FICO Score Cards - 8/31/2009
We all know that we have credit scores and that they are used to determine our “credit worthiness” with lenders and credit card companies. Some may even know the five different areas that are focused on when calculating the scores. What most don’t know is how in depth the scoring model goes when determining your risk level to lenders.
The way our FICO credit scores are calculated is very complex. Not only does the scoring model focus on payment history, amounts owed on revolving debt, length of credit history, inquiries, and types of credit, but it even goes a step further. It uses a number of different scoring models to compare you individually to those with similar credit. In other words, the FICO scoring model actually uses 10 to 12 different scoring models called “score cards”. Depending on your personal/individual credit history, each one of us is placed on a certain score card that compares us to our peers. For example, if you have filed bankruptcy, you will be compared with everyone else who has filed bankruptcy. Examples of other types of score cards include those with “thin files” or reports with very few accounts, those who have derogatory items but no bankruptcies, and those with a clean credit history.
These different score cards will emphasize certain information or variables over others. In addition, different score cards will have different scoring ranges. Those who do have some type of derogatory information on their credit report will fall on a score card that has a lower maximum score than someone with a clean credit history. This is the reason why any given change on a credit report doesn’t equate to a set number of points lost or gained.
I have helped many individuals restore their credit by simply educating and working with them to build a plan towards credit improvement. Contact me to find out more about how I can help.
Kevin D. Weier
Credit Coach, LLC · Three Point Place, Madison, WI 53719
Phone: (608) 268-6677 · Cell: (608) 774-2434 · FAX: (866) 311-7478
Web: www.creditcoachwi.com · Email: [email protected]
