FICO score chart

Notice something interesting about how the chart is carved up? That is right! Not all of the 5 sections are "weighted" equally. Lenders care about some things more than others. This is the major lesson in figuring out to maintain a good score and how to increase a poor credit score.

As you can see from the FICO score chart, FICO scores are calculated using a 100 point system, divided into the 5 areas that lenders care about the most:

2. Your debt to credit ratio = 30% (This means how much debt do you have, relative to the total credit available to you. If you have two credit cards, both with a limit $1,000 each, your total available credit is $2,000. If you owe $250 on each card your total debt is $500 - only 25% of the avilable total of $2,000. Lenders like this ratio to be a maximum of 30-35%. In other words, try to not use more than $350 out of every $,1000 you have available.)

3. Frequency of new credit applications = 15%

4. Variety of credit types, for example installment, bank credit, credit cards = 10%

5. How old your accounts are = 10%.

This means that just 2 things, (1) pay on time, and (2) keep your debt below 30-35% of your available credit, will effect the vast majority of your score. These 2 things along make up 65% of your total 100 point FICO score - well over half.

It also shows how we waste a lot of time worrying about stuff that does not really matter as much. For example, it is very common for people to fret and ask questions about how much applying for new credit will hurt their scores. But as you can see from the FICO score chart, applications for new credit only effect 15% of the total score - not very much.

This is why although an application for a new card may hurt in the short term, in the long term it usually improves your FICO because it gives you a better credit to debt ratio (assuming you don't go out and spend it all), and provides a greater variety of credit types.

Welcome to the wonderful world of contradictions and paradoxes in calculating FICO scores. It explains why knowing the exact details of the FICO formula is so helpful in building and sustaining a healthy score.

As you see, the logic behind the formula is that lenders assume your past behavior with money is the best predictor of your future behavior with money - possibly their money. This is why they care most about whether you pay promptly and regularly, and do not overspend: The Average U.S. Credit Score: 692. The cost to see yours: $0.

There are many myths about FICO scoring. Please be aware - it is illegal for credit scoring to be based on zip code, race, sex, marital status, national origin, or religion. This is ensured by Federal legislation: The Equal Credit Opportunity Act [ECOA].

To learn more about credit scoring, check out this excellent summary on FICO score chart - what you MUST know from the great PBS special "Secret History of the Credit Card."

Also see the Federal Trade Commission (FTC) consumer information sheet on Guide to FICO Scores.

Look at the chart below for a snapshot of how FICO scores are distributed.

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