How is My Score Determined?

FICO (the acronym for Fair Isaac Corporation) is the most commonly used credit scoring methodology, and has become pretty much synonymous with the term “credit score.” While FICO keeps the wraps on its exact scoring system, there’s a lot we do know about how your credit score is determined.

Think of your credit score as a recipe with five ingredients—the five categories of your financial history that FICO reviews in determining your credit score.14 Like most recipes, these “ingredients” don’t make up equal parts of the final product; some are weighed more heavily, and others fall a bit closer to the “just a dash” category—they’re still important, but they’re not the main ingredient. It breaks down like this:

FICO Credit Score Recipe:

  • Three and a half cups payment history (35%)
  • Three cups accounts owed (30%)
  • One and a half cups age of credit history (tip: the older, the better!) (15%)
  • One cup new credit (10%)
  • One cup credit mix (10%)

Mix all that up, and you’ve got yourself a credit score. So where’s FICO picking up these ingredients? Right off your credit report—and right alongside all the banks, credit card companies, landlords and others we previously mentioned. Basically, even if you’re not checking your credit report and score, you can bet a lot of other important folks are.

Expert Advice

Ian Atkins, Analyst and staff writer at Fit Small Business.

“The two biggest areas of impact are your payment history and your debt to credit utilization ratio. Make your payments on time and keep your credit utilization under 30% and you should be fine. The rest is made up of how long you’ve had the accounts, the mix of accounts that you have, and recent activity. The longer a track record you have, the better. A healthy mix of types of financing is seen as better than say, only credit cards. And a flurry of recent activity (use, applications, opening new accounts, etc.) is considered a warning sign of future default and will hurt your score.”

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