Home > Credit Score > The Secret Decoder Ring for FICO Scores

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People love good spy stories! That’s why spies like James Bond and Jason Bourne have such enduring popularity. Spies rely on their wits but they also rely on cool tools like exploding pens and secret decoder rings to help them do their job.

You might not be an international spy that jets from one exotic destination to another, but your FICO score is a code that needs to be cracked! Use this article as a type of secret decoder ring to unlock the mysteries of your FICO score.

When it comes to rebuilding your FICO score, many consumers take the approach that every credit-related action and decision they make will have an equal impact on their scores. However, that is simply not the case. Your FICO score is built on several elements and each of those elements has their weighting; each element influences your FICO score to a different degree.

So the smart consumer — the one who wants to rebuild their FICO score as efficiently as possible — will make sure that they are aware of the weightings and use those weightings to make their decisions.

  • Payment History makes up approximately 35% of your FICO score. Therefore, it has the highest level of influence among all of the elements of your credit score. Payment history includes how diligently you’ve paid your accounts, as well as any judgments, liens and bankruptcies you may have had.
  • Balances Owed makes up approximately 30% of your FICO score and includes the credit utilization calculations that consider how much revolving debt you owe compared to your total credit limits.
  • Length of Credit History, which influences about 15% of your score, is just as the name implies: The longer and more stable of a credit history you have, the better.
  • New Credit accounts for about 10% of your score and it measures how many inquiries and new loans or credit cards you’ve opened.
  • Types of Credit makes up approximately 10% of your score. It is influenced by the mix of credit you have — whether you have just one kind of credit or whether you’ve been able to manage a mix of credit types, such as revolving and installment accounts.

Between each of the credit bureaus (Experian, Equifax, and TransUnion), the weightings along with the information being reported might differ slightly, causing slightly different scores at each credit bureau. But overall the weightings used to determine your FICO score are similar for each bureau.

Now that you have this “secret decoder ring” to unlock the mystery of your FICO score, you can build a simple action plan based on these ratings, and even zoom in on some of the most influential aspects of rebuilding your credit.

For example, since payment history is so influential to your score, make it a priority to maintain optimum credit history by paying your bills on time and keeping your accounts active and open (instead of opening and closing accounts frequently). And since balances owed have the second-highest influence on your score, make it a priority to pay down your credit card debt.

A FICO score is just one (seemingly mysterious) number but it is derived from information about you that is measured according to the weightings listed above. Review the secret decoder ring I’ve provided and build a credit-boosting action plan to help you rebuild your FICO score as efficiently as possible.

Image: Genevieve719, via Flickr

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