How your credit score is derived

Developed in 1956, a Fair Isaac Corporation Score (commonly called the FICO Score) is a three digit number ranging from 300-850 and is calculated according to the following risk factors:

Payment History (35% of score)
– Payment information on many types of accounts
– Public record and collection items
– Details on late or missed payments — specifically:
*how late they were
*how much was owed
*how recently they occurred
*how many there are

Amounts Owed (30% of score)
– Amount owed on all accounts
– Amount owed on different types of accounts
– Whether you are showing a balance on certain types of accounts
– How much of the total credit line is being used
– How much of installment loan accounts is still owed

Length of Credit History (15% of score)
– How long your credit accounts have been established, in general
– How long specific credit accounts have been established
– How long it has been since you used certain accounts

New Credit & Inquiries (10% of score)
– What kinds of credit accounts you have and how many of each
– Total number of accounts you have

Types of Credit (10% of score)
– How many new accounts you have
– How long it has been since you opened a new account
– How many recent requests for credit you have made

Once the borrower’s score is derived, most lenders use a standard ‘grading’ system to categorize the results. While some lenders develop their own systems for classification of scores, below is a general guide for score interpretation. Used as a general reference, this can help you interpret the credit score you’ve been given based on a grading system typically used in schools:
760+ FICO = A+
740-759= A
Below 600=F

Under the Fair Credit Reporting Act, you have the right to dispute the accuracy and comprehensiveness of information in your credit file. Unless the credit reporting agency believes a dispute to be “frivolous or irrelevant,” it must reinvestigate and record the current status of the disputed items within a “reasonable period of time.” A disputed item must be deleted if the credit reporting agency cannot verify it. The credit reporting agency also must correct any erroneous information in the report. Any incomplete item must be completed by the credit reporting agency as well.
In the instance that your file indicates that you were behind on making payments for a period of time but neglects to record that you currently are on time with payments, the current agency must confirm you are now current with these payments. The credit reporting agency also will have to delete any file shown to belong to another person. Any report recipient who has checked your file in the past 6 months must receive a notice of correction from the credit reporting agency if you request it.
You send a brief statement to the appropriate credit reporting agency when you feel there are items in your credit profile that deserve further explanation (such as an account that was paid late due to the loss of job, military call-up, or unexpected medical bills). The information will be placed in your credit profile and will be disclosed each time it is accessed.
Fair Isaac Resolution Resources Helpline (800) 777-2066