Lesson #6 : Understand the FICO score


Yes YOU control what your credit score is and nobody else. Everything on your credit files is something YOU did. Nobody else, nobody can fix it but you!

So how can *I* build my own credit score and have the one I want? First lets break down what the FICO 8 credit file consist of and how its calculated..
(Warning.. Math ahead, the old math not that new crap in school now)

First lets lay out some facts as we know from what they tell us.

Score Makeup Formula
Payment history: (35 percent)
Amounts owed (credit utilization): (30 percent)
Length of credit history: (15 percent)
New accounts: (10 percent)
Credit mix: (10 percent)

Score Ranges:

FICO SCORE (Bad)‡ 350 – 649
FICO SCORE (Fair)‡ 650 – 699
FICO SCORE (Good)‡ 700 – 749
FICO SCORE (Excellent)‡ 750 – 850

Now each part of the Score Makeup within itself.

Payment history:
Poor: < 97%
OK : 97%
Good: 98%
Excellent: 100%

Amounts owed (credit utilization):
Poor: +75%
OK: 50-74%
Best: 10-29%
Excellent: 1-9%

Length of credit history:
Bad: < 2 yrs
OK: 2-4 yrs
Good: 5-6 yrs
Better: 7-8 yrs
Excellent 9+ yrs

New accounts:(inquiries)
Poor: 9+
Bad: 5-8
OK: 3-4
Better: 1-2
Best: 0

Credit mix:
Bank-Issued / Credit Card / Installment Loans
OK: 0-5 Accounts
Good: 6-10 Accounts
Better: 11-20 Accounts
Best: 21+ Accounts

Now Score values: Totals: OK the min FICO score is 350. The MAX FICO Score is 850
and since each category we are told has a “so called” percentage of your score. Honestly these are not exact so we have to take them at face value and assume they are close to what they say they are. See Score Makeup Formula above..Each Section has the min/max number of points available.

Payment history: (35 percent) 122.5 – 297.50
Amounts owed (credit utilization): (30 percent)105- 255
Length of credit history: (15 percent)52.5 – 127.50
New accounts: (10 percent) 35 – 85
Credit mix: (10 percent) 35 – 85

Now we assign points evenly across the values above and we get a Matrix of what each category value is by each grade of that value. And put it alllllll together. I have rounded the number off and dropped the 10ths for ease of use. So its “close” not exact. But it works.

Payment history:
Poor: < 97% = 122 points
OK : 97% = 188 points
Good: 98% = 240 points
Excellent: 100% = 297 points

Amounts owed (credit utilization):
Poor: +75% = 105 points
OK: 50-74% = 143 points
Good:30-49% = 180 points
Best: 10-29% = 227 points
Excellent: 1-9% = 255 points

Length of credit history:
Bad: < 2 yrs = 52 points
OK: 2-4 yrs = 71 points
Good: 5-6 yrs = 90 points
Better: 7-8 yrs = 109 points
Excellent 9+ yrs = 128 points

New accounts:(inquiries)
Poor: 9+ = 35 points
Bad: 5-8 = 48 points
OK: 3-4 = 60 points
Better: 1-2 = 73 points
Best: 0 = 85 points

Credit mix:
Bank-Issued / Credit Card / Installment Loans
OK: 0-5 Accounts = 35 points
Good: 6-10 Accounts = 47 points
Better: 11-20 Accounts = 73 points
Best: 21+ Accounts 85 points

Now with this you can look at your credit file and get a ROUGH idea of what effect each part of your credit file has and what will have the most impact.. Example.. Lets build a credit file.. We’ll use mine from discover score card FICO. My TRUE FICO is 702. I matched each section up with the points above.

Payment history:
Excellent: 100% = 297 points
Amounts owed (credit utilization):
Best: 10-29% = 227 points
Length of credit history:
Bad: < 2 yrs = 52 points
New accounts:(inquiries)
Poor: 9+ = 35 points
Credit mix:
Best: 21+ Accounts 85 points

TOTAL POINTS : 696 Points, DANG CLOSE to my 702 real fico. Out of a 500+ variants being 6 points off isn’t bad for guessing how the calculate the score.. So what does this tell me.. Well lets see what happens when I adjust something..Lets drop my UTIL down to the next level. So I gain about 28 points, instead of 227 points i get 255 points. When this happens my FICO should be close to a 730 FICO.

See how it works Get a calculator and have fun ..

**UPDATE** You have to understand that is some of these categories there is over a 100 point sweep and you could be on either end of that point spread. This CAN and MAY through off the calculations. This just gives you and idea of what points are available in each of the categories and if you are not maxed out in a certain category what you can do to gain some points your missing. Work they system and get all you can out of it. Dont let it decide what points you get, Give up a few here to get a lot more someplace else.

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