FICO Reports Consider All Credit Information About You

2007-03-08 10:33:40

( Financial )



Your ability to qualify for any financing will depend greatly on how FICO reports on your credit scoring. The credit scores or middle scores indicated in FICO reports largely determine whether you qualify for particular credit lines or loan programs and interest rates.

If you're applying for a department store, they generally use only one bureau’s credit report. If you apply for mortgage credit, banks use the middle score (you might say average) of three scores for home loans. These three scores are taken from the credit reports issued by three major credit bureaus. These would include Experian reports but, contrary to popular belief, will not include a dun and bradstreet report.

Those scores are actually generated by FICO, not by the credit bureaus. The bureaus provide your credit data to FICO which processes the data into useful information in the form of scores. FICO reports the resulting scores back to its subscriber credit bureau. FICO reports contain FICO scores that are specific to the credit bureau asking for them. Thus there is a separate scoring system for Experian reports.

In calculating for your scores, FICO looks at the debt reports from card companies, loan reports from banks and bankruptcy reports from the courts that obtained by the credit bureaus.

About one-third of your score represents statistical evaluations of your payment history, particularly lapses thereon, with attention on frequency, severity and most recent occurrences.

Another third is an assessment of your credit utilization, such as the outstanding debt in your credit card accounts in relation to your maximum credit line.

Thus, about two-thirds of your score focuses on how your utilize credit and how you pay. The rest evaluates your credit history (the longer history you have, the better), the types of credit you have (revolving credit such as credit cards is significant) and frequency of credit inquiries.


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