How Is Your Credit Score Determined? (The Five FICO Factors Explained)

Understanding your credit score can feel like trying to solve a puzzle without the picture on the box. However, your credit score is one of the most important numbers in your financial life. Whether you’re looking to buy a home or car in the greater St. Louis or Chicago area, knowing what goes into that three-digit number is the first step toward reaching your long-term goals.

What Are the FICO Score Factors?

Your credit score isn’t just pulled out of thin air. It’s calculated based on five specific categories of data in your credit report. Here’s the breakdown of how those factors weigh into your total score:

1. Payment History (35%)

This is the biggest piece of the pie. It shows whether you’ve paid your past credit accounts on time. Consistent, on-time payments are the best way to build a strong score. Be sure to pay on time, every time.

Setting up Bill Pay with Scott Credit Union Digital Banking is a great way to ensure you’re automating those monthly due dates.

2. Credit Utilization (30%)

Your credit utilization refers to how much of your available credit you are actually using. For example, if you have a credit card with a $1,000 limit and a $300 balance, your utilization is 30%. Keeping this number low (ideally under 30%) shows lenders you can manage credit responsibly.

3. Length of Credit History (15%)

This considers how long your credit accounts have been established, including the age of your oldest account and the average age of all your accounts.

4. Credit Mix (10%)

Lenders like to see that you can handle different types of credit, such as “revolving” credit (credit cards) and “installment” loans (mortgages or auto loans). 

Whether you are looking for a competitive mortgage rate or a local auto loan, having a mix of these installment loans through Scott Credit Union can actually help strengthen your score over time.

5. New Credit Inquiries (10%)

Every time you apply for a new loan or credit card, a “hard inquiry” occurs. Opening several new accounts in a short period can represent a greater risk to lenders and may slightly dip your score.

The Truth About Credit Scores That People Don’t Know

One of the most common questions we hear is: how often is your credit score calculated? The truth is that your credit score is a “snapshot” in time. It isn’t a static number that updates once a month on a specific day for everyone. 

Instead, your credit score is recalculated whenever a lender requests it, based on the information currently in your credit report. Because different lenders report your data to credit bureaus at different times throughout the month, your score can actually fluctuate slightly from week to week.

How to Improve Your Credit Score Based on These Factors

If you’re looking to give your score a boost, focusing on the FICO Score Factors is the most effective strategy. Here are a few tips to get you started:

• Automate your payments: Since payment history is 35% of your score, missing a due date is a major setback. Set up automatic payments to ensure you’re always on time.
• Keep balances low: Work on paying down credit card balances to improve your credit utilization ratio.
• Think twice before closing old accounts: Even if you don’t use an old card, keeping it open helps your length of credit history.
• Monitor your report: Check your credit report regularly for errors, so you can be proactive about your financial health.

 

Understanding what affects your credit score gives you the power to make better financial decisions. If you have questions about your credit or are looking to start your journey toward a better score, Scott Credit Union is here to help.

Where Can You Get Help Boosting Your Credit Score?

If you want to take control of your finances and boost your credit score, you don’t have to figure it out alone. Check out Scott Credit Union’s free financial education resources for tools, videos, and tips designed to help you succeed. Whether you’re just starting out or looking to make a big move, we’re here with you every step of the way on your financial journey.