FICO Scores

Yesterday I wrote regarding Experian may no longer allow people to buy their credit score.

Most people are clueless what a FICO score is or how it's calculated. If you walked down any street in America and asked "hey what's your FICO".

Most likely you'll get blank stares or if your in the wrong neighborhood probably punched since they'll think your cussing at them in some strange language.

But it is a very important question you need to at least have some knowledge of how it's calculated.

Now each company (TransUnion, Experian, and Equifax) has their own secret recipe kind of like Col. Sanders secret herbs and species.

However, we as consumers do know what is included. Let's take a look.

1. Payment History - How have you been paying. Have you made payment late before or always on time. Accounts for 35% of score
2. Amounts Owed - What do you owe on all your credit cards and other loans? If you are maxed out it effects your score. Accounts for 30% of score
3. Length of Credit History - How long is your credit history? Only new credit or do you have older open credit. Accounts for 15% of score
4. New Credit - How many new accounts have you recently opened? Accounts for 10% of score.
5. Types of Credit in Use - Two types of credit: Revolving (credit cards) or Fixed (Home, Car). The more revolving credit you have it can lower your score. Accounts for 10% of score.

As you can see there are a number of different variables and the reason why each credit bureau can have their own recipe.

In my upcoming book I will give tips on how to improve and what can lower your score. Sign my RSS feed to stay updated

LESSON: Learn your FICO score as soon as possible