What affects credit score, according to FICO : Bad Credit Advisor

What affects credit score, according to FICO

FICO recently revealed for the very first time some more or less concrete numbers on how negative activity affects your credit scores. While we have known for many years what affects credit score negatively, the exact number of points the credit scores drop in a given scenario has always been at best, an educated guess. And it still is, but a bit more educated. According to reports I found, and FICO site itself, if you, for example, max out your credit card or home equity revolving line of credit, your credit scores will drop by 10 to 50 points. If you declare Chapter 7 Bankruptcy, then the score can go down by as many as 250 points, and of course, your chances of getting unsecured credit, auto loan and mortgage will be almost nil for some time. Foreclosure will cost you up to 170 points. Quite honestly, some of the numbers look too good and I have seen foreclosures to affect scores by larger number of points, even worse than bankruptcy, but we will try to rely on FICO data, at least in this story, with few additions, based on experience.

Certainly FICO still does not say much, but revealing bits of information on how its algorithm uses very common negative data points, it clearly reminds you that even small misstep can end up costing you a lot. What affects credit score will ultimately affect your pocket. If you have deep ones, and your credit score is high, a 30-day late payment will not change your lifestyle, but for someone, it may mean bigger trouble and changes. So your three credit scores which sit somewhere between 300 and 850, must be carefully protected at all times, but especially if you are or will be looking for credit.

Consumers with good and excellent credit, often called A and A+ borrowers stand to loose more credit points for each misstep. A 30 day late payment will affect you more if your credit score at 750 or above. Someone with an average credit score of 680 will see an immediate 50 to 80 point drop for a 30 day late payment, whereas someone with 780 credit score will loose between 75 to 100 points.

Few examples on how and what affects your credit scores. Some data was added and edited based on my experience and of few others who have seen many credit reports. Of course, we see credit reports with at least few things combined and affecting scores simultaneously, but nevertheless, we can approximate, it is not a rocket science.

Credit Negative	680 Credit Score	750 Credit Score
max out revolving line of credit	10 to 30 point drop	25 to 50 point drop
30 day late payment	50 to 80 point drop	75 to 100 point drop
60 day late payment	75 to 120 point drop	110 to 145 point drop
90 day late payment	130 to 160 point drop	150 to 185 point drop
debt settlement/consolidation	40 to 60 point drop	100 to 120 point drop
chapter 13 bankruptcy	120 to 150 point drop	150 to 210 point drop
chapter 7 bankruptcy	130 to 170 point drop	200 to 250 point drop
foreclosure	100 to 150 point drop	140 to 200 point drop

So here you go, again most data on what affects credit score and how, is according to Internet reports by mainstream correspondents who talked to FICO representatives, some from heavy digging of FICO site and various credit boards, and some from the input of field loan officers, including yours truly.

Wed Feb 3, 2010 10:02PM by Tony | More in Credit Repair | Comments (0)

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