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Risk scores
My first piece advice when talking about risk scores has nothing to do with the risk score number. The first thing you should do is get a list of the risk factor statements that most affected the score at the time it was calculated.
The second thing you should do is get a copy of your personal report directly from Experian and review it.
As you look over the report, compare the information in it to the risk score factors provided by the lender. Doing so should give you a much better feel for what information in your credit history is affecting the risk score models. Addressing those issues puts you in control of improving your creditworthiness and, therefore, the risk score.
For immediate access to your credit report and score, order online. Select the consumer credit product that best meets your needs. And yes, you should get your personal report from the other two credit reporting agencies.
Risk scores not part of your credit report
Now, about the risk score numbers. You won't find them on your personal credit report because they are not part of your credit history. They are an analysis of your credit history and are calculated by the lender, or at the lender's request, when the report is sent.
Often, risk scores are printed by the lender along with the credit report, so it appears the scores are part of the report. Unfortunately, this has resulted in the misperception that risk scores are part of your credit history just like an account. They're not.
Many models, many scales and meaningless numbers
There are many, many different models that analyze risk for a wide range of credit decisions. General creditworthiness and bankruptcy risk are two examples. There also are models specific to mortgage lending, auto lending, credit card decisions and other industry-specific and lender-specific requirements.
There is an equally diverse number of scales for those various risk analysis models, so a number alone doesn't tell you anything. On one model a high score is best. On the other, the lower the score the better.
If you go to a credit reporting agency and ask, "I got a 745, what does that mean?" the representative will tell you they don't know. What model, what scale, and how does the lender interpret the model are all questions credit reporting agencies don't have answers to.
That's where risk factors come in.
Risk factors: helping you get control
The risk factors are all-important. They tell you what from your credit history most influenced a risk score produced by a particular model and are generated every time a risk score is calculated. Understanding the risk factors gives you control over your creditworthiness and, therefore, the risk score – no matter what risk score model is used.
Unlike the numbers, the factors tend to be relatively consistent from risk model to risk model. That's because the things that make you creditworthy – or not – are pretty much the same regardless of how they are measured.
Risk factors are listed in order of importance
Keep in mind, the risk factors usually are listed in order of importance. Inquiries almost always are listed last, or very nearly last, as in your situation.
Inquiries indicate you may have additional debt not yet included in your credit history. If you already are a marginal credit risk, that unseen debt can push you over the edge.
The models have to list three or four factors. When you are a good credit risk, inquiries likely are listed because they are the only thing left.
Risk factors aren't good or bad (They just sound mean)
Another very important thing to understand about risk score factors is that they are neither good nor bad (although they usually sound pretty negative). The risk factors simply indicate the things that most influence the particular risk score at the moment it was calculated.
As I mentioned earlier, risk factors are generated every time a risk score is calculated. So even if you were a perfect credit risk (no one is), a list of three or four factors would be generated, telling you what from your credit history most influenced the score at that moment.
Time is on your side
I have to stress one more thing.
Time is essential to improving your creditworthiness, which is reflected by risk scores.
It's very unlikely that making a single change or even several changes to your credit history will instantly improve a risk score.
The bottom line is that risk scores are simply a representation of how you manage your credit. To change scores you have to change your behavior over time.
Becoming a better credit manager makes you a better credit risk, and risk scores, whatever risk they measure, will get better. Managing your credit better is good for you and for your lenders.
I hope this helps take some of the mystery out of risk scores and risk score factors and helps you utilize them to improve your creditworthiness.
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