How Your Credit Score is Calculated

Do you know how your FICO credit score is calculated?

All of your debts, payments, credit card accounts and other financial history are distilled down into one number, your FICO credit score. All of the credit agencies calculate a score between 300 (extremely poor creditworthiness) and 850 (perfect credit). The average score is roughly 710.

Your credit score may be used to determine the approval or denial of car loans, mortgages and other major credit purchases, as well as the interest rates available to you. Many individuals do not know their score or how it is calculated.

Understanding what a credit score is made of will help you improve your score:

  • The highest percentage, 35 percent, of your score is determined by payment history. Missing payments or frequently paying bills late will drastically lower your score. The good news is, FICO favors recent activity, so you can improve your score by making timely payments or working out payments plans that suit your budget.
  • 30 percent of the FICO score is based on how much money you owe versus how much credit is available to you. Someone close to maxing out his or her credit cards is seen as a higher risk of default.
  • 15 percent of your credit score is based on the length of your credit history. The longer your credit history the better.
  • The type of credit you use determines 10 percent of the FICO score. Having many different types of credit, including mortgages, credit cards, car loans, revolving and installment credit, will generate a higher score.
  • 10 percent of your FICO score includes searches for credit. Applying for many different types of credit over a short period of time can lower your score. Rate shopping for one specific type of loan should not have much impact on your score.

Marc Demetriou has become one of the most trusted and respected mortgage bankers in the state of New Jersey, especially among the accounting and legal community where he is called upon frequently as an expert panelist and speaker. Additionally, he is licensed as a continuing education instructor by the NJ State Board of Accountancy to offer credits to accountants/CPA’s to fulfill their annual licensing requirements.

Demetriou is also a host on The Real Estate & Money Show, along with Antoinette Gangi, airing Thursdays at 10 a.m. on WVNJ 1160 AM or online at: It explores the relevant topics and enlightens potential investors: buying and selling a home, investing in various real estate opportunities, understanding trends in today’s real estate market and achieving financial freedom by living within in your means.

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Meadowlands Magazine

Meadowlands Magazine

Meadowlands Magazine, the official publication of the Meadowlands Chamber and its affiliate organizations, has proudly served the business community of the Meadowlands region for over 40 years. We are among largest business magazine in New Jersey (second by circulation) and offer prime visibility opportunities for businesses to connect with potential customers.

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