FICO^® Credit Score Program

A FICO score takes into account five categories of information in a credit report. Whether positive or negative, the importance of any singular factor depends on the information in your entire credit report. Those five factors include:

1. Payment History

• Payment info on credit card accounts; retail accounts, like department store credit cards; installment loans, such as car or mortgage loans; finance company accounts.
• Public record and collection items – reports of events like bankruptcies, foreclosures, wage attachments, liens and judgments.
• The number of accounts that show no late payments or are currently paid as agreed.

2. The Amounts You Owe

• The amount owed on all accounts of every type.
• Whether you are showing a balance on certain types of accounts.
• The number of accounts where you carry a balance.
• How much of the total credit line is being used on credit cards and other revolving credit accounts.
• How much is still owed on installment loan accounts, compared with the original loan amounts.

Credit utilization, one of the most important factors evaluated in this category, considers the amount you owe compared to how much credit you have available. For example, if you have a $2,000 balance on one card and a $3,000 balance on another, and each card has a $5,000 limit, your credit utilization rate would be 50%. While lenders determine how much credit they are willing to provide, you control how much you use. FICO's research shows that people using a high percentage of their available credit limits are more likely to have trouble making some payments now or in the near future, compared to people using a lower level of credit.

Having credit accounts with an outstanding balance does not necessarily mean you are a high-risk borrower with a low FICO Score. A long history of demonstrating consistent payments on credit accounts is a good way to show lenders you can responsibly manage additional credit.

3. Length of Credit History

In general, a longer credit history will increase your FICO Score, all else being equal. But even people who have not been using credit long can get a good FICO Score, depending on what their credit report says about their payment history and amounts owed. Regarding your length of history, your FICO Score takes into account:

• How long your credit accounts have been established. Your FICO Score can consider the age of your oldest account, the age of your newest account and the average age of all your accounts.
• How long specific credit accounts have been established.
• How long it has been since you used certain accounts.

4. New Credit

FICO's research shows that opening several credit accounts in a short period of time represents greater risk – especially for people who do not have a long credit history. In this category your FICO Score takes into account:

• How many new accounts you have opened.
• How long it has been since you opened a new account.
• How many recent requests for credit you have made, as indicated by inquiries to the credit reporting agencies.
• Length of time since credit report inquiries were made by lenders.
• Whether you have a good recent credit history, following any past payment problems.

Looking for an auto, mortgage or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. The FICO Score compensates for this shopping behavior in the following ways:

• The FICO Score ignores auto, mortgage and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping.
• After 30 days, the FICO Score counts inquiries of the same type (i.e., auto, mortgage or student loan) that fall within a typical shopping period as just one inquiry when determining your score.

5. Types of Credit You Use

Your FICO Score considers your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. It is not necessary to have one of each, and it is not a good idea to open a credit account you don't intend to use. In this category your FICO Score takes into account:

• What kinds of credit accounts you have. Do you have experience with both revolving (credit cards) and installment (fixed loan amount and payment) accounts, or has your credit experience been limited to only one type?
• How many accounts you have of each type. It also looks at the total number of accounts you have. For different credit profiles, “how many is too many” will vary depending on your overall credit picture.