First - FICO stands for the name of the two indiviuals that figured out the Credit Score Formula (Fair & Isaac) with CO being short for company. The formula that they developed is designed to predict the odds that someone will payback whatever they owe and is based on spending and credit habits.

The FICO formula changes from time-to-time so, please click Here for a more current explanation of the FICO formula.

The formula does not take into account how thrifty you are or how well you save money, which is why paying cash for everything will not get you a good score and, unfortunately, there are things, e.g., Rental Cars, that require you to have a Credit Card. The score only cares about how well you've handled credit in the past.

The purpose of credit scores is to help protect lenders against making bad loans. It gives them an idea of your resources and intention to make the payments. The potential lender wants to know how disciplined you are. which is why maxed out credit cards don't look good.

35% of your credit score is based on your "Payment History." This includes on-time payments, the amounts owed, and length of any delinquencies as well as adverse public records such as bankruptcies, judgments, or liens.

The good news is that this data has a shelf life so if you've had serious problems in the past and can stay out of trouble for a while, your score will heal over time.

30% of your credit score was based on the nature of your debts and includes factors like how many accounts you owe money on, the type and amount of debt, and the ratio of money owed to credit available, often referred to as a credit utilization rate.

The 'Credit Utilization Rate' is the percentage of all of your "credit-lines" that have been converted to debt. For example, if someone has multiple credit cards with a combined total credit line of $28,000 and is carrying a balance of (owes) $7,000, then the utilization rate is 25%.

It needs to be noted that the 'Credit-Utilization-Rate' is not the same thing as the 'Debt-To-Income' ratio used in getting a mortgage. DTI is not part of determining a FICO credit score.

15% of your credit score was based on your Credit History which is the length of time your accounts have been open and how long it has been since they have been active.

10% of your credit score was based on the types of credit used such that the wider the variety of the types of accounts (e.g., credit cards, mortgages, retail accounts), the better and more beneficial than holding just a few accounts.

10% of your credit score was based on the number of new applications you've put in, the number of recent credit inquiries, and how many new accounts you have opened. Lots of "new" account activity in too short of a time looks risky and will drop your score.

Debt can be crushing and finding oneself in a place where your DTI and Credit Utilization Ratios are too high can be overwhelming, but this is the reason that we exist. We're not here to quickly fix your credit, but to help you to permanently fix it through our proven Debt Mitigation program.

Start the conversation by contacting us to find out what we can do for you!!!