Five FICO Score Factors Your Members Need To Know

Teach your members the five factors that impact their FICO score and learn ways to manage it.


Many people lack knowledge about their credit scores, arguably the single most influential number in their lives. In fact, forty-nine percent of 1,013 consumers polled do not understand that credit scores measure credit risk, according to a 2005 survey by the Consumer Federation of America and Fair Isaac Corp., the company that created the most widely used credit score formula called FICO.

What Makes Up Your FICO Score?


This knowledge gap presents a real opportunity for credit unions to educate and differentiate. The pie chart on the right shows the five categories that make up a FICO credit score. The detail below can be used to educate members about their credit scores.

1. Payment History: 35%

This category includes payment history information about several different types of accounts such as credit cards, retail accounts and installment loans. Many factors are considered including number of past due items on file, amount past due on delinquent accounts or collection items and severity of delinquency (how long past due)1. Below is a chart depicting the weight assigned to each year of an individual’s payment history:

Approximate Weight Assigned To Year
Most recent 12 months
Prior 12 to 24 months
Prior 24 to 36 months
Prior 36 to 48 months
Older than 4 years

2. Capacity (Amount You Owe): 30%

The FICO scoring model weighs capacity heavily because it knows that the majority of Americans who go bankrupt charge up their cards to the limits before they file.2The FICO model considers three separate components of an individual's credit when assigning capacity points:

  1. Installment balances compared to the original loan amounts.
  2. Revolving account balance compared to an individual's revolving credit limit on an account-by-account basis; and
  3. Total revolving account balances compared to an individual's total revolving limits.

It is in your members' best interests to keep balances low on all revolving credit and pay off debt within open accounts instead of closing accounts and consolidating it into one or two accounts with higher balances.

3. Length Of Credit History: 15%

Even if a member no longer wants an older account, he or she should think twice about closing it. Lenders are looking for borrowers with long credit histories. Also, members with new credit should be cautious about opening many accounts. Rapid account buildup may look risky because of uncertainty in handling the credit.1

Hard inquiries, or requests from creditors for a copy of a report, are tracked on the credit report for 24 months. But, only the inquiries from the most recent 12 months are included in the FICO score calculation. If a member would like to opt out of pre-approved credit offers, they may do so at

4. Types Of Credit: 10%

This category looks at the overall mix of credit such as credit cards, mortgages or consumer finance accounts. Members should try to balance the mix but are advised not to open new credit accounts for balancing purposes unless necessary. It is unlikely that adding accounts will improve their credit scores.

5. New Credit: 10%

Approximately 10% of your credit score is based on how many recent new accounts you have established. This factor reviews:

  1. Number of accounts
  2. Length of accounts
  3. Recent requests for credit report
  4. Length of time since credit report inquiries were made by potential lenders

Members should do all of their rate shopping in a two-week period since they can inquire an unlimited amount of times and it will only count once in that time frame. Also note that if members check their credit scores by going directly to the credit reporting agency, it will not affect their credit.1

Feel free to share this information with your members by linking this article on your website.


  2. Your Credit Score. Liz Pulliam Weston, Prentice Hall Publishing, Upper Saddle River, NJ, 2005.
  3. and



Sept. 25, 2006


  • I was interested in the factors to FICO score, the actual numbers and the sequence of those numbers. To the right of the FICO score the factors are listed in this maner 038/013/010/020: I was interested in the meanning of the numbers...
  • A credit score is really nothing more than an “I Love Debt” score. It isn’t based on how “worthy” you are, how much you have, or how much you make. It’s based on the fact that you got into debt, stayed there for a long time, and paid creditors a lot of unnecessary money.

    I stopped borrowing and paying back debt 20 years ago. As a result, my credit score gradually deteriorated to the point where it doesn’t even exist anymore.

    FICO will love you if you’re always in debt and making payments, but you’ll never be able to take care of your family, retire with dignity, or make a difference in the world through giving. Close the accounts! Cut up the cards and pay cash for everything! You can’t worship at the altar of the great FICO if you want to get out of debt, and stay out of debt!
    Not a Slave To Debt
  • This brings home the message that FICO scores should be more than a loan decision number - its also a valuable educational opportunity between credit unions and their members that provides members with something to act on for noticeable results.
  • Key info and articles of this nature are extremely beneficial to our Member Service Consultants because they serve as a value added dimension to the sales and service process.
    Bruce Tichenor
  • Excellent information, Mary. Now how to get this information into the financial planning of credit union members. I would venture that a small percentage of members know these facts, where they stand, and how to reverse any of their practices that could be hurting their credit score. Credit Unions owe it to their members to provide education to ther members in easy to understand language like this.
  • So what the FICO score is a way to get you in debt and keep you in debt. So it really is the “I love debt” score because there is no way to have a great FICO score without getting into debt and staying in debt. If you make $1 million per year and have $10 million in the bank, you can have a low FICO score simply because you don’t borrow. With all due respect to this forum, getting out of debt and staying out of debt, is the true path to sucess. If you can''t afford it don''t buy it. As for mortgages, you can still get a good mortgage with "manual underwriting." The banks are just getting lazy, and don''t want to go through the extra work.
    Not a slave to Debt
  • Some bad advice told me to get a credit card (after my bankruptcy was discharged), get a high balance and pay it always on time. After I read and realized this was bad, I paid off my credit card yesterday. I wonder how that will affect my FICO score. It''s also not fair that FICO considers some collection accounts in it''s figuring; creditors have the power to place items on your file, with impunity. The onus is upon you, the consumer, to prove that it''s fraudulent, false or otherwise inaccurate. That takes both time and money. The credit system itself is designed to benefit creditors. I''m not suggesting the system is unnecessary, but the way it''s presently designed is, in my opinion, quite biased and a bit unfair. Companies like Equifax, who cleverly delegate their "dispute process" to online-only do this to avoid investing time. You basically say to them "this is false!" and they say "nope, sorry" without so much as any evidence. All the creditor has to do is confirm certain information, and there you go. Is that fair? NO. These companies are no better than the Sallie Mae''s of the student loan industry. They have a vested interest, and they are making tons of money off of it. There has to be a fairer away to do this.
    Fickle FICO
  • You are quite right. A lesson I''ve learned later in life, but a lesson none-the-less. It seems, though, if you do make a credit card purchase, you should consistently pay it off as soon as possible (immediately in the billing period). This looks good on your payment pattern. I still think it''s a game, made by and invented by snakes... the kinds you find around sewer systems ;-)
    Ficlke FICO
  • Who cares what your FICO Score is? Pay cash for everything you can, and it will not matter... And as you have found out, when you play with snakes, you will get bitten!
    Not a slave to Debt
  • "Not a Slave to Debt" is right. How often do you buy a new car? I know an individual who has bought (and financed) a new car every three years since she was 19 years old (she’s now 47). Did you know that if you buy a new car every ten years (today’s cars will easily last ten years if you properly maintain them), versus buying one every three years, that it will save you an average of approximately $400,000 in interest and depreciation over your lifetime? That’s a huge price to pay for enjoying that new car smell every three years. Could you use an extra $400,000 when you retire? Have a 30-year mortgage on your home? Seriously consider paying extra on the principal every month. Doing so can save you many thousands of dollars in interest and will result in paying off the mortgage years earlier. Personal Financial Management Rule Number One: Remember, if you don’t control your credit, it will control you. Consider credit a tool that can either be used wisely or can be abused with deleterious consequences. The best method is to not use credit at all, but not everyone can do that, especially when you are a young adult. However, you should establish a goal early in life, of getting out of debt and staying out of debt. Doing so can save you literally hundreds of thousands of dollars over your lifetime.
    Bill G.
  • Insurance companies check their customers’ credit reports regularly and use the information obtained to increase customers’ insurance premiums, an ethically questionable practice, but it is legal (the insurance industry constitutes a powerful political lobby in the U.S.). You should limit the percentage of available credit that you use to no more than thirty percent, even if you pay off your balance every month. Your credit report will show the maximum amount that you owed, even if you pay it in full every month, and “excessive spending” will lower your score (it’s nonsensical of course, but that’s how the system works) and increase your insurance premiums. Want evidence that the credit reporting system is an unfair system designed by morons? Consider this: How can they determine that you have engaged in “excessive spending” when they don’t even know your income or net worth? And the fact that you might pay off all credit card balances in full every month is not even considered. This system needs to be completely overhauled. It''s time the consumers have a say in how the scores are to be used, instead of it all being determined by retailers, creditors and insurance companies.
    Bill G.
  • Bill G- Thanks for the backup. I have learned the no debt ways by my own mistakes. (I''m 41) Over the last two years, I have cut up and paid off every debt I have, except the house. (I''m working on that now) I pay for everything in cash, And i buy two and three year old vehicles with cash. The FICO is truly the I love Debt score. I am working on getting my score to ZERO! But Bill you are wrong about one thing. Young Adults should especially not use debt as a tool. By living within their means, and without a I love Debt Score, they can get a mortgage. With a letter from their landlord, for the past two years, (On time rent payments, and proof of income), they can get a mortgage at the best rates available. I''m teaching my children to live debt free!!! FICO IS A SCAM! If debt is normal, call me weird!!!!!!
    Not A Slave To Debt
  • FICO is indeed the I love debt score keeper that benefits in its methods of accounting not the consumer but the lenders of all sorts. I''m urging my children and grandchildren to pay off debts sensibly and keep it that way, ignoring gimmicks to affect their FICO scores.
  • I also agree the FICO score is nothing but a measure of your willingness to get in debt and stay in debt ... But is a necessary evil to have a good one... Who gave a private company all this power over the individual consumers by having your worthiness as a human some cases your ability even to get hired!! ?? A low FICO score means extra hardship in obtaining the above-mentioned services and products.. Why complicate your life even further...? It''s hard enough to find a mortgage company to obtain a mortgage from(specially after the tougher credit standards after the crunch)let alone the extra effort to find the one that does manual underwriting...Why pay more for insurance?..Why risk not getting the apartment you wanted? Just pay your cards and don''t over-extend yourself..
  • Point one, the only thing that can hurt getting hired is possibly bankrupcty. Don''t even tell me that if you have several hundred thousand in the bank, no debt, a paid for house, but a low fico score, you won''t get a job. Second, Most credit unions, do manual underwiting, all you have to do is ask. So if the big companies, hire dopes, that can''t think and must use a computer program only, and won''t lend money to a otherwise debt free person, go somewhere else. Last point- why complicate your life being saddled with debt? How many times do the scum credit card compies hit you with late charges for not paying by 12:00 noon on the due date? Doesn''t that sound more complicated than just paying with cash? Also the extra money that you might have to pay for insurance, doesn''t come close to late fees, finance charges, over the limit fees, and the fact that people who spend money with credit cards, spend 18% more than cash payers. Personally, I haven''t use a credit card in over two years, (And have been paying down all my other debt) and can tell you all you can live without credit! One day, I hope to have a zero FICO Score!
    Not a save to debt
  • This article can help our loan officers explain ways for members to improve their credit scores in a more knowledgeable manner. The article is concise and to the point. Thank you for runningit.
    Dave Forrester
  • Clear, concise, and relevant to questions our members are asking about their credit scores. Thank-you.
    Donna Jackson
  • What are the rules about using this info as the basis for a newsletter article? I agree with Catt; how do we get the info into our member's hands.
  • This is exactly the type of information we need to know on the front lines to educate our members. Love the graph, I will refer to it when educating.
    Melissa G.
  • excellent article, and to the point, this definately needs to get into the hands of our members.
    Art Williams
  • We use this with members and even offer an incentive, that if they improve their score they are welcome to come and we will relook at their credit and if they qualify for a better rate we will change the rate on their loans with us. We find this helps both the credit union and the member.
    Eric Green
  • It is great information to be able to share with your membership. So many times you tell what you know, but they find it hard to believe. by having this information and putting it in a handout to them makes it more real to them and more willing to work with you.
    D. Thornsberry
  • Educate the value of creating a credit history to our children and share this with them. I have started a borrowing plan even though we do not need it for my daughters future. This was such a wonderful tool to assist. Also we dicsussed the values of guarded identities as a protective part of credit histories. Thanks , Harley
  • Before you all sing the praises of FICO scores you need to read my book (The Great FICO HOAX) and go to my website
    william kirkendale
  • The emphasis on credit history and credit scores in the US is just weird. No one around the world do this. As someone said above, its just banks being lazy - probably because there is so much demand for debt, banks have no time to go through all loan applications carefully. Hopefully someone wakes up one day, and opens up a bank that do traditional creditworthiness checks rather than credit scores, and make a million bucks. Until then, we''re stuck with the current system. I assume with the problems with the financial system now, this day is a long way away.
  • FICO is a joke. You have to play with debt to have a high score. My score horrible, yet I have no debt and plenty of cash. I would rather fund myself then the bank/FICO.
  • It doesn't matter how they calculate your score because it is a huge scam either way, and even if you have good credit, lenders will still find some way to stick it to you.
  • You have to be kidding....FICO scores are the biggest hoax and fraud in American History....go to my website and read my new book The Great FICO HOAX....
    william kirkendale