICO score calculation

The first and largest portion is your payment history and it accounts for 35%. This looks at how well you do at paying you bills on time. It takes into account any late payments you might have and looks at the severity, how recent, and how often it happens. The formula reviews a total of seven years of your payment history.

The next 30% is your utilization. This calculated by dividing your outstanding balances by your account limits. This is done across all your accounts and on an account by account basis.

15% of the FICO score calculation is your credit history. It is better defined as how long have you had credit. There are two sub factors that are considered: The age of your oldest account and the average age of all your accounts.

Inquiries make up the next 15%. These are better defined as how many times your credit report has been reviewed. There are two different types soft and hard. Soft is when any one like yourself, an employer or insurance company checks your report. Hard is when a creditor checks your report after you have applied for a new account.

The last 10% is your credit mix. This takes into account the credit that you use. There are little rules discussed but using several different types of credit is in your favor.

Many of these factors are interdependent which makes understanding and attempting to estimate your FICO score impossible. What is really important is that you know what goes into it and how you can impact on a day to day basis.
To read more about the FICO score calculation visit William's website. There is more in-depth information about the FICO score formula