Credit Score Estimator (FICO Model)
How is a Credit Score Calculated?
Your credit score is a three-digit number, typically ranging from 300 to 850, that represents your creditworthiness. Lenders use this score to determine the likelihood that you will repay a loan on time. While there are different scoring models, the FICO® Score is the most widely used by 90% of top lenders.
The Five Key Factors
The FICO calculation is broken down into five distinct categories, each carrying a different weight:
- Payment History (35%): This is the most significant factor. It tracks whether you've paid past credit accounts on time. Late payments, bankruptcies, and foreclosures heavily penalize this score.
- Amounts Owed (30%): Often called "Credit Utilization," this measures how much of your available credit you are using. Most experts recommend keeping this below 30%.
- Length of Credit History (15%): This considers the age of your oldest account, the age of your newest account, and the average age of all your accounts.
- Credit Mix (10%): Lenders like to see that you can manage different types of credit, such as credit cards, retail accounts, installment loans, and mortgages.
- New Credit (10%): Opening several credit accounts in a short period represents a greater risk, especially for people who don't have a long credit history.
Example Calculation
Consider a person named Sarah:
- Payment History: Sarah has never missed a payment (100% on-time). This grants her the maximum points in the 35% category.
- Utilization: She has a $10,000 total limit and carries a $1,000 balance (10% utilization). This is considered "Excellent" and earns high marks in the 30% category.
- Credit Age: Her oldest card is 10 years old. This provides a solid 15% foundation.
By maintaining these habits, Sarah would likely see a score in the 780–820 range, qualifying her for the best interest rates available on the market.
How to Improve Your Score
To boost your score effectively, focus on the heaviest hitters first. Ensure every payment is made on time and work to pay down high credit card balances. Avoid opening multiple new accounts at once, as the hard inquiries and the reduction in average account age can cause a temporary dip in your score.