We all have one, but how many of us know what a FICO score is exactly? This New York Times article breaks down what this number, which is so crucial in determining how big a mortgage you can take out and how much interest you will pay, means. FICO scores range from 300 to 850. The higher score your score, the more you are eligible to borrow and the more likely you are to get lower interest rates on your mortgage. The breakdown goes as follows:

  • 35 percent is determined by your payment history. The more regular you are with your payments, the higher your score.
  • 30 percent is based on the amounts you owe each of your creditors. Maxing out your credit cards results in a lower score.
  • 15 percent is based on the length of your credit history. In this case, it is better to have few accounts with a long history.
  • 10 percent is based on how many accounts you’ve recently opened as well as the number of recent inquiries on your report made by lenders to whom you’ve applied for credit.
  • The final 10 percent is determined by the types of credit used.

Basically, the idea is to have a few credit cards with a low balance that you pay off regularly. To view your credit report, order it through annualcreditreport.com, the only authorized online site under federal law. You can get a free copy of your credit report from each of the three major credit agencies (Equifax, Experian or TransUnion) once a year.

Credit: New York Times