Okay so you're researching FICO or FICO score. Duane here with how to build
credit TV and in this video I'm going to talk about how the FICO score is
comprised because understanding what makes up the FICO score will allow you
to tweak certain things which will in turn increase your overall credit score
and your FICO score. So that's what I'm going to talk about in this video but
before we get started I have a quick message.
Once again my name is Duane with how to build credit TV. This channel offers 100%
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all of that's out the way let's talk about the FICO score and how it is
comprised. Have you ever been in a situation where you needed to get your
credit pulled because you were looking to get new furniture, a new car or maybe
a personal loan? So they said hey we need to pull your credit but you weren't sure
how that was gonna work out. Well I know that feeling all too well. So this video
is going to be about sharing with you exactly how the FICO score is made up.
There are five different categories and I'm gonna go over them in this video.
Okay so the first category that makes up our FICO score and that is the biggest
portion it is 35% of our FICO score is payment history. Payment history just
simply refers to making your payments on time. Whether you're paying your cable
bill, your water bill, your light bill, your credit card bill, your car note just
about anything that has a monthly payment. This has to do with your payment
history. Specifically since we're talking about credit score of course anything
that has to do with credit like getting furniture, or a home loan, or car loan.
Making those payments on time will be under this category. Anything that you
have to pay on a monthly basis that you can get in trouble for not paying and
they can send to the collections agency. This is what goes underneath payment
history and payment history is very easy to
do especially when you just starting. If you're just starting out it's going to
be easy to have 100% in this category which means that you pay all your bills
on time. So if you are just starting out and you have a new credit it's easy to
pay all of your statements or all of your bills on time and you'll have a
hundred percent which means you will get all 35 percent of payment history. Which
makes up the biggest portion of our FICO score. The next category that makes up
30% of our FICO score is credit utilization. Now there's a lot of
misconception about credit utilization and what's considered good and what's
not good. If you want to get the most out of this portion of the credit score
which is 30% you need to keep your credit utilization between 0% and 10%. A
lot of people talk about 30% okay but in order to get 30% of the credit
utilization which it which is 30% it goes towards our overall FICO score. You
need to make sure that if you have a credit card or credit cards when the
statement closes you need to either have zero dollars on that credit card or up
to 10 percent of that of that particular credit card limit. So an example would be
if I had a credit card that was $1,000 when the statement closes and I hold the
credit card company I need to have either zero dollars on that card or
between $0 dollars and $100. So that would be between 0% and 10%. And when I
do that I'll be more than likely to get the majority of the percentage out of
the credit utilization. Once again credit utilization is 30% of our credit score
and in order to get the maximum out of this category you need to be between 0%
and 10% on your overall credit utilization. So you can use your credit
card as much as you want. You can charge it up you can do whatever you want don't
go over the limit of course, but when the statement closes or before the statement
closes you need to go ahead and pay all to either zero percent or ten percent.
And that's how you stay in and that's how you're able to get the majority out
of that category which once again credit utilization is 30% of our credit score.
The next category in the FICO score and this makes up 15% 15% of our FICO score
is credit history. Credit history is another way of saying how long have you
had credit established. So the longer you have credit established the more likely
you will be to get the 15% out of this category which is credit history. In
other words you need to have credit established for at least eight years in
order to get 100% out of this category, which is 15% of our overall FICO score.
So in other words if I open one credit card and I open it when I was in college
or when I got out of college and I kept that card open and I had that card for 10
years okay that means that I would have I would meet the requirement to get the
max percentage out of the 15% that makes up this category of credit history. Every
time you open a new account you're cutting the age your overall age the
average age of this category. So if I had a card and I had it for five years and
then five years later I opened a new account so I'm gonna have a card that's
five years old and then I'll have the average between the card that's
five years old and the card that's one month old. And they take the average of
that and that that's what makes up your overall credit history or the age of
credit, how long you've had credit established. 15% is not a huge chunk of
the FICO score but if you're looking to maximize every single portion of the
FICO score it's very important that you understand how every single portion
works and how to maximize it. So once again credit history is 15% of the FICO
score. The next category on the FICO score that is 10% is new credit. New
credit is exactly that it's every single time that you apply for new credit
whether it's a personal loan or a credit card or whatever it is. So what you want
to do is you want to make that you're not applying for new credit
continuously like throughout the year as a matter of fact this gets reset every
two years so if you apply for something and then you let two years go by you
don't apply for anything else no other new credit then technically this will be
zeroed out and you'll get every single percent which is 10%. This makes up 10%
of FICO score, it's not a huge percent but if you're trying to maximize every
portion or every category that you want to be certain that you're not always
getting new credit. The last category that makes up the FICO score is types of
credit. Types of credit refers to if you have a
car loan versus credit cards versus a mortgage. That would be different types
of credit versus a store a store credit card. So those would be four different
types of credit. So this is like credit mix and this is only 10% of the FICO
score so it's not really a huge percent. I'm not suggesting that people go out
and get a bunch of different types of credit because this is good for my FICO
score it's only 10% of the FICO score so that's pretty that's a pretty small
portion that makes up your FICO score. Okay so just to review the five
categories that make up our FICO score the first one which is the biggest one
is 35% of our FICO score is payment history. The next one that is 30% of our
FICO score is credit utilization. The third category that makes up our FICO
score is credit history or age of credit and this is 15% that goes towards
our FICO score. The next category is new credit. New credit is 10% of our FICO
score and the last category that makes a fart credit score is types of credit.
Types of credit is also 10%, so 10% that goes towards making up our overall FICO
score. So these are the five categories that make up our FICO score. Knowing this
and knowing how to tweak each category can allow you to increase your credit
score which is a very good thing. It took me years to figure this out well not
really years to figure it out I just had no interest and now I know because this
is my third time rebuilding my credit so I'm very aware of what each category is
and how it affects my overall FICO score. Thank you so much for watching
this video. Once again don't forget to check out our channel our channel talks
about everything you need to know about credit. Whether you're looking to
establish credit, build credit, rebuild credit or learn more about the FICO
score and how it is comprised so you can crease your credit score. Go ahead and
subscribe to our channel if this video was helpful. Be sure to give me a thumbs
up, if you have any questions leave them in the comment below I will answer them
as soon as I see them. Thank you so much for watching the video. Until next time
take care and be blessed. Peace!