The 5 Percentage Breakdowns
Payment History
Things like records of amounts and schedules of payments (including late payments) accounts for 35%. Lending companies see the length of time you've been past due as well as the amount of time since you had a past due payment.
Amounts You Owe
Any loans or a debt that you have outstanding is 30% of your score. Lending companies have a chance to see how many accounts you owe money to and what balance you currently owe. They also take a look at your credit lines and for indications that you might currently (or in the recent past) have been overextended.
Length of History
This area accounts for 15%. Lending companies see how long your accounts have been open and how much time has passed since there was activity in your accounts. The longer and better your credit history, the better your scores will be in this area.
Types of Credit
The number and types of accounts you have makes up 10% of your FICO score. You will receive a better score is there is a variety of account types rather than just credit card accounts.
New Credit
This area is also worth 10% of your credit score. Under this heading, lending companies see the number of new credit inquiries you have made and the number of accounts you have opened recently. Banks and lending institutions want to ensure that you are not trying to open a lot of accounts at the same time and overextending yourself and your financial obligations.
Now you might be wondering, what is considered a good credit score? Credit scores usually fall between 350 and 850. The higher your score is the better. The higher your score is, the less of a risk you are perceived to be. Banks and other lending institutions feel they are more likely to get their money back from people with high FICO scores because these kinds of people have a good history of managing and meeting their financial obligations. The less of a risk you appear to be, the more likely you are to have your loan application approved.
You also want to take a close look at the information on your credit report and ensure that it is all up-to-date and accurate. If the credit agencies have incorrect information to plug into the computer, then your FICO score may not be correct.
Credit and debt can be difficult for anyone to handle, but you need to remember that it is not only the amount of debt you have that influences your FICO scores, but also the manner in which you manage it.
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