Whether you know it or not, the secret sauce, unfortunately, rules your life.

Do you know the muffin men who go by Fair and Isaac? No? Fair and Isaac had a company called Fair and Isaac Company, aka FICO. These two chaps were the first ones to popularize mathematical logic for evaluating an individual's risk in unsecured lines of credit.

FICO scores ruled the financial credit evaluation world for a bit, but they are starting to slow down. Some glaring reasons may help you understand why they were not equitable, although they may have been widespread.

FICO Scores are comprised of the following categories:

1. 35% - Payment History

2. 30% - Amounts Owed

3. 15% - Length of Credit History

4. 10% - New Credit

5. 10% - Credit Mix

35% - Payment History

This really comes down to "have you missed a payment?" If you have, all good - can't change that now. If you have not missed a payment. Do not even think about it. Whether or not you have missed payments comprises 35% of your FICO score. This is essentially half the battle, just set up autopay and don't overspend as I did for the weddings. Paying off your credit card as soon as possible seems the safest idea. But, doing it too early might mean the lender didn't have the chance to report every transaction to the credit reporting agencies. Without the Credit Reporting Agencies knowing about your transaction history, they can't credit you for paying back your borrowed debt. Essentially this part of your score shows that you can be trusted to borrow and repay said debts.

30% - Amounts Owed

This is one of the parts that can sometimes raise an eyebrow about equity. The 30% of your score that evaluates the amount you owe is for the lenders to understand if you have a sustainable debt-to-income ratio. This is something that the market when analyzing publicly traded companies too. Can you repay your debts, given your expected cash flow for this year? It's the same question, just a bit of a different scale.

This total amount owed is part of what makes up 30% of your FICO score. The other part is the utilization rate. People will encourage everyone to stay under 30% utilization, but I say 10%. Try to stay under 10% of your monthly credit limit. This will look like straight As to your lender and help you get better cards and rates for your future loans.

The questionable part comes in when considering historical and generational wealth. How does someone's generational wealth, or lack thereof, impact someone's credit score? Well, take my life as an example. I told you I graduated college. I needed to take on personal student loans, but that's about the end of my worries. Not only was I gifted money from my family to assist, but I was also never asked to stop my education to help ends meet at home. My family's generational wealth enabled me to stay focused on my education and successfully graduate.

Now that I've graduated, what do I do? I live at home with no rent. This keeps my total debt amount low because I did not need to take on a loan to purchase a house or a car. When the time was right, I bought my car in cash for less than the market price because I bought it from a family member who was generous enough to afford the sacrifice.

Time passes, and I move into an apartment. My generational wealth enabled me to use furniture from my family to furnish the apartment, avoiding taking on debt to live the American dream. I'm sure there are several other stops along the way that I've been privileged to avoid, but these are just a few to help you question the FICO scoring system.

15% - Length of Credit History

This was part of the calculation I understood but did not think was too fair for selfish reasons. I was living at home with minimal expenses and little to no debt. Still, I was denied credit cards because of my lack of credit history. This makes sense because historical behavior tends to hint toward future behavior. Yet, I did not have an alternative method of demonstrating my diligence. I learned there were different puzzle pieces, and I had to learn to navigate them.

One trick I learned is to keep your debt accounts open as long as it's free. The older your average credit age, the stronger your resume appears to the lenders. I have only one annual fee credit card, and I use it daily. The other five cards have no annual fee. Therefore, I do not plan to close them.

10% - New Credit

Lenders use new account generation data because, based on historical research, the more credit accounts you open in a short time, the riskier you are to the lender. Think about someone who might be financing a start-up through credit cards. If a lender sees several credit cards opened in a week, there's probably something risky going on. Chase bank has a rule that if you apply for five cards in twenty-four months, you will not be approved, no matter how financially healthy you are. That's because they get registered on your credit report as hard inquiries. Hard Inquiries appear on your credit report, so lenders can see them. Typically Hard Inquiries resolve after twenty-four months, which is why Chase caps their evaluation at twenty-four months.

10% - Credit Mix

Diversity is always a good idea. In credit reporting, diversity references spreading your debt across multiple types of credit. As a general rule of thumb, there are two types of credit accounts with familiar terms.

• Revolving Accounts

  • Unsecured Lines of Credit (Normal Credit Cards)

  • Secured Lines of Credit (Like Debit Cards, but they count toward your credit score)

  • Retail Store Cards

  • HELOC; Home Equity Line of Credit (Borrowing against your equity in your House)

• Installment Accounts

  • Mortgages

  • Auto Loans

  • Student Loans

Having a good mix of these is helpful for your lenders to know you've diversified your total debt across multiple classes of creditors.