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The Points Game and Your Credit Score

August 15th, 2016 · No Comments


One of the most popular questions asked about credit is “How many points will I lose/gain if X happens?” If you were trying to repair your credit, it would be good to know what “baddies” on your credit report are doing the most damage and target those items first. Unfortunately, it’s not possible to absolute number, as the credit-scoring model is both a secret and takes into account many other things on your profile besides the occurrence of a single event. However, it’s possible to deduce approximate losses and gains from the various articles and press releases that FICO has put out over the year.
The credit-scoring model is based on 5 factors:

1. Your payment history
2. Your revolving account balances
3. The average age of your credit accounts
4. Your mix of credit
5. How much new credit you have.

First of all, let’s see how much your score is affected by your payment history:

Type of event Starting FICO score Number of Points Lost
Bankruptcy 780 220 – 240
Bankruptcy 680 130 – 150
Foreclosure 780 140 – 160
Foreclosure >680 85 – 105
Short Sale 780 40 – 50
Short Sale 680 105 – 160
30 day late 780 90 – 110
30 day late 680 60 – 80
90 day late 780 110- 120
90 day late 680 60 – 80
Collection 780 100
Collection 680 50 – 80
Charge Off (paid) * 780 60 – 80
Charge Off (paid) * 680 20 – 50
Charge Off (unpaid) 780 105 – 160
Charge Off (unpaid) 680 50 – 80
Repossession (no balance)* ★ 780 60 – 80
Repossession (no balance) * ★ 680 20 – 50
Repossession (balance)** 780 80 – 120
Repossession (balance) ** ★ 680 50 – 80
Debt Settlement 780 105 – 125
Debt Settlement 680 45 – 65
Judgment (unpaid or unpaid)* 780 105 – 160
Judgment (unpaid or unpaid) * 680 50 – 80

* Your car was sold at the remaining balance or more than the remaining balance
** Your car was sold, but a deficiency balance remains.
★ Fico score drop was estimated by reviewing user posts on

The credit-scoring algorithm is proprietary to all who formulate it, namely, FICO and Vantage. As you can see in the chart above, even a slight misstep can cause those with an excellent credit score (for our purposes here, it’s 780). For those with a credit score below 700, there is probably one or more other factors in your credit score that is driving it into the “good” range (for our purposes, this is 680).
Again, the chart above only approximates what your credit score drop would be if any of those events occurred. John Ulzheimer, credit expert for Credit Sesame says, “It’s not as simple as just assigning a number to those incidents. That’s not how credit scoring works. However, judgments and repos are equal derogatory events to whatever the impact, it would be the same assuming the age of those 2 events are the same and they’re added to identical credit reports…which of course would never happen because no 2 reports are the same.
“For some people adding a repo or a judgment would be meaningless if their credit reports are already polluted with derogatory information. For others, the impact would be catastrophic. Generally speaking, people with good scores are going to see a larger score drop than someone with already poor scores. This is because no derogatory event has a specific point value. “
A key takeaway from Ulzheimer’s statement is that the above charts are approximations, and indeed there is no guarantee that if you have an event listed in the chart above that your score drop will fall into the ranges listed. The other take away is that everyone’s credit report is unique. Buried in consumer reports are metrics like:

  • the amount of debt, in the case of repossessions, unpaid charge offs, foreclosures, and settlements
  • whether or not a balance is still owed on an account,
  • the amount of time the problem with your credit lasted, and
  • how long has it been since the credit problems began.

The more derogatory marks that are on your credit report, the less effect an individual occurrence has on your credit.

Maxing Out Credit Cards

If you max out a credit card, you will experience about a 25 – 45 point drop in your credit score. You will see this drop even if you pay off your credit balances each month: your statement date is the date that a credit card company reports your balance to the credit bureaus. In fact, the higher your starting score, the more a maxed-out card can hurt you. Someone with a so-so score of 680 stands to lose only 30 points, at most, says FICO.

Short Length of Credit History

You average age of accounts (AAoA) is 15% of your credit score and it’s based on the amount of time your accounts have been open. It is not the amount of time you’ve had a credit history, though these two things can be closely related. Therefore, if you are new to the credit world, you will not be able to get a perfect credit score.

Average Account Age: How People with Excellent, Fair Credit Scores

Credit Score Average Age of credit account Oldest account age Newest Account age
650 – 699 7 years 12 years 6 months
750-850 11 years 25 years 2 years

Your Mix of credit

Barry Paperno, credit-scoring expert, says that your mix of credit has the least impact of any of the 5 criteria, making up only 10% of your score. “FICO’s research has found that, all things being equal, consumers with a ‘mix’ of credit types on their credit reports tend to be less risky than those who have experience with only one type of credit,” says Paperno, “it’s best to consider this category as more of a ‘good to know’ than a ‘got to know’”.

Amount of new credit

The amount of new credit you have comprises 10% of your credit score, but it has more impact than the mix of credit. New credit is calculated by considering factors about your accounts that include:

  • How many accounts have been opened in the past six to 12 months
  • How many credit inquiries have been made recently.
  • How long ago you opened a new account
  • How long ago you had a credit inquiry.

Hard points numbers: it’s widely accepted that merely having an inquiry on your credit report can cost you up to 5 points.


Tags: credit and debt

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