Amounts Owed – 30% of Your FICO Score

This category reflects the amounts you owe on a variety of different types of loans including revolving and installment accounts.

DEFINITION ALERT:
Revolving Account is an account that does not have a fixed number of payments, such as a credit card account.

Installment Account is an account with a fixed number of payments for the life of the loan.  Examples include student loans, mortgages, and car loans.

The “Amounts Owed” category includes the number of different accounts that you have open and the amount of money you owe on each account.

It is also based on your debt to credit ratio on your revolving accounts (i.e. credit cards). 

In order to calculate your debt to credit ratio, simply divide the amount of money you owe by the total credit card limit on all your credit cards.

In order to increase your credit score, you want to lower your debt to credit ratio.  A good rule of thumb is that you should have no more than 50% of your credit being used at any given time.

However, if you can, it is a good idea to lower your credit card balances even further to help get you out of debt.

Your credit score is also based on the amount of money you still owe on your installment accounts such as mortgages, car loans, and student loans.

The lower your balance on these loans in relation to the original loan amount, then the higher your credit score will be.