Understanding the Ins and Outs of Your FICO® Score

Understanding the Ins and Outs of Your FICO Scorefeatured image

Posted on January 31, 2023 by Rick Griffith

Understanding your FICO® score can take time and effort, leaving you wondering where to begin. A good starting point is researching and comprehending the details of your credit.

FICO Scoring Factors

FICO Scores get figured using information available in your credit report and broken down into five categories:

  1. 35% of your payment history
  2. 30% outstanding debt you still owe
  3. 15% how much credit history you have
  4. 10% on approved new credit
  5. 10% of your credit mix or the variety of credit you hold

Your FICO Score gets figured using positive and negative credit report data, which gets weighted on each determining factor outlined above. However, the importance of these categories may vary from one person’s credit to another.

For instance, making on-time car payments on a car loan and on-time payoffs can be one of the fastest ways to improve your credit score, even if your credit isn’t great.

FICO Scores Are Exclusive to Data in a Credit Report

The FICO Score is calculated solely from data in your credit report, but other factors like annual income, job stability, and type of credit can affect a lender’s decision. Here is how lenders might perceive your data.

Payment History (35%)

As the most critical factor in a FICO Score, lenders will always consider your credit history when giving out loans to measure the risk associated with lending to you. They’ll want to see a record of past repayments made on time to gauge their decision.

Outstanding Debt Owed (30%)

Although being in debt does not mean you have a bad credit rating, banks may interpret it as an indicator of financial strain if your borrowing limit is almost reached; this could lead them to believe you are more unlikely to pay back the money borrowed.

Length of Credit History (15%)

Although not necessary, having a lengthy credit history typically helps enhance one’s FICO Scores. Your FICO Score looks to answer many of these questions for lenders reviewing your credit lines and bank accounts:

  • How long ago were your credit accounts established?
  • What is the age of your oldest credit line?
  • What is the age of your newest line of credit?
  • What is the average age of all your credit lines and bank accounts?
  • What year was each line of credit established?
  • How often do you use specific lines of credit and bank account(s)?

Credit Mix (10%)

Your FICO Score considers how many credit limits you hold, including credit cards, retail accounts, installment loans, finance company accounts, student loans, and mortgage loans—but you don’t need to have one of each for it to be good.

New Credit (10%)

Studies have found that rapidly opening multiple credit accounts can be a significant risk for those with little credit history. In addition, having numerous credit checks run by different lenders, like new car dealerships, can lower your credit score.

You should always ask while at the dealership if they plan to pull a soft or hard credit check. The type of credit check is essential to be aware of because soft credit checks do not change your credit score.

Car Credit, Working to Get You Back on Financial Track

Remember, on-time payments positively impact your credit score, so when you work with the team at Car Credit they will report those to Equifax.

The staff at Car Credit understand that no one should feel shamed by financial challenges. But unfortunately, these past few years have hit many Americans’ finances hard, and there’s no team working harder to safeguard your privacy regarding your finances, which is why the team at Car Credits only does soft credit checks and doesn’t approve you based solely on your credit score.

That is also true of every car they sell. They have a rigorous reconditioning program for every vehicle because you and your family’s safety is of great importance to the team at Car Credit. A car that doesn’t pass Car Credit’s quality standards of safety and reliability never gets put up for sale to the public. Instead, those vehicles get sold wholesale.

Now that’s the kind of service you should expect from any dealership. To get started today, look through Car Credit’s current inventory of cars, SUVs, and trucks, then complete their online credit application! After all, you and your family are worth it to the team at Car Credit.

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