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How FICO Credit Scores Work

Article From, Published: October 14, 2010

Buying a house, refinancing it, getting a loan from places similar to, getting a job—they’re all dependent on your FICO credit score. It pays to learn how it’s calculated.

How are FICO credit scores computed?

FICO uses five broad categories to calculate credit scores, and each category is weighted accordingly:Payment History35%Amounts owed30%Length of credit history15%New credit10%Types of credit in use (is it a “healthy” mix?)10%

Why are there three FICO credit scores?

There are three main bureaus that collect data on your credit history and run Credit History Checks: Equifax, Experian, and TransUnion. FICO takes data from each credit bureau and runs it through its system. This leads to three different FICO credit scores because:

  1. Each agency may have information one or both of the others don’t have. For example, a collection agency may have reported a bad debt to only one of them.

  2. Errors that occur just in one agency’s data may affect that agency’s results, but not the results from the other two.

And to make it even more complex, many lenders augment their credit decisions by adding particular criteria they want to consider. Your best bet when it comes to making sure you’re accepted, is to get your score as high as possible using something like the Fingerhut store (read the review here). You can always fight your case as long as you can prove that you are reliable with a strong score.

Also, although FICO is the best-known credit score, there are many others. Some lenders generate their own credit scores using data from the same three credit