sketched, adam johnson, Ajinsight, what makes up your credit score, the five components of credit, credit, debt, fico, credit cards Illustration: Elements of the credit score Illustration: Elements of the credit score Illustration: Elements of the credit score Illustration: Elements of the credit score
Your Money

Credit & Debt

Sketched: What Makes Up Your Credit Score

Save on balances and new purchases with Slate. Learn more.

Your credit score is one of the key metrics many lenders consider when determining whether to approve your mortgage application, car loan or new credit card. The most widely used Fico Score attempts to quantify the likelyhood that you might go past due on a new loan. In other words, it measures your creditworthiness as a borrower.

Scores generally range from 300 to 850, and higher numbers imply higher quality. Each lender sets its own standards, but the Federal Housing Administration generally considers a score of 640 or higher as the level at which a borrower qualifies for better lending terms.

Many lenders rely one, two or all three of the major credit bureaus to calculate FICO Scores, applying FICO's algorithms to the credit data they have on file about you. Since each bureau may have slightly different information about you, the scores often vary among bureaus. While the way each score is calculated can vary depending on things like how long you've had a credit history, FICO says the average person's score is computed with the weightings for each of five categories.

Payments History

For that average borrower, Payments History accounts for 35 percent of the overall credit score. If you've only missed one or two payments intermittently, the penalty is small. They key here is consist on-time payment. Those late payments will generally stay on your credit report for 7 years. "An easy way to set yourself up for success," notes Pam Codispoti, President of Chase Consumer Branded Cards, “is to consider setting up auto-reminders or auto-payments with your financial institution - which are especially helpful balancing life's many demands."

Amount of Debt

The Amount of Debt you currently owe is often weighted at 30 percent. While every lender has its own standards, some financial advisors suggest that housing debt should equate to no more than 28 percent of your gross monthly income, while other loans (cars, tuition, credit cards, etc) should add only an additional 8 percent.

Credit History

Length of Your Credit History. This accounts for 15 percent of the calculation and considers how old your oldest accounts are, how new your newest ones are and how long you've had certain kinds of accounts. In general, having kept open, and used, the same accounts for a long time can be a positive factor. Adds Codispoti, “Establishing your credit history as a young adult, and staying engaged in your financial well-being, is an investment that can build over time. It could really pay off when you need credit to achieve a life goal down the line."

Types of Credit

Finally, your FICO Score also considers the Types of Credit you rely on and whether you've recently applied for any New Credit. Each accounts for 10 percent of the score. Ideally, you should have experience with both revolving debt like credit cards and installment loans with regular monthly payments. The loan amounts are not as important as your pattern of use and repayment.

Federal law requires the major credit bureaus to each give you a copy of your credit report each year for free, and you can get those reports at https://annualcreditreport.com. Those reports show what data they have about your credit usage, but they do not include a credit score. Chase Slate® credit card customers can get a monthly FICO Score on the Slate Credit Dashboard, and other companies will sometimes provide credit scores if you're getting other services from them or if you sign up for credit-monitoring services.

Learn how Chase Slate can help you better understand your credit health so you can better sketch out your own financial future.

For more tips and resources on mastering your finances, visit chase.com/financialfitness.

FICO® is a registered trademark of the Fair Isaac Corporation in the United States and other countries.

Screen Reader Users: To load more articles, scroll down the page, or click the list of articles.