COMPONENTS OF CREDIT
Your FICO score is made up of data from your credit report that breaks down into these five components. Each component works with and against each other, so what works for one credit profile might not work for another.
New Credit makes up 10 percent of your FICO Score, and it consists of the number of new accounts on file, as well as any and all Hard Inquires.
The goal here is to avoid pulling credit without good reason, and to add accounts while considering their impact to Credit Mix, Length of Credit History, Payment History or Amount of Debt. As with everything else in Credit, it’s a balancing act.
Amount Of Debt
The amount owed category determines 30 percent of your FICO score. Credit cards and Department Store cards are examples of revolving lines of credit. These types of accounts are heavily weighted when reported in your FICO score, and for most customers, which cards are heavily utilized and which are not determines the number of points earned here.
We consider each account, each limit, each Statement Date and each Due Date when we give our recommendations. We can tell customers exactly how much to pay to which accounts to maximize the FICO point return.
Payment history- taking up 35 percent of your score, is the largest category out of the five to determine how your credit score is evaluated. This category has many intricate parts, and it touches every other area of Credit, but it ultimately describes your readiness of making the consistent, minimum payments on each line of credit on time.
Your payment history can get complex the more data you start to accumulate. It analyzes your payment information on a variety of accounts; including credit and retail cards, mortgages, and loans; as well as any opposing public records or negative accounts. In maximizing Payment History, it’s important to make sure you aren’t harming Amount Owed, Length of Credit History or New Credit.
Length of Credit History
Length of credit makes up 15 percent of your FICO score. This category is based off when you opened an account and the last time you were actively using the account. FICO factors in your oldest accounts, new accounts, and average-aged accounts.
In terms of FICO evaluation, long-term account holders are always better, so you’d never intentionally close an account. That's if you make your payments on time. Although the length of credit only takes up 15 percent of your score, long-term credit history will always look good in the eyes of FICO.
Credit Mix measures the types of credits you are using altogether. It’s a mix of revolving and installment methods, and it determines 10 percent of your overall FICO score.
Many assume that the credit mix is an insignificant category within the scoring, but it’s useful for those that don’t have a strong credit history. It’s important to plan a diverse mix of accounts, without harming Length of Credit History, Payment History or New Credit in doing so.