The Five Factors of Fico ( Fico 5)

Credit scores are comprised of five factors. Points are awarded for each component, and a high score is most favorable. The factors are listed below in order of importance.

• 1. PAYMENT HISTORY - 35% IMPACT Paying debt on time and in full has the greatest positive impact on your credit score. Late payments, judgments and charge-offs all have a negative impact. Missing a high payment will have a more severe impact than missing a low payment, and delinquencies that have occurred in the last two years carry more weight than older items

  2. OUTSTANDING CREDIT BALANCES - 30% IMPACT This factor marks the ratio between the outstanding balance and available credit. Ideally, the consumer should make an effort to keep balances as close to zero as possible, and definitely below 30% of the available credit limit when trying to purchase a home.

  3. CREDIT HISTORY - 15% IMPACT This portion of the credit score indicates the length of time since a particular credit line was established. A seasoned borrower will always be stronger in this area.

  4. TYPE OF CREDIT - 10% IMPACT A mix of auto loans, credit cards and mortgages is more positive than a concentration of debt from credit cards only.

  5. INQUIRIES - 10% IMPACT This percentage of the credit score quantifies the number of inquiries made on a consumer's credit within a six-month period. Each hard inquiry can cost from two to 25 points on a credit score, but the maximum number of inquiries that will reduce the score is ten. In other words, 11 or more inquiries within a six-month period will have no further impact on the borrower's credit score. Note that if you run a credit report on yourself, it will have no affect on your score.