Universal Ramblings

The FICO score is the most common credit score used by creditors/lenders in order to evaluate a borrower’s creditworthiness. It is developed by Fair Isaac Corporation. However, scores offered by each credit reporting agency (CRA) or credit bureau may vary because not all creditors report information to every CRA. Moreover, the credit scoring models used by the bureaus slightly differ from one another.

The FICO scores offered by the 2 CRAs namely Equifax and TransUnion are known as Beacon and Empirica. Consumers can get these scores online from MyFICO. Experian, another CRA also offers FICO score but consumers can’t access it from MyFICO. They can get credit scores based on Experian data available on Experian’s website. However, the Experian FICO scores are available only to lenders.

The FICO score/credit score is calculated using the information available on your credit report. The credit bureaus can only calculate your FICO score if you have at least 1 account open for 6 months or more. Also, there should be at least 1 undisputed account reported to the bureaus in past 6 months.

In general, there are 5 factors which affect your credit score calculation. The factors with their weightage of importance are given below:

1. Payment history (35%): This includes information on -
* How you’ve paid credit cards, installment loans, mortgages etc.
* Adverse public records such as bankruptcy, liens, collections
* Time of past due items and adverse public records
* Accounts paid as agreed

2. Amount you owe (30%): This provides details on -
* Number and type of accounts you owe
* Ratio of balance to total credit limit (revolving accounts)
* Ratio of balance to original loan amount (installment loans)

3. Length of credit history (15%): This includes the time period since you’ve opened different types of accounts.

4. New credit (10%): This provides details of -
* The accounts you’ve recently opened
* Number of recent credit inquiries
* Time since recent credit inquiries
* Time since accounts opened recently
* How you’ve rebuild credit after past credit problems

5. Credit/loan types used (35%): This factor includes the different types of credit/loans you’ve opted for.