The following factors go into the determination of your credit and FICO scores:
- 35% – Bill payment history
- 30% – Outstanding amounts owed
- 15% – Length of credit history
- 10% – New credit
- 10% – Types of credit used
Given this, here are a few do's and don'ts for improving your FICO score:
- Do pay your bills on time. A single late payment can drop your score by 100 points or more.
- Do pay down large credit card balances. Try to keep your balances below 30% of the card's limit.
- Don't consolidate credit card balances. It's usually better to have lower balances on several different cards than a high balance on one card.
- Don't cancel multiple credit cards. It's a myth that this will help your score; in fact, it may actually hurt your score by lowering your available credit.
About a quarter of all Americans (27%) have a FICO score of 750-799, while 13% have a score that exceeds 800. 15% have a score between 650 and 699, 18% have a score between 700 and 749, and 27% have a score of 649 or lower.
FICO scores can have a huge impact on mortgage interest rates, changing the rate by as much as one-and-a-half percentage points. This can change the monthly payment on a $200,000 mortgage by as much as $200.