How Your Credit Score Is Derived
Developed in 1956, a Fair Isaac Corporation Score (commonly called the FICO Score) is a three digit number ranging from 300-850 and is calculated according to the following risk factors:
Payment History (35% of score):
*Payment information on many types of accounts
*Public record and collection items
*Details on late or missed payments – specifically:
(how late they were, how much was owed, how recently they occurred
how many there are)
Amounts Owed (30% of score):
*Amount owed on all accounts
*Amount owed on different types of accounts
*Whether you are showing a balance on certain types of accounts
*How much of the total credit line is being used
*How much of installment loan accounts is still owed
Length of Credit History (15% of score):
*How long your credit accounts have been established, in general
*How long specific credit accounts have been established
*How long it has been since you used certain accounts
New Credit & Inquiries (10% of score):
*What kinds of credit accounts you have and how many of each
*Total number of accounts you have
Types of Credit (10% of score):
*How many new accounts you have
*How long it has been since you opened a new account
*How many recent requests for credit you have made
What It Means:
Once the borrower’s score is derived, most lenders use a standard ‘grading’ system to categorize the results. While some lenders develop their own systems for classification of scores, below is a general guide of score interpretation. Used as a general reference, this can help you interpret the credit score you’ve been given based on a grading system typically used in schools:
CREDIT SCORE – GRADE
670 and above – A+ to A
650 – A-
620 – B+ to B-
580 – C+ to C-
550 – D+ to D-
520 or below – E
