How Do I Improve my FICO® Credit Score?


The FICO score is calculated by FICO, an analytics company that specializes in predictive analytics. FICO takes information from one of the three major credit reporting agencies (CRAs) – Equifax, Experian, or Transunion – analyzes it, and predicts what is likely to happen. FICO looks at a range of credit information to create a score used to help predict how likely a person is to pay bills on time, late, or not at all, and if they are able to handle a larger credit line.

Generally, the range of FICO scores is 300 to 850. A higher score indicates a higher likelihood the consumer will repay a loan, which represents less risk to a lender. Each lender has different standards, but usually a FICO score around 760 or higher is considered an excellent score.

There are five factors that make up a FICO score, and each factor has a different weight. If you are trying to improve your FICO score, it’s helpful to know which action will have the biggest, quickest positive impact. It is helpful to note, however, that the importance of any one of the factors depends on the overall information in the credit report. For example, people who are new to using credit will be factored differently that those with a longer credit history.

The FICO score factors and their relative weights are:

  • Payment History – 35%.  Past payment performance is considered a good predictive tool that a person will make on-time payments in the future.

TIP: Make all bill payments on-time, every time to improve and maintain your FICO score. If you find yourself having trouble making payments due to job loss or health-related issues, contact your creditor(s) immediately.

  • Debt/amounts owed – 30%. How much debt is outstanding relative to the total amount of credit available is important to lenders who want to make sure you are not overextended and maxing out your credit lines. The credit utilization ratio lenders prefer is no more than 30% of available credit.

TIP: Pay down your balances each month to help increase your score. It might also be wise to take advantage of offers from your credit card company to increase your credit limit – but not increasing your balance owed, which can improve your credit utilization ratio.

  • Age of credit history – 15%. The older your up-to-date credit cards are, the better it can be for credit scoring.

TIP: Keep your old accounts open, even if you don’t use the account often (or at all) as it can be good to have long-term accounts on your history. Don’t let the credit company close an account for inactivity by charging a small amount and paying it off.

  • New credit/inquiries – 10%. It might be tempting to apply for a lot of credit cards in a short time frame, but it can send a bad signal. Each application results in a “hard inquiry” on the credit report and lenders may see a sudden hunger for credit as the sign of a high-risk customer.

TIP: Plan ahead – before applying for a new account and being subjected to a hard inquiry, make sure you are likely to be approved for the account first. And if you are trying to get a big loan such as a mortgage, don’t apply for other forms of credit while the mortgage application is pending.

  • Mix of accounts/types of credit – 10%. It can be good to have a variety of different types of credit such as a major credit card (Mastercard or Visa), store card, auto loan, and mortgage.

TIP: Making on-time payments on different types of credit such as revolving-line credit cards and installment loan car payments is a good sign in the FICO scoring model. If you are financially able to take on a new type of debt like a store charge account or a low-rate auto loan, it can help to diversify your credit mix – but only do this if it makes sense.

How to monitor your credit score

Check your credit report regularly so you know what information is in it, and to check for errors. You are entitled to one free credit report per year from all three credit bureaus. If you find errors, contact the credit bureaus to get them fixed. Some financial advisors recommend requesting credit reports throughout the year by contacting one credit reporting agency each four months (instead of requesting them all on the same day). This way, if something is wrong on a report, you have the potential to spot it sooner.

Many credit card companies provide your FICO score as a regular part of their monthly statement, which allows you to see ongoing changes in your score as payments are made and balances change.

Visit myFICO Credit Education for helpful articles and videos about using credit and FICO Scores. 

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