Have You Ever Wondered What the FICO Pie Chart Means?
Fair Isaac created FICO Score models to rate an individual’s credit history. In 1989, the company began selling new business models and scoring models to banks and consumers. A pie chart allows factors impacting a FICO Score to be displayed visually. Five pie pieces represent how payment history, outstanding loan debt, an individual’s track record, new credit, and credit mix affect an individual’s FICO score.
Do you know what the two biggest factors of your credit?
The giant pie pieces are owed to past and present ledgers. Past and present rosters involve a customer s record of all payments over a long period. The amount of available credit and the amount spent (i.e., your credit utilization ratio) are compared. For example, Pete has credit cards worth $5,000 on his two accounts combined. He charges $5,000 a month, totaling $10,000 each billing cycle. Pete s credit utilization ratio is $5,000/$10,000, which is 50 percent.
3 Pieces of the Credit Score Puzzle You Didn’t Know About
The other three components of the credit score pie are the length of time a credit score remains accessible, new credit, and the score’s volume in the mix. If it’s been a while since the first account opened, it can help to increase a score. An account’s combination of revolving and fixed loans can improve the score if it has various lines. Applying for far more lines of credit than cash in hand soon can have a negative impact.
5-piece pie leaves two pieces essential for a high credit score
The 5-piece pie obscures that the two divided pieces are vital to an excellent history of managing your finances and carefully monitoring how much finance you are using. If these two factors are present, your score will be increased, and you will borrow at the discretion of your money at a lower rate. Therefore, you should carefully consider these two elements when considering your credit score.
In conclusion, by accessing www.annualcreditreport.com, consumers can receive free credit reports that do not include a score but provide payment history and credit utilization. This is a valuable resource for individuals looking to monitor their credit or make improvements.