1. How you pay your bills (35 percent of the score)
The most important factor for your FICO score is how you've paid your bills in the past, placing the most emphasis on recent activity. Paying all your bills on time is good. Paying them late on a consistent basis is bad. Having accounts that were sent to collections is worse. Declaring bankruptcy is worst.

2. Amount of money you owe and the amount of available credit (30 percent)
The second most important area for a FICO score is your outstanding debt -- how much money you owe on credit cards, car loans, mortgages, home equity lines, etc. Also considered is the total amount of credit you have available. If you have 10 credit cards that each have $10,000 credit limits, that's $100,000 of available credit. Statistically, people who have a lot of credit available tend to use it, which makes them a less attractive credit risk.Carrying a lot of debt doesn't necessarily mean you'll have a lower score. It doesn't hurt as much as carrying close to the maximum. People who consistently max out their balances are perceived as riskier. People who never use their credit don't have a track history. People with the highest FICO scores use credit sparingly and keep their balances low.

3. Length of credit history (15 percent)
The third factor is the length of your FICO credit score history. The longer you've had credit -- particularly if it's with the same credit issuers -- the more points you get.

4. Mix of credit (10 percent)
The best FICO scores will have a mix of both revolving credit, such as credit cards, and installment credit, such as mortgages and car loans. Statistically, consumers with a richer variety of experiences are better credit risks. They know how to handle money.

5. New credit applications (10 percent)
The final category with your FICO score, is your interest in new credit -- how many credit applications you're filling out. The model compensates for people who are rate shopping for the best mortgage or car loan rates. The only time shopping really hurts your FICO score, is when you have previous recent credit stumbles, such as late payments or bills sent to collections.

Then, looking for new credit will be seen as an alarm because statistically, before people declare bankruptcy and default on everything, they look for a life preserver. Also, if you have a very young credit file, an inquiry can count for more than if you've had credit for a long time.

What doesn't count in a FICO score

The FICO scoring model doesn't look at:

• age
• race
• job or length of employment at your job
• income
• education
• marital status
• whether or not you've been turned down for credit
• length of time at your current address
• whether you own a home or rent

A lender may consider all those factors when deciding whether to approve a loan application, but they aren't part of how a FICO score is calculated.

FICO Credit scores are not perfect
The major drawback to FICO credit scoring is that it relies on information in your credit report, which is quite likely to contain errors. That's why it's critical that you check your credit reports annually, or at the very least three to six months before planning to buy a house or a car. That will give you sufficient time to correct any errors before a lender pulls your FICO score.

The need for accuracy in credit files is one reason why it's good for consumers to learn about FICO credit scores.