The three digit number is calculated with the help of five determinants that have their own individual importance, including your payment history, amount owed, new credit, credit history duration, and credit types used. If you wish to improve your credit score, you must improve any of the aforementioned determinants.

Here is the description of these categories individually:

Payment history

35% of payment history is counted during your FICO score calculation. Your payment history represents your account payment information on various sorts of accounts, such as retail accounts, mortgage, finance company accounts, credit cards, and installment loans. It is also concerned with previous problems, including delinquency, wage attachments, bankruptcy, suits, liens, and collections. If you have such type of problems, then your FICO score will be low.

Amount owed

If you owe any amount to the lenders, that will account for 30% of your FICO score. This takes into consideration the number and type of your accounts as a borrower and the amount of debt on each of those accounts. FICO will also calculate your credit utilization ratio – available credit and the amount of credit being used.

Length of your credit history

The length of your credit history will make up at least 15% of your FICO credit score. The length of your credit history does matter to some extent. You must have at least some credit history. If you have newer credit history, you are likely to have lower FICO scores than those people that have a longer credit history.

New credit

It makes up about 10% of your credit score. If you have opened a new account recently, your FICO score will fall. FICO takes into consideration the number of new credit accounts that have been opened during the past twelve months.

Types of Credit Used

The last 10% of the calculation is your credit mix. It is to be seen what sorts of credit you are using, including car loan, mortgages, installment loan, and retail accounts. Generally a good mix of credit is a good option.

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FICO score can be obtained by some statistical calculation. To find this calculation, a proprietary tool is used, which is the pioneering work of Fair Isaac Corporation (FICO). For any borrower, each credit bureau uses this technology to compute a FICO score. The credit bureau includes Experian (Range 320-844), Equifax (Range 334-818), as well as TransUnion (Range 309-839), with each having their respective credit score range limits.

Good FICO Score

A bad credit score can cost you a lot of money. On the other hand, a good FICO score is concerned, it ranges very high, that is, from 720 to 850. If you have a good FICO score, it will help financial institutions, such as banks, to make quick lending decisions. A good FICO score shows that you have a good credit score and good bill paying habits or the power to clear your debt. There are a lot of benefits of a good FICO score, such as, consumers with higher or excellent FICO score are able to receive loan automobile or mortgages at a very low rate of interest.

On the other hand, applicants with bad FICO score have very poor repayment histories. That’s why they are required to pay a very high rate of interest.

FICO Score Range

720 to 850: This is considered an excellent score, allowing you to get a good mortgage rate, a credit card of your choice, a better car loan rate, etc.

700 to 719: This is seen as a very good score. You can get a better mortgage rate, or easily purchase second property.

675 to 699: This is not the best score, though it is not that bad as well. Considered an average score, it depicts that you can qualify for most of the loans.

620 to 674: This is considered a sub-prime score. It represents that you can get loan but on a higher rate of interest.

560 to 619: This is a risky score. You can expect to meet a lot of obstacles in getting a loan.

500 to 559: This is a very risky score. If you have this score, it means you have a dire need to improve your rating.

Bottom Line

You should obtain a good FICO score so that you are able to get a good mortgage rate or car loan rate, among others. In order to improve your FICO score, you should make your bills or payments on time or try to pay off the payment if you can. A longer and good payment history makes your FICO score higher.

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1. What is considered a good FICO score? FICO score is one of the best credit score models...
2. What is an excellent credit score range? When you apply for a loan, the lender will first...

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FICO score can be obtained by some statistical calculation. To find this calculation, a proprietary tool is used, which is the pioneering work of Fair Isaac Corporation (FICO). For any borrower, each credit bureau uses this technology to compute a FICO score. The credit bureau includes Experian (Range 320-844), Equifax (Range 334-818), as well as TransUnion (Range 309-839), with each having their respective credit score range limits.

Good FICO Score

A bad credit score can cost you a lot of money. On the other hand, a good FICO score is concerned, it ranges very high, that is, from 720 to 850.  If you have a good FICO score, it will help financial institutions, such as banks, to make quick lending decisions. A good FICO score shows that you have a good credit score and good bill paying habits or the power to clear your debt. There are a lot of benefits of a good FICO score, such as, consumers with higher or excellent FICO score are able to receive loan automobile or mortgages at a very low rate of interest.

On the other hand, applicants with bad FICO score have very poor repayment histories. That’s why they are required to pay a very high rate of interest.

FICO Score Range

720 to 850:  This is considered an excellent score, allowing you to get a good mortgage rate, a credit card of your choice, a better car loan rate, etc.

700 to 719: This is seen as a very good score. You can get a better mortgage rate, or easily purchase second property.

675 to 699: This is not the best score, though it is not that bad as well. Considered an average score, it depicts that you can qualify for most of the loans.

620 to 674: This is considered a sub-prime score. It represents that you can get loan but on a higher rate of interest.

560 to 619:  This is a risky score. You can expect to meet a lot of obstacles in getting a loan.

500 to 559: This is a very risky score. If you have this score, it means you have a dire need to improve your rating.

Bottom Line

You should obtain a good FICO score so that you are able to get a good mortgage rate or car loan rate, among others.  In order to improve your FICO score, you should make your bills or payments on time or try to pay off the payment if you can. A longer and good payment history makes your FICO score higher.

Related posts:

1. What is an excellent credit score range? When you apply for a loan, the lender will first...

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