Asked Questions about
Credit Reports and Scoring Systems
is a FICO credit score?
FICO is an acronym from the name Fair, Isaac, and Company,
the company that created this popular scoring system. The three
major credit repositories (bureaus) use this system to quantify
credit report information. This system was created to overcome
the lack of uniformity, unprofessionalism and subjectivity that
was common in the credit analysis industry.
ordering my score cause my FICO score to drop?
Ordering a report of your credit score is considered an inquiry
only and will not change your score.
credit reporting agency should I select?
three major credit-reporting agencies offer FICO scores for making
is a FICO score analysis?
FICO score analysis gives you a detailed, plain-language explanation
of your current FICO score. This includes how your score compares
to FICO scores nationally and what your score says to creditors
about your likelihood to repay. In addition, a review of the reason
codes delivered with your FICO score helps you learn what specific
factors affected your final score, and what you can do to improve
your credit rating over time.
my score actually change over time?
it's normal for scores to change. Your FICO score today is likely
different from your FICO score of a few weeks ago. Your score
changes when the underlying information on your credit report
changes. Since this can happen anytime, lenders usually make decisions
based on your most current FICO score and not on yesterday's score.
much will my score change over time?
much your score changes depends on how you are managing your credit.
If you manage your credit consistently over time, your score should
remain quite stable. You'll see bigger changes in your score if
you significantly change your credit behavior by opening new credit
accounts, for example, or by changing account balances in a big
way, or not paying your bills on time.
my score more likely to go up or down?
depends on a lot of things under your control. For example, if
you manage your credit carefully by paying your bills on time,
keeping credit card balances low, and only taking on as much new
credit as you really need, then your score is likely to improve
over time. But if you pay your bills late, carry high credit card
balances or shop excessively for new credit, then your score will
probably go down. Statistically, low scores are more likely to
go up over time and higher scores are more likely to remain stable
or go down over time. That's because it is harder to lower an
already low score or to raise an already high score. If you do
have a high score, don't worry when you see an occasional small
move downward. Most lenders would not see this as negative since
your score is still very good and represents a low credit risk.
if I find an error on my credit report?
should contact your credit bureau directly. They are required
to investigate and respond to you within 30 days. If you are in
the process of applying for a loan, immediately notify your lender
of any incorrect information in your report. Your landlord will
need to reorder your credit report and score once any changes
have been made to your information at the credit bureau.
an error is fixed when is my score updated?
very next score will reflect the updated information. Since FICO
scores are recalculated every time they are requested (rather
than stored as part of your profile), they respond to meaningful
changes instantly. What's a meaningful change? An update to your
address, for example, would have no effect on your score. On the
other hand, substantially lowering the balance on a maxed out
credit card might have a notable impact on your score.
will credit changes affect my score?
impossible to say exactly how important any single factor or new
information is in determining your score. That's because the importance
of each factor depends on the overall information in your credit
report. In scoring, what's important is the mix of information,
which varies from person to person and for any one person over
I share this information with my landlord?
but please be careful about sharing your personal credit information
with anyone. It is unlikely that a landlord would use this credit
report or score in considering a credit application. Most landlords
will get a fresh credit report and FICO score to protect against
the possibility that you may have altered the report before you
delivered it to them.
What if I am denied because of an error on my credit report?
at least at that moment. Lee Street Management does not accept
explanations in lieu of an acceptable credit score. If you still
want an apartment from us after a denial, you will have to undertake
the correction of your credit report on your own and come back
to us when it is better. As a concession to an applicant who is
denied an apartment based on an erroneous credit report, we will
not charge a second application fee if you reapply no sooner than
six months after the denial. Your credit report can and will be
used by creditors to check for discrepancies between any credit
application and the report itself, or to verify that a debt
has been satisfied. Discrepancies that cannot be explained
may be regarded as falsifications and may subject your application
to summary rejection.
is a FICO score?
a number lenders use to help them decide: "If I give this person
a loan or credit card, how likely is it that I will get paid
back on time?" A FICO score is a snapshot of your credit risk
picture at a particular point in time. The higher your score,
the lower the risk to lenders. "FICO" is short for Fair, Isaac
and Company, which develops the mathematical formulas used to
produce these scores.
can I improve my FICO score?
FICO score analysis will suggest things you can do to improve
your score overtime. Generally, people with high FICO scores consistently:
- Pay bills on time.
- Keep balances low on credit cards and other revolving credit
- Apply for and open new credit accounts only as needed.
the most important factor in a Score?
scores consider five main kinds of credit information. Listed
from most important to least important, these are:
- Payment history.
- Amount owed.
- Length of credit history.
- New credit.
- Types of credit in use.
do FICO scores ignore?
Your race, color, religion, national origin, gender, sexual orientation,
or marital status.
- Your age.
- Your salary, occupation, title, employer, date employed, or
- Where you live.
- Any interest rate being charged on a particular credit card
or other account.
- Certain types of inquiries (such as promotional, account review,
insurance or employment-related inquiries).
- Any information not found in your credit report.
- Any information that is not proven to be predictive of future
is a good FICO score?
there is no one "score cutoff" used by all lenders, it's hard
to say what a good score is outside the context of a particular
lending decision. Your lender may be able to give you guidance
on the criteria for a given credit product.
often does the score change?
credit file is continually updated with new information from your
creditors. The FICO score is calculated based on the latest snapshot
of information contained in your file at the time the score is
requested. So your FICO score from a month ago is probably not
the same score a lender would get from the credit reporting agency
today. Fluctuations of a few points from month to month are quite
are the FICO scores calculated?
FICO score is calculated at a credit reporting agency using a
mathematical formula that evaluates many types of information
on your credit report at that agency. By comparing your information
to the patterns in millions of past credit reports, the score
identifies your level of future credit risk.
are the highest and lowest FICO scores?
scores range from 300 to 850. The higher the score, the lower
the predicted credit risk for lenders.
do lenders use FICO scores?
scores provide an extremely valuable guide to future risk based
solely on credit report data. The higher the consumer's score,
the lower the risk to lenders when extending new credit to that
everyone have a FICO score?
a FICO score to be calculated on your credit report, the report
must contain at least one account which has been open for six
months or longer. In addition, the report must contain at least
one account that has been updated in the past six months. This
ensures that there is enough information - and enough recent information
- in your report to compute an accurate score.
there other types of scoring systems?
but FICO is the scoring system of choice for the three primary
bureaus. FICO scores are calculated by the major credit reporting
agencies - Equifax, Experian and Trans Union - using formulas
developed by Fair, Isaac. The FICO scores are known as BEACON
at Equifax, EMPIRICAŽ at Trans Union and the Experian/Fair, Isaac
Risk Score at Experian.
area Average Credit Usage Information
of Credit Accounts/Obligations
On average, the current consumer has a total of 11 credit obligations
on record at a credit bureau. These accounts include credit cards
(such as department store charge cards, gas cards, or bank cards)
and installment loans (auto loans, mortgage loans, student loans,
etc.). Not included in these numbers are savings and checking
accounts (typically not reported to a credit bureau). Of these
11 credit obligations, consumers are more likely to have credit
card obligations than installment loans at a ratio of 7:4.
The average consumer is paying his bills on time. Fewer than 4
out of 10 have ever been reported as 30 or more days late on a
payment. Only 2 out of 10 have ever been 60 or more days overdue
on any credit obligation. Eighty-five percent of all
consumers have never had a loan or account that was 90+ days overdue,
and less than 10% have ever had a loan or account closed by the
lender due to default.
The chart below shows
the likelihood of a ninety day delinquency for specific FICO scores.
of a delinquent account
About half of the U.S. population is conservative with regard
to credit balances. About 48% of credit card holders carry a balance
of less than $1,000 and about 10% are far less conservative in
their use of credit cards and have total card balances in excess
of $10,000. When we look at the total of all credit
obligations combined (except mortgage loans), 54% of consumers
carry less than $5,000 of debt. This includes all credit cards,
lines of credit, and loans-everything but mortgages. Nearly 30%
carry more than $10,000 of non-mortgage-related debt as reported
to the credit bureaus
The typical consumer has access to $12,190 on all credit cards
combined. More than half of all people with credit cards are using
less than 30% of their total credit card limit. Just over 1 in
8 are using 80% or more of their credit card limit.
of Credit History
The average consumer's oldest obligation is 13 years old, indicating
that he or she has been managing credit for some time. In fact,
we found that 1 out of 5 consumers who recently applied for credit,
had credit histories of 20 years or longer. Only 1 in 20 consumers
had credit histories shorter than 2 years.
The average consumer has had only one inquiry on his or her accounts
within the past year. Fewer than 7% had four or more inquiries
resulting from a search for new credit. Self employed people have
a considerably higher volume of inquiries.
Codes for Score Deductions
credit score is not the only thing that appears on your credit
report. The score is often accompanied by one or more reason
codes, which help explain your credit score. On your report,
these reason codes are ordered by their importance in arriving
at your credit score. They may just be numbers that can be looked-up
on a chart, or they may be numbers accompanied by the corresponding
reason descriptions. Don't expect the reason codes
to provide much information to you the consumer.
codes are designed specifically for the landlord. Landlords
use reason codes in a couple of different ways. In theory, the
reason codes should call attention to areas on your credit report
that should be studied further. In practice, the reason
codes often are used just to make it easy for the landlord to
generate a letter of declination, complete with reasons, should
you happen to fall below the landlord's predefined minimum. Interestingly,
the landlord might see the same four reason descriptions for applicants
having much lower or higher credit scores. The scores and the
reasons are not necessarily interdependent. For the applicant,
the reason descriptions often merely provide hints as to what
might be improved to get a higher score.
codes fulfill requirements of the Equal
Credit Opportunity Act. According to the ECOA, when
declining credit, a landlord can't just tell you "Your score
wasn't high enough", or "You didn't meet our
standards." A statement of specific reasons must
be provided, or you must be advised of your right to demand specific
reasons. Credit scoring, accompanied by reason codes, helps the
landlord provide reasons. For the consumer reading
his/her credit report, reason codes are often difficult to interpret.
Here are a few popular reason codes and an explanation of what
#1: Not all accounts paid as agreed. Recent delinquency
This reason code usually indicates that you've had some late payments
or defaults. The more recent your late payments, the more heavily
this reason code will weigh on your score.
#2: Lack of recent information on apartment rentals, auto loans,
revolving accounts, bank or credit accounts, or installment loans
This reason code will be weighed differently depending upon the
type of credit you are seeking. For example, if you seek an auto
loan, a score model that giving special weight to how you've handled
auto loans might be used. Messages often indicate that the scoring
model is not seeing recent activity in the category being evaluated.
#3: Insufficient recent payment history
Loan balances too high, compared to original loan amount.
Accounts not open long enough. This message indicates that
you probably have new loan that lacks payment history. Credit
scoring requires current information, as well as a history. New
loans may not be helpful to your score, because there is not enough
history to see your repayment track record.
#4: Number of accounts in total
This message indicates that you have too few or too many unsecured
credit accounts. It's probably obvious which applies to you.
#5: Recent legal filing or collection
Derogatory public records. Credit reporting agencies look
at courthouse records - and this can affect your score. Transfer
to a collection agency or collection account is also considered