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Understanding Your FICO® Score Powered by Experian Data: Inquiries and Other Actions

Financial blogger Ash Cash explains how certain actions do (or don’t) affect your credit scores. Get the scoop on what can come in, and what can stay out.

Many people are familiar with the Fair Isaac Corporation, also known as FICO. It’s one of the largest and best-known companies providing software to calculate credit scores. However, if you haven’t previously consulted a FICO Score, you may have questions – how does it differ from other credit scores? How is it similar?

Your FICO® Score powered by Experian data helps lenders determine what interest rates to offer you; even some insurers use it to help determine your premiums. Low credit scores can prevent you from being able to rent the apartment you want, or worse, render you ineligible for certain jobs. It’s important to know that your credit behaviors can affect your Score, since it’s calculated from the information on your Experian credit report.

The scoring model that calculates your FICO Score using Experian data considers the following:

  • 35% is based on your consistent payment history and only includes payments later than 30 days past due.
  • 30% is based on the ratio of current credit debt in comparison to total available credit. Carrying a low balance on your credit cards is widely considered a positive credit behavior and a good sign of financial management. It can also positively impact your credit scores.
  • 15% is determined by the age of your accounts – also known as the length of your credit history.
  • 10% is based on the types of credit you have; i.e., installment loans (car payments, student loans, or a mortgage), revolving debt (credit cards or lines of credit), or consumer finance debt (bank loans and the equivalent).
  • 10% is based on recent searches for credit and/or the number of new accounts reported to your credit report in the past year. Every time you apply for credit, it creates a hard inquiry that can impact your FICO Score for the first 12 months that it appears on your credit report.

Once you know how the FICO scoring model processes the information from your credit report, it’s important to know how your credit behaviors impact the calculation of your credit scores. There are a wide range of factors that can potentially have a negative impact on a credit score – from a payment made more than 30-days late to a judgment filed against you. Despite popular belief, there’s no quick fix that can “repair” poor credit due to accurate, negative information. There are, however, ways to remove information that suggests suspicious activity and to ensure that the information appearing on your credit report really is your own.

  • Dispute any inaccurate or suspicious information as soon as you see it. The accuracy of your credit report is a checkpoint you can use to help identify charges you don’t know about, information that isn’t yours, or addresses you haven’t lived at. All of these might be indicators that you’re a victim of identity theft.
  • If you’ve had other credit issues that resulted in a legal action and public record such as a judgment, bankruptcy or foreclosure, it may be in your interest to seek a non-profit credit counselor or an attorney specializing in credit rebuilding for specialized strategic planning.

Be aware that simply paying off a judgment against you doesn’t mean that it disappears immediately from your record. A judgment can remain on your credit report for a maximum of seven years. Each type of record appears for a set amount of time. For example, bankruptcies remain on your Experian credit report for 7-10 years, depending on their type – 7 years for Chapter 13, and 10 years for Chapter 7.

Once you know what having a FICO Score can mean for you, it’s important to also know how your actions and behaviors are considered and displayed within the scoring model. Then you’ll truly be equipped with the information you need to make the best choices for your financial future.

FICO is a registered trademark of the Fair Isaac Corporation.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Experian.

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