Credit Score Demystified



What is the FICO Score?

  • Fair Isaac Corporation (FICO) Score is used by lenders to assess how likely borrowers are to pay their credit obligations as agreed.

  • The FICO scoring range is between 300 and 850, where a score greater than 750 is considered excellent.


How is the FICO score calculated?

  • The exact formula is not disclosed, but the factors and their associated weights are below:

-- 35% of the FICO score is based on payment history

-- 30% of the FICO score is based on amount owed

-- 15% of the FICO score is based on length of history

-- 10% of the FICO score is based on new credit

-- 10% of the FICO score is based on types of credit used (for example, home mortgage, student loans, credit card, vehicle loan, etc.)


As you can see from the weights/factors above, 100% of the FICO score is based on DEBT!


Factors NOT considered in FICO score:

  • Income/Salary

  • Savings

  • Net Worth

  • Investments

  • Retirement Savings

  • Marital Status

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