FICO Scores &

Ratios Explained

Included in your credit report is a credit score developed by the Fair Isaac Company and used by your mortgage company to help in the lending decision. The score is commonly known as FICO Scores, although Trans Union uses the name Emperica and Equifax uses the name Beacon. Each score is a Fair Isaac Company product and uses the same factors. The score may vary from one bureau to another, as some creditors may or may not report to all three credit bureaus, which may lead to variations in the credit score. 

A score is a number that tells a lender how likely an individual is to repay a loan, or make credit payments on time. A "scorecard," or scoring model calculates a mathematical equation that evaluates many types of information from your credit report at that credit bureau. By comparing this information to the patterns in thousands of past credit reports, scoring identifies your level of credit risk. 

Approximately 35% of your score is based on Payment History. Payment History Includes the following: 

Payment history on credit card accounts, retail accounts, installment loans, finance company accounts and mortgage loans. Public records, such as bankruptcies, judgments, suits, liens, wage attachments and collection accounts. The number of accounts showing no late payments. A good track record on most of your credit accounts will increase your credit score. 

Approximately 30% of your score is based on Amounts Owed:

Owing on your credit accounts does not mean you are a high-risk borrower with a low score. However, owing a great deal of money on many accounts can indicate an individual is overextended and more likely to make some late payments. A large number of accounts with balances, high revolving balances and installment loan payment patterns all are taken into consideration in the score factor. 

Approximately 15% of your score is based on the Length of Credit History: 

The scoring model considers both the age of your oldest account along with an average age of all your accounts. The length of time credit accounts have been established along with how much time since accounts have been used is also considered. 

Approximately 10% of your score is based on New Credit:

People tend to have more credit today and to shop for credit more frequently than ever. Research shows that opening several credit accounts in a short period of time represents greater risk. This also extends to requests for credit, which results in inquiries by a lender to receive a copy of your credit report. 
The score will look at how many accounts you have by type, how long since accounts have been opened, how many recent inquiries on you report which indicates recent requests for more credit, and re-establishment of good recent credit history if there had been past problems. 

Approximately 10% of your score is based on Types of Credit Use: 

The score considers your mix of various types of accounts: credit cards, retail accounts, installment and auto loans, finance company accounts and mortgage loans. Having one of each is not necessary and opening accounts you do not intend to use is not advisable. The score looks at the types of credit accounts you have, the total number of accounts, and how many of each type of account. For different credit profiles, how many is too many will vary. 
There are approximately 34 "reason codes" which are the factors used to determine the score on credit profile. The four top reasons used for the calculation of the credit reasons are listed on the credit report, which explains why the score is not higher. The score reasons are not particularly helpful when the score is already high (for example, 680 or above), because they may be marginal factors with little impact. The score model ranges from 300 to 850. Higher scores indicate low risk. Lower scores indicate higher risk.

As you can see there are many components that make up your FICO Credit scores. So please consider that when data is removed from your credit report it is NOT always the case that your credit scores will INCREASE! If all or most of the negative data is removed from your credit reports and you have not re-established your personal credit history by obtaining new, open and active installment and credit card accounts this will need to be done on your part in combination with what we are doing to help you credit FICO scores to improve and for you to see the gains.

Payment History and Amounts Owed make up 65% of your score. Focus on this.