What Is FICO Score?

How Are FICO Scores Calculated?

FICO's algorithm evaluates five categories from data in your credit report:

• Payment history (35%): Whether you've paid on time. This is the single most impactful category. Late payments, collections, and public records (bankruptcies) all damage this category.
• Amounts owed (30%): How much of your available credit you're using. High credit utilization — especially above 30% on revolving accounts — signals higher default risk.
• Length of credit history (15%): How long your accounts have been open. Longer credit history generally produces higher scores, which is why closing old accounts can be counterproductive.
• Credit mix (10%): The variety of credit types — revolving (credit cards), installment (mortgages, auto loans), and open accounts. A diverse mix indicates experience managing different credit types.
• New credit (10%): Recent credit applications and account openings. Multiple new accounts or inquiries in a short period suggest higher risk, except when rate shopping for a single loan type.

The exact algorithm is proprietary, but the weights are published and the general logic is well-documented. FICO recalibrates its models periodically using large datasets of actual consumer payment behavior.

Why Are There So Many FICO Score Versions?

FICO has released numerous score versions since the original model in 1989. Key versions include:

• FICO 2, 4, 5: The classic mortgage scoring versions, still mandated by Fannie Mae and Freddie Mac for conforming loans. Being phased out.
• FICO 8: The most widely used version for auto loans and credit cards. Introduced in 2009 with changes to how isolated late payments and authorized user accounts are treated.
• FICO 9: Reduced the penalty for medical collections. Not widely adopted by mortgage lenders.
• FICO 10 and 10 trillion: The newest versions. FICO 10T uses trended data — analyzing 24 months of payment patterns rather than a single snapshot. FHFA validated FICO 10T in 2022; as of September 2026 it is not yet eligible for Fannie Mae or Freddie Mac loan delivery.

The version proliferation creates a practical problem: the score you see on Credit Karma (typically VantageScore 3.0) or your bank app (often FICO 8) may differ substantially from the score your mortgage lender uses (FICO 2/4/5). Differences of 20–40 points between versions are common.

How Does the FICO Score Connect to Financial Distress?

The FICO score is the mechanism through which the American Distress Index's indicators translate into individual borrower outcomes. When the ADI registers rising delinquency rates, those delinquencies flow through FICO's payment history category (35% of the score) to produce lower scores, which trigger higher rates, reduced access, and deeper financial strain. The FICO score doesn't just measure distress — it amplifies it through a feedback loop of worsening terms on subsequent borrowing.