International Baccalaureate (IB) Practice Exam

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Which of the following is not considered a factor in determining a FICO score?

Getting a personal loan from a bank
Using credit cards
Taking out a mortgage on a house
Paying cash for all purchases

The correct answer is: Paying cash for all purchases

A FICO score is primarily calculated based on an individual's credit history and behavior, which includes factors like payment history, credit utilization, length of credit history, types of credit in use, and recent credit inquiries. Paying cash for all purchases does not contribute to establishing or maintaining credit because it does not involve borrowing or repaying debt. Consequently, it is not factored into a FICO score. In contrast, getting a personal loan, using credit cards, and taking out a mortgage all involve credit transactions that affect the FICO score. These activities show how an individual manages debt, which is critical for lenders in evaluating creditworthiness. By only paying cash, an individual may not build a credit history, which can limit their overall credit score potential.