Getting Started | The FICO Score Mini-Series

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Do you know your FICO score? And are you aware there are 5 key categories used to calculate your FICO Score? Over the next few weeks we’ll unpack these key categories as I walk you through The FICO Score Mini-Series.

Here’s the thing, each key category equals a chunk of your credit score and the chunks are not created equal! So what are they?

#1. Payment History ~ 35%
#2. Total Debt ~ 30% (debt/income ratio)
#3. Length of Credit History ~ 15%
#4. New Credit History ~ 10%
#5. Types of Credit Used ~ 10%

meet_mary_2

this is Mary

Meet Mary. She’s 29 years old, single and rents an apartment. Mary will be our guinea pig throughout The FICO Score Mini-Series. We will look into each one of Mary’s key categories and determine the best plan of action to increase Mary’s FICO Score. Hey! So you should follow along side of us! By using a copy of your own credit report, you can follow these steps and increase your own FICO Score. Get your FICO Score here >>

Like you and me, Mary has a credit profile. She has a FICO Score and a full credit report. Her Experian Credit Report looks like this:

creditreport_mary

Mary’s Experian Credit Report

Like you and me, Mary’s credit report contains the good, the bad, and the ugly. So a FICO Score of 520 isn’t amazing, but there are several things Mary can do right away that will only make her score go up. Can you guess what they are? To end today’s blog, I will give you a strategy to see your credit report more clearly.

Imagine you have 2 buckets ok? Now count the number of items on your credit report. Mary has 8 items. Your first bucket is called “helping”, the second bucket is called “hurting”. Mary’s looks like this.

  1. Helping
    ……….
  2. Hurting
    Defaulted Student Loan
    Capital One Credit Card
    Collections Accounts x2
    Inquire x4

It’s now obvious why Mary’s FICO score is a 520. All the items on her credit report are in the “hurting” bucket. The goal is to get as many items out of the “Hurting” bucket and into the “Helping” bucket. Currently, Mary’s Student Loan and Capital One Card are hurting her credit score. But these two types of accounts are actually the most helpful for building credit. Student Loans (installment loan), Credit Card (revolving credit). By making only a few changes, Mary can have these accounts HELP her FICO Score rather than HURT it.

In next weeks blog, we will help Mary, and you, do just that.

Stay thirsty friends!

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