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Articles » Fico Score | | Top Factors That Affect Your FICO Score |
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The FICO scoring algorithms for each of the three major credit bureaus attaches a numerical value to each entry on your credit report. The highest score achievable in any of these formulas is 850 and the lowest is 300, a range of 650 points. For the purposes of the following table, a high impact on your credit score is anywhere from 200 to 250 points, medium is 100 to 200 points, and low is below 100. The factors below are the main elements of your credit report that are used when calculating your FICO score. Knowing about them can help you to improve your FICO Credit Score quickly .
Affecting Factor Affect Score Change
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Bankruptcy - High
Tax Lien - High
Foreclosure - High
Paying off mortgage loan + Medium to High
New Loan or Mortgage - Medium to High
Pay off credit card + Medium
New Short Term
Credit-Credit Cards - Medium
Credit Inquiries - Low
Payment history accounts for 35% of your overall FICO score. Defaulting on payments or going into bankruptcy or foreclosure will result in the single largest impact there is in the scoring system. In most instances any of these actions can be a hit of 200 points or more on your overall FICO score. Paying off a mortgage or loan doesn’t have the same impact in a positive direction because loans and mortgages are paid over time. Your credit score will go up as you make your payments on time, but it will be a gradual rise, not the sudden impact that happens when you default.
How much you owe accounts for 30% of your overall FICO score. Taking out a new loan or mortgage will make this number go up substantially. The impact on your credit score for small loans will usually be around 100 points, but mortgages and loans of over $100,000 would be categorized as high impact. Paying off or taking out new lines of short term credit, like department store credit cards, are generally medium impact because the dollar amounts are relatively small.
Credit inquiries, contrary to what many credit counseling agencies will tell you, do not have a large impact on your FICO score. Lenders understand that when you are shopping for a loan or new vehicle you will often have multiple credit inquires in a short period of time. This is taken into account by the lenders themselves and their numbers are adjusted accordingly.
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