How a FICO Score Is Determined

fico score

The image above that I created details the credit scoring system used by Fair Isaac, the creator of the world renowned “FICO score,” one of the most widely used credit scoring methods employed by banks and lenders in the United States.  So let’s take a closer look at how a FICO score is determined, shall we?

Payment History Most Important

The most important factor in determining your FICO score is far and away payment history. This metric accounts for 35% of the overall scoring criteria, and can essentially make or break your FICO score. Payment history includes all revolving and installment accounts found on your credit report, including mortgages, auto loans, credit cards, charge cards and student loans. This section also takes into account public records and collections, bankruptcies, foreclosures, tax liens, judgments, and charge-offs.

Although late payments can drag down your FICO score tremendously, the weight of each derogatory account is diminished as time goes by, especially if your credit history is robust. The opposite is true if you have a relatively thin credit profile and run into a late payment early on while trying to establish credit. In this case, your FICO score can be affected quite dramatically as creditors have little else to come up with to generate your score.

Amounts Owed on Accounts Second Most Important Factor

The next most important factor in determining your FICO score is the amount owed on open accounts. This includes the total balances on each one of your lines of credit in proportion to the amount of total credit available (credit utilization). For example, if you’ve only got two lines of credit open, each with a $5,000 credit limit, and both lines of credit have a $4,000 balance, you’ll be left with only 20% of your total credit available. This can seriously drag down your credit because you’re viewed as possibly overextended, and you have little credit leftover to leverage your high debts.

For this reason, it should be noted that closing credit cards or other credit lines will lower your total available credit, and will likely drop your FICO score as a result. On the other hand, you can periodically raise the credit lines on your existing credit cards as a means to increase your total available credit, without having to open new credit cards unnecessarily. And note that having too many lines of credit open can be a detriment to your credit score as well.

In some cases, carrying small balances on credit cards (but paying them off in full each month) is better than having no balance at all because it shows an active use of credit, and the ability to control spending and make timely payments.

Credit History An Important FICO Score Factor

The third most important factor in determining your FICO score is the length of credit history established. The first account ever opened (that is still open) determines the beginning of your credit history, and the latest account opened determines your newest credit account. A deep, clean credit history is very important, but if you’ve opened a large number of credit lines recently, or in a short period of time, it could be a signal of financial distress, and subsequently lower your FICO score in the short term. Creditors may also shy away from offering additional financing if they feel you are in a cycle of over-extension.

FICO scoring also takes into account the average length of time your credit accounts have been opened, and the last time you used your accounts. In addition to that, FICO looks at how long specific types of accounts have been established. A consumer with a deep mortgage history will likely have a stronger credit history than a consumer with a long history of only credit card use. Paying down installment loans is also a good way to strengthen your credit history.

Remember that most banks and lenders that offer mortgages usually want three active credit lines with at least a two-year history. Those trade lines should also have fairly high balances to prove to the creditor that you can support large amounts of debt, as a mortgage is a very large loan.

New Credit Can Lower Your FICO Score

The fourth most important factor in determining your FICO score is the amount of new credit in your credit profile. This includes all recent credit inquiries and new accounts opened in the short term. If you’re shopping for a loan and your credit report gets pulled by ten different lenders your FICO score could suffer. Though in recent years, the scoring model has been adjusted to allow for multiple credit inquiries in a short period of time in the same field when shopping for things like a mortgage. This isn’t the case for credit card applications though!

And if you have multiple, unrelated inquiries, your FICO score will likely suffer. This is another sign of financial distress, as it appears that you’re looking for credit from several different outlets, and the amount of new credit can cause payment shock if abused. Note that credit inquiries stay on your credit report for two years, but are only considered in your FICO score for 12 months.

Tip: Don’t be afraid to order a personal credit report. If you simply order a consumer credit report (or credit score) for personal use, your FICO score will not be affected because credit reporting bureaus know you’re just monitoring your own credit (does a credit check lower your credit score?).

If you’ve opened a large number of accounts in a short period of time, your FICO score will likely see a drop in the short term until things “normalize” and you build history on all the new accounts. FICO scoring also factors the proportion of new credit accounts versus old credit accounts, and a consumer with little credit history applying for a large amount of credit will be impacted more than a consumer with a long history of high credit limits.

Type of Credit Also Affects FICO Score

The final factor affecting your FICO score is the type of credit used. While this isn’t critical, FICO scoring does look at the mix of types of credit in use, and will score someone higher who has experience with different types of accounts, such as mortgages, auto loans, credit cards, and more.

If your credit profile is limited to just credit cards, your FICO score may be lower than someone with a better mix. It also takes into account the total number of each type of credit account. So if you’ve got 10 credit cards, and no other types of credit accounts, your FICO score could suffer, or be held back from A+ levels (what is an excellent credit score?).

But even if your credit mix doesn’t affect your FICO score, most lenders prefer to provide financing to individuals with experience with a certain type of loan, so if you already have an auto loan or a mortgage, you’ll probably have an easier time getting a second one.

Much of the above is common sense if you think about it. If you want to raise your credit score, you need to think like a lender. Who would you lend money to? A person with a deep history of paying down large amounts of debt, or an individual who has paid a debt just once or twice in their lives? These factors in determining your FICO score should help you make informed credit choices in the future, and ensure you have the best credit scores when it comes time to get an auto loan or a mortgage.

The savings could be huge if you manage your credit score wisely.  Knowing your FICO score is one thing, but making sense of the number is another.  Check out my FICO score range to see where you stand.  You may also be interested in knowing the average credit score to see how you stack up against the rest of the population.

What’s Not in a FICO Score?

Sadly, there’s a lot of misinformation out there about credit scores. Part of this has to due with the fact that the credit score providers like to keep their trade secrets close to their chest.

One could also argue that credit scoring is inherently clandestine because if we knew how everything worked we’d be able to manipulate the system, making credit scoring less accurate and ostensibly more unreliable.

We know what’s in a FICO score, now let’s find out more about what’s NOT in a FICO score so we can dispel some myths.

Your race, ethnicity, national origin, gender, and martial status do not affect your credit score, per the Consumer Credit Protection Act. You can thank anti-discrimination laws for that.

Your age is also not a determinant of a FICO score, though other types of credit scores may use it. And there’s certainly a correlation between older age and higher credit scores.  In short, those who have had access to credit longer (more credit history) tend to have higher credit scores than young consumers.

Your occupation, title, and employer may be included in your credit report, but do not affect your actual FICO score.

However, banks and lenders may use this information against you as part of their own underwriting decisioning. In fact, recently the credit bureaus have started working on income estimation as a means to tap new streams of revenue and give creditors new ways to determine risk.

Additionally, a FICO score does not take into account where you live, the interest rate being charged on your accounts, or any items reported as child/family support.

Rental history doesn’t affect FICO scores either, but now affects VantageScore.

Finally, certain types of credit inquiries don’t count against you, such as those initiated by you and those initiated by employers and insurance companies.

These Things Won’t Affect Your FICO Score

– Race, ethnicity, national origin
– Gender
– Age
– Martial status
– Occupation, title, income, employer
– Rental history (could change soon)
– Where you live
– Interest rate on accounts
– Items reported as child or family support

Tip: If you know somebody that works for a bank or lender, or any other company that has access to consumer credit reports, it’s not wise to have them pull one for free on your behalf.

It will look like you’re attempting to obtain credit from the associated company, and as a result, it could lower your credit score.

And as a rule of thumb, if it’s not on your credit report, FICO doesn’t use it.


  1. Paying on time is the most important, yes, but keeping balances low is also very important. Even if you’ve never missed a payment, a ton of credit card debt can really hurt your FICO score.

Leave a comment

Your email address will not be published. Required fields are marked *