Payment History – 35%
This is the most self-explanatory category, simply pay your bills on time and do not be more than 30 days late on any bill, as creditors start reporting late payments on your credit at that time. If you do foreseeing yourself being late on a bill, you are better off notifying the creditor in advance as some installment loans might allow a special 30-day forbearance without any adverse effect on your credit. A recent late payment affects your credit more adversely than an older one, so do not be surprised to see a drop of 60 odd points on a new late you incur if you currently have a flawless credit history
Credit Card Capacity – 30%
It is not how much money you owe, but what percentage of your available credit limit you are using up. Your credit score will be lower if your combined credit card limits are $500 and you are using $400 of it, as compared to you using up $50,000 of $100,000 available credit. Therefore you should carry balances on not more than a couple of credit cards and preferably keep their balances at 10% utilization of the credit limits of those accounts. Doing so can result in an increase of over 60 points
Length of Credit History – 15%
The older your credit history is the higher your credit gets propelled by this factor. You can expect someone with a 20-year-old credit profile to have a relatively higher Fico Score than compared to someone that has had a credit profile for 10 years, considering all other factors are similar
Types of Credit – 10%
This factor pertains to the assortment of the credit accounts found on your credit profile. In order to satisfy this category, one is expected to have open and active at least one of each of the different credit accounts: a) Mortgage Account b) Installment Account c) Revolving/credit card account. Of the three different types of accounts above, not having an open credit card account will affect your credit the most. So for those who do not have an open credit card, simply by acquiring one will result in a Fico Score boost of up to 30 points.
New Credit – 10%
Your score is also calculated by factoring in the average length of time accounts have been open on your credit report. Opening a new account contributes negatively to this factor, also it is not wise to close old accounts as they will lower this average. Therefore you will notice as accounts become more seasoned your credit score will propel provided no new accounts have been opened. Also factored into this category are recent requests for your credit reports made by prospective lenders and the number of recently opened accounts you have. It is advisable to keep both at a bare minimum.