how to improve your fico score
achieving a high fico score requires having a mix of credit accounts and maintaining an excellent payment history staying well below your credit limits also helps your score the ideal credit utilization ratio is below 30 maxing out credit cards paying late and applying for new credit frequently are all things that lower fico scores you can check your credit regularly to ensure your credit report is free of errors by law you are entitled to one free credit report each year from major credit bureaus calculating fico scoresto determine credit scores the fico weighs each category differently for each individual however in general payment history is 35 of the score accounts owed is 30 length of credit history is 15 new credit is 10 and credit mix is 10 payment history refers to whether an individual pays their credit accounts on time credit reports show the payments submitted for each line of credit and the reports detail bankruptcy or collection items along with any late or missed payments accounts owed refers to the amount of money an individual owes having a lot of debt does not necessarily equate to low credit scores rather fico considers the ratio of money owed to the amount of credit available to illustrate an individual who owes 10 000 but has all of their lines of credit fully extended and all of their credit cards maxed out may have a lower credit score than an individual who owes 100 000 but is not close to the limit on any of their accounts as a general rule of thumb the longer an individual has had credit the better their score however with favorable scores in the other categories even someone with a short credit history can have a good score fico scores take into account how long the oldest account has been open the age of the newest account and the overall average credit mix is the variety of accounts to obtain high credit scores individuals need a strong mix of retail accounts credit cards installment loans such as signature loans or vehicle loans and mortgages new credit refers to recently opened accounts if a borrower has opened a bunch of new accounts in a short period of time that indicates risk and lowers their score fico score vs vantagescorethe main alternative to the fico score is vantagescore a credit scoring method jointly developed by the three main credit bureaus in 2006 like fico scores the vantagescore rates an individual s creditworthiness on a scale of 300 to 850 based on factors like payment history credit mix and credit utilization however the vantagescore attaches different weights to those factors so your vantagescore may be slightly different from your fico score they also have different scoring criteria fico requires at least one tradeline older than six months in order to calculate a score and at least one tradeline with activity over the last six months in contrast vantagescore requires only one tradeline with no age requirement fico versionsvarious versions of fico exist because the company has periodically updated its calculation methods since introducing its first scoring methodology in 1989 each new version is made available to lenders but it is up to them to determine if and when to implement the upgrade the most widely used version is still fico score 8 even though it has been followed by fico score 9 and fico score 10 suite fico score 9 was introduced in 2016 with adjustments to the treatment of medical collection accounts increased sensitivity to rental history and a more forgiving approach to fully paid third party collections it did not surpass fico score 8 in popularity however the incorporation of trended credit bureau data in fico score 10t part of fico score 10 suite announced on jan 23 2020 might cause it to supplant fico score 8 in the future fico score 5 is one alternative to fico score 8 that is still prevalent in auto lending credit cards and mortgages according to fico score 8 is consistent with previous versions but there are several specific features that make it a more predictive score than prior versions like all prior fico score systems fico score 8 attempts to convey how responsibly a borrower manages debt scores tend to be higher for those who pay their bills on time keep low credit card balances and only open new accounts for targeted purchases conversely lower scores are attributed to those who are frequently delinquent or who use a significant amount of their credit scores do not include collection accounts in which the original balance is less than 100 the change with fico score 8 included increased sensitivity to highly utilized credit cards meaning that low credit card balances on active cards can more positively influence a borrower s score it also treats isolated late payments more judiciously than past versions fico score 8 is more forgiving if a late payment is an isolated event and other accounts are in good standing and it divides consumers into more categories to provide a better statistical representation of risk the primary purpose of this change was to keep borrowers with little to no credit history from being graded on the same curve as those with longer credit histories 