Credit scores what do they mean? what is good, what is bad?

[greenbriar]

just curious

[Mike 03]

1. I know somebody can answer this question. My vague recollection is that

850 is great, anything over 700 is good, and that things are not so good below that. But I know somebody here will answer your question. I'm surprised nobody has.

[texastoast]

2. it's a rating system

How much money do you earn?
How many credit accounts do you have open (including utilities)?
How much do you owe on each of those accounts?
What is your monthly payment on each account?
Have you ever been late on a payment?
If so, when and how much?

And from questions like that, using probably some kind of actuarial formulae, a credit score is reached.

[Mike 03]

3. Just to add one thing, what you earn is the least important factor in this list, but it is a good

list.

I think your credit score, ultimately, is simply how capable you are of making the payments required of you, and to what extent you keep your available credit amount open to use.

[The Straight Story]

4. Wonder what the credit rating is for some of those banks we helped out

:)

[Mike 03]

7. LOL, and that is sad laughter, but I just want you to know I agree.

You hit the nail on the head. There is a double standard.

[texastoast]

6. Yes

And another factor I heard about is how many accounts you have open, their limits, how often they are used, etc. I heard that closing inactive accounts (e.g., those whose intro rates have disappeared and/or from which balances have been transferred) will improve the score.

[Pithy]

13. Not always true

Part of your FICO score is the age of your oldest account, and the average age of your current accounts. All positive scores stay on your reports for 10 years after they are closed, but closing a card just because you haven't used it in a while can hurt your overall utilization (ratio of card limits to how much of the card limit you're actually using.) It can also decrease the average age of your accounts.

If you haven't used a card in a while, go buy a pack of gum on it and then pay it off in full. Card companies are starting to close accounts for inactivity, so try to give each card that you want to keep open some use at least every 3 months.

[Statistical]

15. Usually the opposite happens.

One MAJOR factor is utilization %.

So say you have 3 cards.
Everyday card $500 balance / $5000 limit
0% debt card $4500 balance / $10,000 limit
not used card $0 balance / $5,000 limit

Right now your utilization is $5000 out of a potential $20,000 which is 25%.

25% is pretty bad (but not horrible). If you paid down the debt to 15% utilization you woudl pick up 20-30pts on your score.

Now here is what happens if you close the old/usused card.
Same $5K in debt but it is now on $15K limit. Utilization jumped to 33% and credit score drops 30-60pts.

NEVER CLOSE UNUSED ACCOUNTS.

Pay them to $0. Cut them up. Set up a balance alert online for $10 balance (in case it gets used).
Keep the account open to push utilization DOWN. Hell get a credit line increase if you can.

To keep a FICO in 750+ club you need utilization of <10% (<5% would be optimal).

[Dreamer Tatum]

12. They don't consider income nt

[Statistical]

14. income is not part of your FICO score. n/t

[rucky]

5. It's a measure of how profitable you are to the creditors (FICO's clients)

Mid-600's is ideal. Anything else higher or lower makes you a "deadbeat".

[ohheckyeah]

8. from my last credit report

This is from my last credit report:

[Dreamer Tatum]

9. Here's the straight poop

Credit scoring is usually thought of as a FICO score, though Fair Isaac licenses its scores to credit bureaus for rebranding.

A FICO score is a numerical representation of the likelihood to generate a seriously delinquent account (90DPD+) within the next 6 months.

Higher scores are better, lower scores are worse. The score is scaled to be between 300 and 890, in general, though this need not always be the case.

FICO is generally used in bands, ie, 675-700 is a 25-point band that, historically, means that some percentage of accounts that score within that band had an ACTUAL incidence of delinquency of some amount. Lower score bands generally double the odds of bad; higher score bands generally halve the odds of bad.

The FICO score is built from several hundred individual credit attributes. The 10-20 that are determined to be the most statistically relevant are used to explain the odds of bad. Attributes known to be predictive include, but are not limited to:

Total number of previous accounts
Percentage of accounts that have never been delinquent
Maximum amount ever owed
Number of applications for credit in the last 6-12 months
Number of revolving accounts
Months since first account opened
Current utilization of revolving lines
Number of historical delinquencies


Scorecards are often generated separately for "thin" files (people with little credit history) and "thick" files (lots of history). It is quite possible that a person will not have enough information at the bureau to score; these scores come back as missing.


Income is NOT used in FICO score development.


Any other questions?

[rwheeler31]

10. So what your telling me it does not matter how much you make

it is how you pay?

[Dreamer Tatum]

11. That is correct nt

[Statistical]

16. Exactly.

Race, Age, Gender, Income, Marital status and other socio-economic factors have 0 influence on your FICO score.

Only things that matter are:
* 35% — punctuality of payment in the past (only includes payments later than 30 days past due)
* 30% — the amount of debt, expressed as the utilization ratio (total balance / total limit)
* 15% — length of credit history
* 10% — types of credit used (installment, revolving, consumer finance)
* 10% — recent search for credit and/or amount of credit obtained recently

Now there are lots of people who will sell you this score and that score on line but they are pure garbage.

If you try to get car loan, credit card, mortgage they will pull your FICO score. All the other scores are "fako". They are snake oil.

On average:
<660 is considered subprime.
660-720 is prime
721+ is prime+

[graywarrior]

22. OK, how about one credit card with payments made on time and a bankruptcy

4 years ago....and one credit company who keeps selling the account, therefore refusing to be taken off your credit report even tho you filed bankruptcy. Whew!!!

[SoCalDem]

17. Credit scores CAN be totally meaningless

If you NEED to borrow money, they are important, but if you are a cash customer, they mean nothing..

I couldn't care LESS what ours is, because we pay cash for our cars (used) and we never plan on buying another house, we use our debit card for everything else...we have ONE major credit card (Discover), which we use regularly (to keep it active) and pay off in full every month..

Our credit rating "could" be shit, but I'm not willing to jumpt through hoops to see it, and don't really care what it is..

[greenbriar]

18. so a 721 is okay? Hubby bought an old Chevy blazer today and was worried about getting the money

His credit union at work was more than happy with our credit and pretty much gave him what he wanted without blinking


about 18 years ago, we did the bankruptcy thing because I had to have 2 surgeries and we didn't have insurance...

looking back, we probably could have sued for malpractice after needing the second surgery because things weren't done right the first time, but we were young, dumb and idealistic


since then, we have been on time with almost every bill but we have more debt than we are comfortable with. We are working on that tho

[Dreamer Tatum]

19. A BK 18 years ago would not register on your FICO nt

[Statistical]

20. 721 is great.

Another above 700 you should have no problems.

Bankruptcies only remain on Credit report for 10 years so as far as a creditor knows he never filed BK.

Keep paying on time.
Pay down debt. On CC (revolving credit) as the balance as % of credt line goes down the score will improve.
Don't close cards you don't need (unless they have annual fee). Just cut them up or lock them up.
Closing accounts raises your utlization % and lowers average account age (both are negative to score).

[greenbriar]

21. thanks

good advice