Your FICO, or credit, score is calculated independently by the Big Three credit reporting agencies (viz., Equifax, TransUnion, and Experian) based upon a shared formula. Your score has a huge influence on your financial health. An improvement of just 40 or 50 points can mean paying hundreds less per month for a 30-year mortgage, for example. Anything you can do to increase your FICO score can literally mean money in your pocket.
The creators of the FICO score, the Fair, Isaac & Company, hold their exact formula for calculating your score under lock and key as top secret. But, they have made public the 5 main components of your credit score and how heavily each component is counted in the formula. The breakdown is as follows (note: this information is subject to change at any time, so be sure to check the Fair, Isaac & Company Web site or recent press releases for the most up-to-date information):
Payment history: 35%
Amounts owed: 30%
Length of credit history: 15%
New credit: 10%
Types of credit used: 10%
Based upon these 5 components, here are some quick tips for keeping each one looking good in the eyes of the Big Three...
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