financialcounselor

How Financial Mistakes damage a Credit Score

In When it Comes to Borrowing Money... on November 4, 2012 at 5:17 pm
POTENTIAL DAMAGE FOR A CREDIT SCORE BASED ON VARIOUS FINANCIAL MISTAKES
 Nobody knows exactly how a FICO score is computed except for the people who do the computing. It is often said that FICO guards their formulas as zealously as Coca-Cola guards the formula to its soda. The reason is simple, it’s a trade secret, and an extremely valuable one. Just like the recipe for KFC chicken.
But in the fall of 2009, amid the public anger directed at the credit and financial industries, FICO disclosed for the first time ever the numeric effects that things such as bankruptcy and missed payments have on a FICO credit score. Until then, FICO never would reveal just how many credit score points a person stood to lose for even the most common financial mistakes.
According to one news report, FICO disclosed that a person with a credit score of 680 would see their score drop by the following number of points based on the following mistakes:
Bankruptcy – 130-150 points
Foreclosure – 85-105 points
30 days late on a payment – 60-80 points
Debt Settlement – 45-65 points
Maxed out credit card – 10-30 points
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