Jonathan Machado
The FICO score is the most widely used credit score in lending. It runs from 300 to 850 and is calculated from data in your credit reports at Equifax, Experian, and TransUnion. The exact formula is proprietary, but Fair Isaac (the company behind FICO) has publicly disclosed the five categories the model uses and the approximate weight of each one. Knowing those weights tells you where to spend your effort.
Payment history — about 35%
Payment history is the single largest factor. The model looks at whether you have paid past credit accounts on time, and how recently and severely you have missed payments. A single 30-day-late payment can drop a score by 60 to 100 points, depending on starting point. A 90-day-late or a collection account is more damaging still.
The implication: nothing else you do to your credit profile matters as much as never missing a payment. Set autopay for at least the minimum on every revolving and installment account. Autopay does not replace responsible spending, but it eliminates the most common cause of damage by accident.
Amounts owed (utilization) — about 30%
The amounts-owed category is dominated by credit utilization — the percentage of your available credit you are using on revolving accounts. If your credit cards have a combined limit of $20,000 and your statement balances total $4,000, your utilization is 20%.
FICO penalizes high utilization steeply, especially above 30%. Scores improve as utilization drops. The lowest utilization that produces the highest score is generally believed to be in the 1%–9% range — meaning you do want some reported activity, just not much.
Two levers move utilization: pay down balances, or raise limits. Both work. Asking for credit limit increases on existing cards (usually granted after 6–12 months of clean payment history) lowers utilization without changing what you spend.
Length of credit history — about 15%
The model looks at the age of your oldest account, the age of your newest account, and the average age across all accounts. Older is better.
This is the category that punishes you for closing old credit cards. A 15-year-old card that you stop using and close eventually drops off your report and pulls your average account age down with it. The general advice for cards with no annual fee: leave them open, use them once or twice a year to keep them active, and let history do its work.
Credit mix — about 10%
The model rewards having a mix of revolving accounts (credit cards) and installment accounts (auto loans, mortgages, personal loans, student loans). It is not a large category, but it is enough to matter for borrowers near a scoring threshold.
You should not open a loan just to improve your credit mix. The effect is too small to justify the cost of interest. But if a financing decision is genuinely close — finance a car loan vs. pay cash — there is a small credit-score upside to having an active installment account on your file.
New credit — about 10%
New credit captures recent applications and recently opened accounts. Each hard inquiry typically costs a few points and the effect fades over 12 months. Multiple inquiries within a short window for the same type of credit (mortgage, auto loan) are bundled into a single inquiry for scoring purposes — a deliberate accommodation for rate-shopping.
Practical guidance: do not open multiple credit accounts in the run-up to a major credit decision. If you plan to apply for a mortgage in six months, do not open a new credit card next week.
