How Are FICO Credit Scores Calculated?

How Are FICO Credit Scores Calculated?

No amount of Googling will get you the exact formula for how your FICO credit score is calculated since it’s a closely guarded trade secret. Thus, FICO can continue to sell your FICO credit score to lenders and others who wish to use it to make decisions about how to, or whether to do business with you.

There are some guidelines out there, published by Fair Isaac Corporation, so you can at least know what factors are considered in calculating your FICO credit score:

Payment history is 35% the calculation of your FICO credit score.

Payment history generally stays on your report for 3 years but might stick around for up to seven. Paying your bills on time is the easiest way to improve your credit score. In fact, some loan rates such as auto loan rates may be renegotiated cheaply after one or two years of on-time payments, often saving you hundreds of dollars over the life of the loan.

Your debt amount is 30% of your FICO credit score.

In general, if you appear to be maxed out, your score is lower. Be cautious when paying off accounts, because if you close them as you pay them off, your credit score may not improve. For the best results in this category, be sure that your balance is less than one-third of your available credit. To improve this category quickly, you can ask your credit card lender for an increase in credit limits (Just be sure you don’t run out and use it). Another strategy is to ask a creditor to raise your limit to match an account you have just paid off and closed.

The length of your credit history is 15% of your FICO credit score.

Older accounts are worth more points than newer ones, so if all other factors are equal, you should keep the older cards. An old trick that used to work: getting someone else to add you as an authorized user, so you could attach their good credit history to yours. Lenders and bureaus are becoming wise to this since it is the trick most often used by scam artists who offer to give you “years of good credit instantly!”

New credit affects 10% of your FICO credit score.

Applying for new cards frequently may make it appear as though you are desperate for cash. Before opening a new account, see if your current cardholder will improve your current deal.

The type of credit you use also affects 10% of your FICO credit score.

Having a mortgage may help since it shows you are a homeowner. An installment debt is considered less risky than revolving debt.

If you are searching for more exact guidance on how certain actions may affect your score, check out They offer a simulator that uses your actual credit history to show how certain actions might affect your FICO credit score. It isn’t free, but it might be worth the money if you are considering a mortgage or loan, and you need to improve your credit score to get better terms.