According to the Fair Isaac Corporation (FICO), which produces the FICO score, there are 5 primary factors used to compute a credit score: 

  1. Payment history

  2. Amounts owed

  3. Length of history

  4. New credit

  5. Types of credit used

Payment history = 35% of your credit score. 

Payment history is the single largest factor used to compute your credit score. It includes your current and past credit obligations (such as credit cards and mortgage payments). This applies only to institutions that report your payment data to the credit bureaus. 

It records every on-time, late or missed payment. Basically, it means that paying your credit accounts on time is incredibly important. 

A credit builder loan can give you the opportunity to establish payment history with the credit bureaus. 

Amounts owed = 30% of your credit score.

Amounts owed describes the outstanding balance of the credit accounts on your credit report, such as loans and credit card balances. 

Length of credit history = 15% of your credit score.

Length of credit history is the length of time you’ve been making payments on your credit accounts. The longer your credit history, the more information credit bureaus have. 

New credit = 10% of your credit score.

New credit is the number of new credit accounts you recently opened, including credit cards and loans. New accounts show you are financially active, and could have a positive impact on your credit score. 

However, opening too many new lines of credit in too short a time period could signal you’re in financial trouble, and could have a negative impact on your credit.

Types of credit used = 10% of your credit score.

Types of credit basically means having a mix of different types of credit. There are two types of credit: installment loans (such as a mortgage, student loans, or a Self Lender Credit Builder Account) and revolving credit (such as a credit card). 

Having a mix of both types is considered healthier than having several of just one type.   

For more detailed information, please read our blog on the 5 factors that go into your credit score.