My wife sat in on a seminar presented by someone who worked at FICO, and decided to write an article for her blog.

Figured the topic of credit scores and personal finance comes up often enough, and that this article was concise enough, that it would be helpful to some people.

Full Article Here:

https://www.liveworkoc.com/hom.../26/fun-fico-facts-1


Excerpt:

The FICO® Score model has 5 different predictive categories, with varied levels of impact, that are used to evaluate the credit risk of individuals.

“Payment History” is the biggest piece of the pie, making up 35% of the predictive information and looks at how recent, how severe and how many delinquencies are on your record. It’s very important not to miss payments before obtaining a mortgage, and definitely avoid public record and collection items.

“Outstanding Debt” is the second significant influencer of the credit score at 30%. This variable evaluates how much you owe creditors and more importantly, the percentage of available credit are you using. Having a low level of utilization implies that you can manage your money well.

“Credit History Length” represents 15% of the credit score. How long have you had credit experience? The longer the better so opening a credit card at an early age is a good idea (as long as you can pay the balance in full each month and keep that line of credit active).

“Pursuit of New Credit” accounts for 10% of the information going into the credit score. The only type of credit inquiry that will impact your score are those initiated by the consumer to seek credit within the last 12-months. If an inquiry is done more than 12-months ago or without the intent to receive credit, there will be no impact.

“Credit Mix” is the remaining 10% of the credit score evaluation. Having a well-rounded experience with various credit products (revolving credit, installment credit) is preferred and shows you can manage different types of debt. But that doesn’t mean you should open up a new product type to boost your score.

Interesting that income isn't factored in. $50,000 in outstanding debt may be a year's income for some and a rounding error to others.

Good article. One minor correction: Vantage scores are not produces by Credit Karma. It's a competitor to FICO created by a joint effort by the three major credit reporting agencies; Equifax, Trans Union and Experian.

It may be used by Credit Karma, I don't know.

quote:

Originally posted by MNSIG:
Interesting that income isn't factored in. $50,000 in outstanding debt may be a year's income for some and a rounding error to others.

FICO score is about the likelihood to repay your debt. People with modest incomes can have perfectly healthy FICO scores. And some rich people are terrible with managing their finances and get way in over their head with buying too many things at once, despite having plenty of income.

When deciding to extend credit, the FICO score is just part of the equation. You can have a great FICO score, but you'll also need sufficient income (verified by tax and bank statements and pay stubs) to support the amount you are borrowing.

quote:

Originally posted by KurtZ66:
Good article. One minor correction: Vantage scores are not produces by Credit Karma. It's a competitor to FICO created by a joint effort by the three major credit reporting agencies; Equifax, Trans Union and Experian.

Cool, fixed it for her.

quote:

Originally posted by MNSIG:
Interesting that income isn't factored in. $50,000 in outstanding debt may be a year's income for some and a rounding error to others.

And most lenders use a debt-to-income ratio to decision loans.

When we got our mortgage, we were monitoring our FICO and Vantage scores and knew our numbers well.

When our credit was pulled for the lock, the number given was much lower (but still in the same bracket) then we expected. We questioned it and were told that FICO is an aggregate of the numbers, and that mix is weighed differently depending on the report requested.

So when getting a car, it might be a 760
when getting a credit card, it might be a 785
but getting a house it might be 740.
And there is no way to refute or challenge this number either.

Personally I think it's all a crock, but I have my house, my vehicles, and ample credit card space if needed, so screw it.

quote:

“Pursuit of New Credit” accounts for 10% of the information going into the credit score. The only type of credit inquiry that will impact your score are those initiated by the consumer to seek credit within the last 12-months. If an inquiry is done more than 12-months ago or without the intent to receive credit, there will be no impact.

This one has me scratching my head. Am I supposed to apply for more credit or avoid applying for credit?

Since I froze agency access in '13, there have been, predictably, zero inquiries. Possibly some type of insurance inquiry as my commercial policies are rewritten.

The score I find useful for monitoring my credit. An unused joint card was dragging down our scores; monthly use restored our numbers within three months.

quote:

Originally posted by Woodman:
This one has me scratching my head. Am I supposed to apply for more credit or avoid applying for credit?

Too many inquiries in too short of a period of time may indicate that someone plans on buying a bunch of stuff on credit all at once, or is in immediate need of money, so fewer inquires is better.

quote:

Originally posted by Gibb:
When we got our mortgage, we were monitoring our FICO and Vantage scores and knew our numbers well.

When our credit was pulled for the lock, the number given was much lower (but still in the same bracket) then we expected. We questioned it and were told that FICO is an aggregate of the numbers, and that mix is weighed differently depending on the report requested.

So when getting a car, it might be a 760
when getting a credit card, it might be a 785
but getting a house it might be 740.
And there is no way to refute or challenge this number either.

Personally I think it's all a crock, but I have my house, my vehicles, and ample credit card space if needed, so screw it.

So when your credit card(s) company says "click on this link to get your score" you say it may be incorrect or vary?
I don't really borrow much but put a bunch on credit cards only to pay it off every month.
A couple of the cards American Express, one of my Mastercards and it might even be on my banking portal had this.
Each time I check it does vary one or two points > 846 ~ 848.
So is this a real number (don't really care as I'm not going on a borrowing binge) but curious?

quote:

Originally posted by smschulz:

quote:

Originally posted by Gibb:
When we got our mortgage, we were monitoring our FICO and Vantage scores and knew our numbers well.

When our credit was pulled for the lock, the number given was much lower (but still in the same bracket) then we expected. We questioned it and were told that FICO is an aggregate of the numbers, and that mix is weighed differently depending on the report requested.

So when getting a car, it might be a 760
when getting a credit card, it might be a 785
but getting a house it might be 740.
And there is no way to refute or challenge this number either.

Personally I think it's all a crock, but I have my house, my vehicles, and ample credit card space if needed, so screw it.

So when your credit card(s) company says "click on this link to get your score" you say it may be incorrect or vary?
I don't really borrow much but put a bunch on credit cards only to pay it off every month.
A couple of the cards American Express, one of my Mastercards and it might even be on my banking portal had this.
Each time I check it does vary one or two points > 846 ~ 848.
So is this a real number (don't really care as I'm not going on a borrowing binge) but curious?

It's directionaly correct but no, not exact at all. If you have a strong score there you'll more than likely have a strong score using another model geared towards specific lending. There are FICO score's for auto, card, mortgage, etc... All have little twists on the OP's theme. An auto specific FICO score used by an auto lender has more weight on the 5 things above related to prior auto loans for example. Now if you paid everyone but your auto on time then that same score will be quite a bit lower (maybe not same tier) because they're looking more closely at how you paid your auto.