Do you ever wonder what determines your credit score? The methods of calculating your FICO may differ slightly depending on the credit bureau. When obtaining your score from one of the Credit Bureaus it is important to understand that your score does not come directly from FICO. It is adapted to each bureau and is given its own name: Equifax uses "Beacon", Trans Union uses "Empirica", and Experian uses "Experian/Fair Isaac." These scores are also referred to as your "Bureau Scores."

Since your score is derived from your bureau data, it will change every time your reports change. However your score is calculated, it will always take into consideration many categories of information. No one piece of information or factor determines your score. As the information in your credit report changes, the importance of one or several factors may change in your FICO score. Lenders look at many things when making a credit decision, including your income and the kind of credit for which you are applying.

 

Your score takes into account:

 

How many new credit obligations have recently been assumed?

 

Opening several credit card accounts at the same time can look bad. What FICO looks for is:

 

To what extent is this consumer trying to open new credit accounts?”

How recent were these efforts? How long it has been since you opened a new account? Primary consideration is given to the following:

Number of inquiries in last six months.

 

Number of months since most recent inquiry

There are no good inquiries. Inquiries are typically seen as a request for credit and thus are factored as if you are searching for credit. Every time you fill out one of those credit card applications to get a free t-shirt or hat, you are also getting an inquiry. Every time you fill out an online application for a credit card, or other type of loan, you are getting an inquiry. Too many inquiries look bad. While there are no good inquiries there are neutral inquiries. Neutral inquiries are most often known as:

Consumer initiated - A request for your credit report shows as a consumer inquiry when you run a credit check on yourself. (provided that you don’t call your mortgage broker buddy to pull your report)

Pre-Approval - If a potential lender has viewed your credit reports to determine whether they want to offer you a loan, these are not factored into your score. However, once you fill out a credit application, your full report will be reviewed and a “bad” inquiry will appear on your reports.

Periodic Review - Many lenders will periodically review the credit reports of their current customers to see if there have been any major changes to their credit reports. If the lender discovers that your credit score is now too low for their standards, they may close your account. These inquiries created as a result of the periodic reviews are not supposed to be factored into your credit score.

 

Do you know your FICO score? Your credit card company does, and they're using it to evaluate your every financial move. Anthony Mason reports.

Your Credit Score