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What Creates Your FICO Score?

By: Michael Millington

Everyone has a FICO score, a number that defines their credit worthiness based on their past financial decisions. What most people do not know is how a FICO score is broken down by creditors. Since this is a main factor that a lender will use to determine your credit risk, it is imperative to know what creates and impacts a FICO score. More importantly, it is good to know what you can do to keep your FICO score healthy.


How are FICO Scores Calculated?

Within your credit report, there are many different factors that contribute to your FICO score. These factors combine to create five major categories that give creditors and yourself a clear outlook on what your credit health is like. These factors range from the immediately changeable to the types that fluctuate over time.


Payment History

Payment history involves how adept you are at making bill payments. If you make your payments on time every month, then your FICO score will improve. If you fail to make payments on your bills and let them become delinquent, then your FICO score will worsen. This is one factor that has a more immediate effect on your FICO score, as you can see a decrease or increase in your score within months. According to, payment history accounts for the largest part of your FICO score.

Making sure you stay up to date on your bills can be crucial to maintaining a great FICO score. It can also help to improve a FICO score if you have been delinquent in your payments. Getting current on missed payments can have an almost instant turn around, but you will need to continue making payments on time to see a significant change in your FICO score. Like many things, changing a FICO score takes time. Try to avoid negative actions against your credit report, like collections or lawsuits, as these can also take time to fade from impacting your FICO score.

If you find that you cannot make proper payment on your accounts, you can always contact your creditors to try and work out a payment plan to handle your credit debt. Lenders will appreciate the effort to pay back money instead of potentially never collecting what you owe. Setting up a payment plan with a lender can prevent them from closing your account and placing your debt in the hands of a collector.


Amounts Owed

The amount of debt you owe to your creditors is also a substantial factor in calculating your FICO score. Having a balance on your credit is not necessarily a bad thing. Keeping your owed amounts to a small quantity will actually help keep your FICO score in good health. Letting your credit debt grow will be deemed as problematic and will negatively impact your score.

This portion of your FICO score can be slightly easier to fix than your payment history. Ideally, making a payment large enough to eliminate your credit obligation would help gradually increase your FICO score to a better standing. If you have to make multiple payments on your credit debts however, it will require some discipline and time to see an increase in your FICO score.

If you find that the amount of debt you owe is too great for you to manage, consider seeking alternative methods to achieving debt relief. Debt settlement can help reduce the overall debt you have so you can achieve debt relief for your unsecured debts, including your credit cards. Although a relief method like bankruptcy can do the same thing, it will also negatively impact your credit report for 7-10 years.


Other Factors Involved

The age of your credit accounts has an effect on your FICO score as well. Making sure you’re keeping your oldest credit lines open will help gauge your ability to hold longstanding credit. This metric is based on the average age of all your forms of credit, not just the oldest line. If you open many lines of credit at the same time, it could negatively impact your credit age by lowering it. Opening credit lines selectively can help to avoid this.

Looking for new types of credit can be stressful when you have no idea how it impacts your FICO score. Many people look for multiple types of credit in a short period of time, the same way they might shop for other things. Depending on your FICO score, your score might not suffer as much for “shopping” for credit lines. You might have a better chance of avoiding negative impacts to your FICO score if you plan a given period of time to search for credit cards or loans. Doing so may limit the effect your search will have on your credit report.

Having a good mix of credit will also impact your FICO score. This falls in a similar category as the search for new types of credit. If you open credit lines in a short period of time just to have a diverse array of open credit, your FICO score might experience a decrease or might not change at all. With this being said, having open lines of credit will do more for your score than not having any lines of credit at all. Keeping multiple lines open and paying these lines off in a timely manner will help to improve your FICO score.


Dealing With Your Credit Debt

Trying to maintain a healthy credit report can be a daunting task if you have debt you simply can not manage. Large amounts of credit debt can create long lasting damage on your credit report. Before you succumb to your credit debt, talk to Guardian Debt Relief first. We can help you find a better way to achieve debt resolution through settlement. Our debt specialists are ready to assist you with your unsecured debt troubles. Take advantage of our free consultation call and find out how Guardian Debt Relief can help you achieve debt relief today.

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