Table of Contents
1. The Credit Score: Your Financial Reputation in 3 Digits
A credit score is a 3-digit statistical representation (ranging from 300 to 850) that predicts the likelihood that a borrower will repay debt on time. A top-tier score (760+) can save you tens of thousands of dollars in interest over the life of a 30-year home mortgage.
2. The 5 Core FICO Score Factors
| Factor | FICO Weight | Key Determinant |
|---|---|---|
| Payment History | 35% | Consistent on-time payments; zero 30+ day delinquencies or collections. |
| Amounts Owed (Utilization) | 30% | Total revolving balance divided by total available credit limits. |
| Length of Credit History | 15% | Average age of accounts and age of your oldest active account. |
| Credit Mix | 10% | Healthy balance between revolving accounts (cards) and installment loans. |
| New Credit (Inquiries) | 10% | Number of recent hard credit checks and newly opened accounts. |
Key Takeaways
- Payment history (35%) and credit utilization (30%) account for nearly two-thirds of your entire score.
- Pay card balances before the monthly statement closing date to register low utilization on credit bureau reports.
- Keep older credit card accounts open to preserve your average credit history length.