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Credit Building Tips

We believe that you need to understand how credit scoring works before you can understand how to build, maintain, or repair your credit. The most common credit scoring model is the Fair Isaac Corporation (FICO) model. FICO is a public company that provides analytics and decision making services – including credit scoring – intended to help financial service companies make complex risk decisions. Credit Scores are basically a numerical calculation of your credit risk. Like your social security number, these scores follow you everywhere and have a significant impact on your cost of credit. The FICO Score is calculated from several different pieces of credit data in your credit report. This data is grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining how your FICO Score is calculated.

Your FICO Score considers both positive and negative information in your credit report. Late payments will lower your FICO Score, but establishing or re-establishing a good track record of making payments on time will raise your score.


These percentages are based on the importance of the five categories for the general population. For particular groups—for example, people who have not been using credit long—the relative importance of these categories may be different.

Credit Score Breakdown


Your FICO credit score is calculated based on these five categories. For some groups, the importance of these categories may vary; for example, people who have not been using credit long will be factored differently than those with a longer credit history.

The importance of any one factor in your credit score calculation depends on the overall information in your credit report. For some people, one factor may have a larger impact that it would for someone with a much different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your FICO Score.

Therefore, it’s impossible to measure the exact impact of a single factor in how your credit score is calculated without looking at your entire report. Even the levels of importance shown in the FICO Score chart are for the general population, and will be different for different credit profiles.


Your credit score is calculated from your credit report. However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.

The first thing any lender wants to know is whether you've paid past credit accounts on time. This is one of the most important factors in a FICO Score.


Having credit accounts and owing money on them does not necessarily mean you are a high-risk borrower with a low FICO Score.


In general, a longer credit history will increase your FICO Score. However, even people who haven't been using credit long may have a high FICO Score, depending on how the rest of the credit report looks.

fico score


  • How long your credit accounts have been established, including the age of your oldest account, your newest account and an average age of all accounts.
  • How long specific accounts have been established.
  • How long it has been since you used certain accounts.


The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.


Research shows that opening several credit accounts in a short period of time represents a greater risk - especially for people who don't have a long credit history.

"My credit history is so bad. I wish I could just start over."

If your credit history is bad and your score is low because of too much spending and poor bill-paying habits, don’t despair. With a little time and a bit more discipline, you can improve your credit profile. Credit scores change with each new piece of information about you. Because the scoring system gives extra weight to the most recent activity, the positive steps you take today may make a quick improvement in your score. Here are some suggestions:

  • Review your free credit report every year. You can get it for free!
  • Keep credit card balances below 50 percent of your credit limits. Your balance is the second biggest factor affecting your score. High balances mean high risk and maybe higher interest rates for you.
  • Dispute any errors or out-of-date information. Up to 25 percent of credit reports have errors; yours may too. Disputing negative errors can boost your score.
  • Pay your bills on time. The largest part of your credit score is based on your payment history. Get a system in place that suits your style to make sure you don't forget any due dates.
  • Keep your accounts open longer. Length of credit history is another important factor. Don't close your older accounts if possible. Add new accounts if you like, but don't automatically close your older ones when you do. Doing so can cause you to lose points for having new inquiries, adding new credit, and having a shorter history.
  • New credit can lower your score. In the short run, the combination of more available credit and more inquiries on your account can increase your risk profile and lower your score. This is most sensitive for those without a long credit history. The bottom line is that you should only add new credit when it makes sense, not just to have another card or to get an incentive gift.
  • Use more than one type of credit. Open a variety of accounts to show that you can manage credit cards, retail accounts, installment loans, and other types of credit.
  • Accurate negative information stays on your credit report for seven to ten years. However, it counts for less every time you add positive information to your report. Most credit scores look heavily at the last two years of history, not all seven.
  • Secured cards can help establish or reestablish credit. These cards are backed by your savings and build a positive payment history with the bureaus. A positive payment history improves your score.

We hope you find this information to be helpful. If you have any additional questions, please check out this "Understanding Your FICO Score" booklet or shoot us an email with your question.