What Changes a FICO Score?

The FICO score is a composite measure of a particular individual's credit strength. The score has a tremendous influence on the availability of credit, the necessity for collateral, and the overall cost of borrowing money. While the exact procedures for calculating the score are kept secret by the FICO company, there are five general factors that can change a FICO score.

Payment History

Consumers who pay their bills on time enjoy a higher FICO score. Payment history commands a weighty 35 percent influence on the overall score. FICO scores also change negatively if payment deadlines are missed, particularly for expensive or valuable items. Every missed payment affects your credit score in a different way, depending on if the bill was eventually paid, the length of time since the deadline, and the cost of the bill.

Utilization

Utilization is a ratio of the amount of credit you have used to the amount of credit available to you and accounts for 30 percent of your FICO score. For example, if you have a credit card with a $100 limit, and you have used $80 of that limit, your credit utilization is 80 percent. FICO scores improve when your credit utilization decreases, and scores fall when the ratio increases. Closing your credit card accounts also raises the ratio and therefore weakens your FICO score, while expanding your existing credit limits lowers the ratio, strengthening the score.

Credit History

Your credit history has a 15 percent impact on your FICO score. The credit history metric incorporates the length of time that individuals have maintained their lines of credit. Each separate credit account has a credit history value associated with it, and the combination of these values forms the overall metric. Holding on to credit cards for long periods of time raises your FICO score, while opening a variety of new credit lines lowers the score. Opening new credit accounts lowers your score because the value number will shift to represent a younger, less-established credit history.

Credit Variety

Credit can be used in a number of different ways and for a number of different purposes, from automobile loans to credit cards to mortgages to school expenses. Those who manage several different kinds of credit enjoy an elevated FICO score. Conversely, consumers with credit cards alone, or consumers who close existing accounts, have little credit variety, and therefore see a falling FICO score. Credit variety affects 10 percent of the overall score.

Credit Inquiry

Credit inquiry measures the number of new credit lines that a consumer wishes to open. Obligating yourself to lots of new credit in a short time period is considered risky behavior, and causes your FICO score to fall. Searching for new credit can also affect the 10 percent impact this measure has on your FICO score. Taking careful and rational steps to acquire new credit will not normally affect your credit score.