A consumer's FICO score is a version of a credit score available through the three major credit bureaus: Experian, TransUnion and Equifax. The majority of financial institutions use FICO scores to determine the credit risk of individuals. There are a variety of factors that go into calculating a FICO score, each with its own significance.
Account Information
One of the largest factors in determining a FICO score is the payment history and amounts owed on accounts. These two factors account for 65 percent when calculating a FICO score. The payment history examines payment information on all types of accounts, including credit cards, mortgages, installment loans and retail charge accounts. The severity of delinquency, the amount past due on delinquent accounts and the time since delinquency are considered. The amounts-owed calculation looks at the amount owed on all accounts, the number of accounts with balances and the amount owed on specific types of accounts. In addition, the amount of credit lines used and the proportion of installment loan amounts owed is also considered.
Length of Credit History
The length of a consumer's credit history will also play a role in calculating a FICO score, accounting for 15 percent of the calculation. In addition, the amount of new credit on a consumer's report will account for an additional 10 percent of the score calculation. Length of credit history includes the time since all accounts have been opened, the length of time since the accounts have had activity and the length of time since specific types of accounts have been opened. New credit accounts include the number of credit inquiries, the time since accounts have been opened and the reestablishment of positive payment history following delinquency.
Types of Credit Used
The remaining 10 percent of a consumer's FICO score calculation consists of the types of credit accounts that are on the report. This will include a look at the number of credit card accounts a consumer has as well as any retail charge accounts or consumer finance accounts. Installment loans such as a personal loan or auto loan are also considered. A mortgage will also play a factor in determining a credit score if a consumer has one on her report. The recent information on each account will also be used in calculating a score.
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