Your FICO Score
by Debra McCann



Your credit score influences the credit that’s available to you and the interest rate that lenders offer you. The cost of bad credit when financing a home can be substantial since you may have to pay a higher interest rate. This can add up to thousands of dollars each year. Following are the main categories that FICO scores evaluate and their percentage of importance.

35% Payment History
If you have past due balances, I suggest paying them first and keeping them current. Then pay collection agencies that agree to delete it from your record if you pay them. Just paying off a collection account will not remove it from your credit report. It will stay on your report for seven years.

30% Amounts Owed
Your FICO score takes into account the amount owed on all accounts each month. A heavily weighted factor is how much money you owe on your credit cards relative to your total credit limit. Request that your limit be raised, but don't use the available credit. Make sure that the credit limit is being reported on the bureau report. No limit being reported gets scored as though current balance is maxed out. Closing a credit card can hurt you because it will increase your debt ratio due to you having less credit available after closing the card but still having the same balance owed total.

15% Length of Credit History
Your FICO score considers the age of your oldest account, the age of your newest account and an average age of all your accounts. Opening new accounts will lower your average account age, which will have a large effect on your FICO score. Closing older accounts will have the same effect. If you have a limited credit history you can ask someone to add you on as an authorized user. It will treat it as though it is your account and you will benefit from the low balance and the long history with that creditor. When you don’t use a credit card for six months it gets updated on your credit report as being inactive. An inactive account is ignored by credit scoring software and you won’t get the benefit of the positive payment history and low balance that card may have.

10% New Credit
Your FICO score looks at how many new accounts you have. It also considers how many recent requests for credit you have, as indicated by inquiries to the credit reporting agencies. Inqueries have a greater impact if you have few accounts or a short credit history.

10% Types of Credit Used
Your score takes into account what kinds of credit accounts you have and how many of each.