FICO Reveals Penalties…Sort Of
According to MSN MoneyCentral, FICO has finally revealed information on how they calculate penalties…sort of. For years, people have wondered exactly how FICO figures out scores. Now they can get a better idea, but of course FICO is not going to reveal their whole process.
The information from MoneyCentral states that a person with good credit may get penalized more than a person with a bad credit score for the same offense. For instance, MoneyCentral shows a graph with FICO reports stating that a person with a score of 680 who maxes out a credit card gets penalized in the range of 10 to 30 points. In this same graph, a person with a score of 780 would get penalized 25 to 45 points.
For a bankruptcy, the person with the higher score of 780 could get up to 240 points deducted from his or her credit score, quickly transforming the great credit score to one that is not so good, at 540. In turn, the person with a 680 score could get a deduction of up to 150 points, leaving him with a credit score of 530.
Possible translation of this is that people with the higher scores get deducted more because they should know better. However, number logic and other factors may say different. Those with higher scores likely also have more credit cards, possibly more vehicles, a larger home and so on.
The other thing to remember is that even people with the same credit score may have completely different credit situations. One may have a large number of credit accounts, while another may not. There are many different credit situations because not everyone will have the same circumstances. That’s why there’s such a range and also probably the reason that FICO does not fully reveal everything about how they factor credit scores. However, looking at the above scenarios can certainly be helpful in determining what possible penalties may be faced in certain credit situations.
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