A new system created by the FICO people (”FICO 08″) will discount certain small payments lingering in collections and change the way scores are calculated. One change will allow for a stray missed payment not to destroy a credit score if it is offset with a number of good payment records. The new system will boost the credit scores of some applicants. Also address is the “Credit Repair” scam in which others (parents, for example) are piggybacked onto a credit score in order to make the FICO score higher. The new system of scoring has been in place since last month. Read the MarketWatch article for more:
Posts Tagged ‘FICO Score’
Changes to the FICO Scoring System
Friday, August 28th, 2009Important Things to Know About Credit Reports
Tuesday, August 18th, 2009After some research in reading the sites for Experian, MyFICO, TransUnion, and Equifax, I have found that the following tips are useful in understanding credit reports and the FICO score:
- Avoid moving around debt. Pay it off.
- If you are trying to build credit, do not open a rash of accounts. This strategy can backfire and actually lower your credit score. Too many open accounts of a particular type (i.e. fuel revolving accounts) can actually lower a credit score. Having too many accounts in a short period of time can also lower your average account age. Low account age will lower your score.
- Delinquent accounts that go to collections are not removed from your credit report after they are paid. Accounts in collection stay on your report for 7 years after they are closed.
- A closed account does not mean it is removed from your credit report. Closed accounts still show up on the credit report.
- Missed payments decrease your score (I know, obvious)
- Closing a revolving (credit card) account reduces the amount of credit you have available to you. This can increase the percentage of credit you’re using. An increase in this percentage of credit being used can lower your score.
- Some “counseling” services can recommend actions that will actually damage your credit. For example, taking the advice to allow an account to go into collections by paying partial amounts could result in negative factors. Find out all the angles before using a counseling service that sounds too good to be true.
- Chapter 7 and 13 Bankruptcy status on a credit report are treated similarly and will stay on the report for the same amount of time.