Breaking Down the FICO Credit Scoring Formula

Table of Contents

If you’re in the market for a new credit card, personal loan or mortgage loan, you’re going to have to produce a solid credit score – preferably over 700 based on the FICO credit scoring model.

The FICO scoring range, used my creditors and lenders to weigh a borrower’s credit health, is between 300 and 850 – the higher your credit score, the better you chances of obtaining a loan or credit.

Credit scoring firms like Experian, Equifax and Transunion largely depend on the FICO credit scoring model to issue their consumer credit scores.

“The FICO score, developed by the FAIR Isaac Company more than 30 years ago, is the primary measure used by lenders to determine your credit worthiness,” says Richard Best, personal finance specialist at, a digital debt management platform. “To this day, its formula for calculating your score is a closely guarded secret, however, based on years of study, we have been able to determine the key criteria used in the scoring along with their approximate weighting.”


Breaking Down the FICO Score

Overall, there are five key factors that comprise your FICO score: payment history, credit utilization, length of history, credit inquiries, and overall mix of debt products,”

Here’s how creditors break down the FICO credit score.

— Payment history comprises 35% of your credit score and is the largest factor. “A consumer’s past payment behavior is used as a risk assessment factor to predict credit worthiness for the future,” says Nishank Khanna, chief marketing officer at Clarify Capital in New York, N.Y.

— Credit utilization comprises 30% of your score. “Consumers who use less than 6% of their overall credit limits tend to have the best scores,” Khanna notes.

— Length of credit history comprises 15% of your FICO score. “The longer your overall credit history, the higher your score,” he adds. “Consumers should be cautious about closing old credit cards as it can have an effect on the average age of all open accounts.”

— Credit inquiries account for 10% of your FICO score. “Opening many new accounts can suggest a consumer might be in financial trouble,” Khanna says. “As such, you should only get new credit cards when there is an actual need and space out new applications.”

— Credit mix account for 10% of a credit score. “If you have to much credit with certain types of accounts, such as credit cards, or installment loans, that could weight against you – it’s important to have a broad mix of credit accounts,” says Best.

Your FICO score constantly changes, so it’s important to monitor your credit score on a regular basis.

“With each activity – a payment or non-payment, a new account, a credit limit increase, or a sudden increase in your debt – the score fluctuates up and down, it never stays the same,” says Best. “That’s why it’s important to review your score frequently, especially if you have plans to apply for new credit.”


Using the FICO Model to Strengthen Your Credit Score

While the five FICO credit scoring factors listed above account for most credit scoring activity, there are other personal financial influencers in play that can shift a credit score one way or another – and credit-seekers and borrowers should get to know them.

“Credit scores by themselves can be deceptive,” says Brian Davis, director of education at Spark Rental, a New York City-based financial services company. “There are plenty of people out there with 700-plus credit scores who have declared bankruptcy within the last few years.”

Davis, a former mortgage loan officer and landlord who regularly vetted consumer credit scores, says he has his own set of priorities when vetting a creditor or borrower in everyday life.

“The first thing I look at on a credit report is payment history,” he says. “People either tend to be rigidly conscientious about paying their bills on time every month or not, and you can see these patterns clearly in their payment history.”

Davis says he also looks for any public records, such as liens, bankruptcies, or foreclosures.

“At a minimum, it means you should ask more questions and find out exactly what happened and why before extending credit,” he notes. “Lenders will also check the “accounts” section of the credit report, look for any consumer financial activity with collections or charge-offs. Those are other big red flags.”

Some creditors will also check out a consumer’s income, as well – especially as more Americans participate in the “gig economy.”

“While income is easy to verify for people with a traditional nine-to-five job, it’s harder to evaluate self-employed people,” Davis adds. “Consequently, a creditor or lender may look at bank statements and tax returns to get a sense for total income.”

A lender will also keep an eye out for frequently shifting sources of income as well.

“Someone who has worked the same job for five years looks far more reliable as a borrower than someone who has changed jobs four times in the last five years,” Davis says.



© AchieveFinance 2023. All Rights Reserved.

The operator of this website does not make any credit decisions, but rather, upon the submission of your application, shares your submission with multiple lenders in order to provide you with several options of loans that may meet your credit needs. You acknowledge, agree and authorize that we and our network partners and lenders may obtain your credit report from one or more consumer reporting agencies, such as but not limited to TransUnion, Experian, Equifax, or Clarity, in order to: (1) authenticate and verify your identity based on the information you provided; (b) access your eligibility for credit and identity products and/or services you may qualify for; (c)  determine your current debt-to-income ratio; and (d) to obtain your credit score or information about your creditworthiness and credit standing. When you check your rates and review the loan offers available to you, we/our network of lenders or partners may perform a soft inquiry or hard inquiry on your credit report, which may impact your credit score. By submitting your information, you agree to allow participating lenders to verify your information and check your credit. Loans provided by independent, participating lenders in our network are designed to provide cash to you to be repaid pursuant to the individual terms as outlined within their consumer loan agreement. Each lender has their own terms and conditions, please review their policies and terms for further information. Nonpayment of credit could result in collection activities and may impact your credit.