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Around 30% of your FICO® credit score is calculated based on the total amounts you owe.*
An important factor in calculating your FICO® score has to do with how much you owe on all your lines of credit.
For revolving credit lines, like a credit card, FICO® may compare how much you owe to your credit limit. A high debt-to-eligible credit ratio could indicate higher risk. If you owe $100 on your credit card and your credit card limit is $500, you have a low debt-to-eligible credit ratio on your credit card ($100 to $500).
With an installment loan, they compare how much you owe to the original borrowed amount. The more you have paid off, the more likely it is to improve your FICO® score.
A credit score is a calculation that indicates how likely you are to pay back debts. The FICO® score is the most common type, and is a three digit number (between 300 and 850), where a higher score means more likely to pay back a debt. It is calculated by a math formula that takes into account the following factors:
- Payment history (35%)
- Amount owed (30%)
- Length of credit history (15%)
- Credit mix (10%)
- New credit (10%)
Two ideas to reduce the amount of money you owe:
- Pay off your credit card bill in full every month. While credit cards do allow you to carry a balance, it’s extremely expensive to do so.
- Don’t open new lines of credit to increase your eligible credit. While this might shrink your debt-to-eligible credit ratio, it doesn’t help you pay off money that you owe. This tip comes straight from FICO®, and is a good one.
The best way to reduce the amount you owe is to avoid credit card debt.
*FICO® is solely responsible for its credit score calculation. Information contained on the FICO® website is its own content and is not managed, sponsored or endorsed by Oportun. Oportun does not require a credit score to qualify for its products nor does Oportun rely on this score.
The information in this site, including any third-party content and opinions, is for educational purposes only and should not be relied upon as legal, tax, or financial advice or to indicate the availability or suitability of any Oportun product or service to your unique circumstances. Contact your independent financial advisor for advice on your personal situation.
Credit cards through Oportun subject to credit approval. Terms may vary and are subject to change. The Oportun® Visa® Credit Card is issued by WebBank. The Oportun Credit Card is open to all consumers, except for residents in CO, DC, IA, MD, WI, and WV. See the Oportun Cardholder Agreement or the Oportun Cash Back Cardholder Agreement for details, including applicable fees.
Personal loans through Oportun subject to credit approval. Terms may vary by applicant and state and are subject to change. If you refinance, you may pay interest over a longer period of time or at a higher rate and the overall cost of your loan may be higher. Loans in CA, ID, MO, NM and WI are originated by Oportun, Inc. California loans made pursuant to a California Financing Law license. NV loans originated by Oportun, LLC. In AL, AK, AR, AZ, DE, FL, GA, HI, IL, IN, KS, KY, LA, MI, MN, MS, MT, NC, ND, NE, NH, NJ, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA and WY loans are originated by Pathward®, N.A.. Terms, conditions, and state restrictions apply.