How is Your FICO Score Determined?

Let's define the acronym FICO. It is used to describe a system developed by the Fair Isaac Company for one of the Big Three credit reporting companies, Experian. Since its inception, FICO has gone on to become the standard within the credit industry for determining the creditworthiness of potential borrowers. It consists of a series of questions, and answers are given a certain number of points. When they're all added up, that number represents your FICO score.

The first category considers your payment history, and represents 35 percent of your score. FICO places a 30 percent emphasis on the amount of money you owe and your available credit. It also asks about your outstanding debt, such as your mortgage, credit cards, and auto loans. FICO also asks the total amount of credit you have at your disposal.

Some 15 percent of your FICO score comes from the length of your credit history.

FICO puts a 10 percent value on the overall mix of your credit. The more types of loans you've had, the better, as far as your FICO score.

Your FICO score also gives you a 10 percent premium if you've sought new credit within the past year.

Your FICO score can determine the percentage rate of your car or home loan, and may even get you a lower rate on your credit cards. It's a number that's worth knowing. However, don't pay for your FICO score.