This sections lists the different categories of entries on your credit report. Along with each item category is a description, and whether items in that category are helping or hurting you. Where appropriate, the breakdown also describes how to optimize the items in question to help your score the most (or hurt it the least) both in the short term and over the long haul. The background color shows whether the item is a Red (derogatory items, which hurt your score at first, but decay over time) or a Blue (positive, desirable items which start out with little effect, but help you build your credit score over time), and gives a general idea of how potent a Red or Blue each type of item is.
In the case of multiple instances of the same item, each successive occurrence generally counts less. In other words, if you have one revolving account and you add a second, over time this helps your score a lot. A third or fourth account helps some. A fifth and sixth, a little. After that, you're pretty much past the point of diminishing returns.
This same principle holds for Reds, too. Your most recent instance of a given Red hurts you most. A second collection account hurts some, a third a little, and so on, but each one after that hurts less and less. If you're looking to hunt down Reds and remove them, focus on your most recent Red...as per the Law of Reds, it has decayed the least and is therefore hurting you most.
In addition to using straight data from your credit report, the scoring system also computes a couple of variables from that data. After the section on credit report entries is a section on these variables, how they are computed, what effect they have on your score, and how you can optimize them to work for you.
Credit Report Entries
| Description
of Item Data that is included |
How This Item Gets Onto Your Credit Report | The Effect This Item Has on Your FICO, in the Short and Long Term | How to Optimize the Item to Improve Your FICO |
| Revolving
Credit Account (Visa, MasterCard, AMEX, etc.) The date the account was opened, the date it was last active, the issuer of credit, the last reported account balance, and the credit limit (if any) |
You get a credit card. | In the short run, a revolving credit account may be a minor Red, because you usually have to take an inquiry to get it, and opening a new account slightly diminishes your average age of accounts. However, as the inquiry fades and you establish good payment history, a revolving credit account becomes a definite Blue. These accounts remain Blue even after being closed (and remain on your credit report for ten years), but it's better for them to be open. | Make sure you make all payments on time, and keep your balance below 10% of your credit limit. This will help your utilization. Don't cancel a credit card without a good reason--and for goodness' sake try not to cancel your oldest account. Ask for credit limit increases every six months or so. |
| Charge
Cards (some AMEX, some store cards) The date the account was opened, the date it was last active, the issuer of credit, the last reported account balance, and the credit limit (if any) |
You get a charge card from Macy's, Shell, etc. that does not have a Visa or Mastercard logo | Same as above, only many of these cards have no pre-set limit. If they don't, these accounts are not factored into utilization. You can cancel the card and it will remain a Blue for ten years, but not as big a Blue as it would be if it was in use being paid as agreed each month. | Make sure you make all payments on time. Don't cancel a charge card without a good reason. Canceling one of these cards won't hurt your FICO score, but if canceled the account won't help your FICO as much as it could. If your account is closed, your credit report will indicate whether you closed it or the lender did, but this does not affect your FICO score. |
| Installment
Loan (most lines of credit, including car loans) The date the loan was granted, the date it was last active, the issuer of the loan, and the last reported account balance. |
You get a loan or open a line of credit--ask whenever you open a line of credit or get a loan if it is reported to the credit agencies. | Much the same as the above...you may take a small hit on FICO when you first establish the new account, but as you establish a good payment history, installment loans work to improve your FICO. Amazingly, many users report a small drop in FICO after paying off the loan, though this is usually short-lived. Remember that FICO scores are not everything, and when a live person reviews your credit report, a loan paid on time is evidence you have kept current on your financial obligations in the past. | Pay the loan as agreed. Paying the balance off early may result in a slight FICO decrease (go figure), though this is generally short-lived. In any event, FICO won't give you any extra credit for paying early or being ahead on payments. Of course, if you borrowed, say, $28,000 at 18.9%, retiring the debt ahead of schedule may well result in saving enough money on interest payments to justify the small, temporary ding to your FICO. |
| Mortgage The date the mortgage was granted, the date it was last active, the issuer of the mortgage, and the last reported account balance. |
You obtain a mortgage | Mortgages are perceived by FICO scoring as a sign of financial stability. Many users suspect that this is Fair-Isaac's way of doing a little "piggybacking" on the efforts of others: a mortgage is a sign that someone somewhere did an in-depth review of a consumer's finances (using information beyond what FICO scoring has access to) and deemed the borrower worthy of being loaned a large sum of money. As with installment loans, paying off a mortgage may actually lower your FICO somewhat, but equally important is that a paid-off mortgage tells humans reviewing your credit report that you are reliable and trustworthy. | Pay your mortgage payments on time. As with installment loans, you'll not achieve a gain on your FICO score by paying early or being ahead on payments, but when you're figuring interest savings on hundreds of thousands of dollars of principal, don't let FICO considerations prevent you from sending in that extra money each month to retire the loan as far ahead of schedule as possible. |
| Inquiry
(also called hard pulls) The date of the inquiry, and who pulled it. |
You apply for credit | Inquiries exert a slightly downwards tug on your FICO. One or two won't hurt you much, but by FICO logic, if you're applying for a lot of credit, that implies you have financial demands your current income and resources are unable to meet, and therefore you may be slouching toward default. The scoring formula is jiggered so that multiple inquiries over a period of 14 days for home loans count as a single inquiry, so as not to penalize consumers for shopping around. FICO scoring ceases to count inquiries after a year, and after two years they fall off your credit report entirely. | Inquiries are the inevitable by-product of applying for credit...don't let them scare you off of trying to get accounts to build credit. Also understand there is a price to pay for repeatedly applying for credit. If you get rejected for a given card, you may need to set your sights a little lower--don't keep beating your head against a wall of rejection, lest that wall grow thicker and taller. |
| 30-day
late This appears under the history of a loan or credit/charge account. The month(s) the account was late are reported. |
You are between 30 and 60 days late paying a reported account | A 30-day late may seem trivial, but at least in the short run it can cost you 20 to 40 FICO points if your score is around 700. 30-day lates do decay over several months to a year, and after two years likely aren't doing much to lower your score. Still, they are listed for seven years... | Pay on time...if you know you are going to be late, try and contact the creditor to work something out to avoid the late payment being reported to the credit agencies. Try and keep your payments on time, and after six months of on-time payments, try and get the creditor to remove the late payments from your account. |
| 60-day
late This appears under the history of a loan or credit/charge account. The month(s) the account was late are reported. |
You are between 60 and 90 days late paying a reported account | A 60-day late indicates more than an oversight on your part, and can cost you 25 to 50 FICO points if your score is around 700. Because they indicate a higher risk of default, 60-day lates take longer to decay. Note that the effects of a 30 and 60-day late on the same account are not cumulative--on a given episode of lateness, you are dunned once for the maximum lateness. | Pay on time...if you know you are going to be late, try and contact the creditor to work something out to avoid the late payment being reported to the credit agencies. Try and keep your payments on time, and after nine months of on-time payments, try and get the creditor to remove the late payments from your account. |
| 90
or 120-day late This appears under the history of a loan or credit/charge account. The month(s) the account was late are reported. |
You are over 90 days late paying a reported account. | A 90-plus day late indicates serious financial problems, and can cost you 30 to 60 FICO points if your score is around 700. Because they indicate a higher risk of default, 90 and 120 day lates take still longer to decay...usually about three years before they are no longer exerting a significant effect on your account. Note that the effects of a 30, 60 and 90-day lates on the same account are not cumulative--on a given episode of lateness, you are dunned once for the maximum lateness. However, if a 120-day late account charges off or goes into collections, you are dunned twice--once for the late, and once for the collection. | Pay on time...if you know you are going to be late, try and contact the creditor to work something out to avoid the late payment being reported to the credit agencies. Try and keep your payments on time, and after a year of on-time payments, try and get the creditor to remove the late payments from your account. |
| Charge-off This appears under the history of a loan or credit/charge account. For accounts not reported until they charged off (like cell phone and cable TV accounts) the final balance and the company name are reported. Charge-offs can have one of three statuses, "unpaid," "settled," and "paid." This status flag means nothing to FICO scoring, though it may be considered by humans reading your credit report. |
This means a company has closed your delinquent account and counted it as a loss...probably handing it off to a collection agency. | This hits you a little harder than a late, and takes longer to wear off, because it means the creditor in question took a loss and you defaulted completely on your obligation. Charge-offs take about three to four years to decay to near-zero impact, and remain on your account for seven years. Interestingly, FICO is all-but-indifferent to how large a charge-off is...a $10,000 loan you failed to repay will hit only a bit harder and longer than a $117 unpaid phone bill. As with other entries, FICO isn't everything: other creditors in the same class of creditor you defaulted on will tend to view a charge-off more seriously. In other words, if a charge-off involved a store credit card, stores you apply for credit at will likely weigh it more heavily than an auto dealership would. | Try and prevent debts from charging off. On a manual review, an account that went even 120 days past due but was then caught back up again looks a lot better than a charge-off where the company got stiffed. Charge-offs usually get sent to a collection agency. If the collection agency reports the debt (and they will!) you're looking at two damaging Reds on your credit report. Note that paying the company at this point will NOT in and of itself remove the charge-off...you have to enter into a agreement, called a "pay-for-delete," where the creditor removes the charge-off in exchange for payment. The advantage you have here is that companies don't like to engage collection agencies because the collector gets a sizeable "cut" of the debt. This makes them willing to "wheel and deal" with you in most cases...if you act quickly. |
| Collection These are supposed to list the name of the collection agency, contact information, the date of first delinquency, the date the debt was last reported, and the current balance. Collections can have one of three statuses, "unpaid," "settled," and "paid." This status flag means nothing to FICO scoring, though it may be considered by humans reading your credit report. |
This means an unpaid creditor engaged a company specializing in collecting bad debts, to wit, a collection agency. The debt may or may not have been sold outright to the collection agency. | This has about the same effect as a charge-off. However, most collection listings were preceded by a charge-off, so you quite possibly have two Reds for the same debt...and yes, this is perfectly legal (and not uncommon). | If you know a debt has charged off, or you get a notice from the collection agency, act fast to try and prevent that second Red from hitting your credit report. Original creditors are almost always easier to deal with than collection agencies. If you are dealing with a listed collection, and you don't believe the debt is yours, you can do a debt validation demand. The collection agency is then legally obligated to furnish you with proof the debt is yours. If the debt turns out to be yours, you can try for a pay-for-delete. Otherwise, paying the collection does not remove it from your credit report, and does not help your credit score. Contrary to what some collectors will tell you, there is no legal reason whatsoever a collection agency can't remove a collection from your credit report. If a collector tells you that, they're either misinformed or they've been trained to lie to get you off the line. Demand to speak with a supervisor. A telephone should only be used for initial communication to get contact names and addresses at the agency--after that first conversation, conduct all business with collection agencies in writing. |
| Repossession
or Foreclosure The date the event happened, and how much you left the lender on the hook for. In the case of cars, what typically happens after a repossession is that the car is sold at auction, and that amount plus any payment on the principal of the loan are subtracted from the amount of the loan, and the amount leftover (known as a "deficiency" is reported). |
You had a car repossessed (voluntary or otherwise), or a home foreclosed on. | This has about the same effect as a charge-off or collection: a fairly sizeable Red. As with charge-offs, the amount has little impact on this entry's Redness. Non-FICO wise, this entry will also hit harder in the eyes of anyone in the same class of creditor you defaulted on. | Try to avoid repossession and foreclosure. Note that voluntary and forced repos hit your credit score just as hard, though a voluntary repo looks slightly better on a manual review. If you've made a strategic decision to walk away from your mortgage because you've lost substantial equity and are now upside-down, bear in mind this will haunt you credit-wise for seven years, and if you're looking to buy back into the housing market when it hits bottom in a year or two, you may not be able to secure a mortgage at all. If you don't want to lose your home, remember banks are willing to work with you to prevent a foreclosure--in today's market, they're liable to end up sitting on that house for a long time or selling it at a loss. If there's a reasonable prospect your inability to pay is temporary, your bank may well be willing to go the extra mile. |
| Judgment These list the date of the judgment, the amount, and whether it is paid or unpaid...as you've probably guessed by now, FICO scoring doesn't care if you pay a judgment or not. |
A case involving money went to court, you lost, and a judge awarded the plaintiff money. | This counts as a public record. While they doesn't really hit your FICO any harder than a collection, judgments can be the kiss of death to many prospective creditors like mortgage bankers. As with most other debts, if you're in for a penny, you're in for a pound: FICO scoring counts a $200 judgment almost as heavily as a $20,000 judgment. | Try and prevent financial issues from getting to a courtroom. A judgment can add a third Red over a single debt: first the debt charges off (Red #1), then gets picked up by a collection agency and re-reported (Red #2), and then the collection agency secures a judgment, and the court will RE-re-report the debt (again, this is perfectly legal) for Red #3. |
| Tax Lien | You owe taxes to the IRS, the State, or city or county, and they placed a lien on your assets, reporting it to the credit agencies. | This is functionally similar to a judgment, and likewise rather scary to anyone thinking of loaning you money. | Try and head these off at the pass by working out a payment arrangement with the tax agency in question. If it's too late, pay the lien as quickly as you can, then ask the agency to remove it (many will) from your credit report. |
| Child Support Arrears | You fall behind on child support payments | This is usually, though not always, reported as a judgment. Some states (including California) report child support as an installment loan, so it is theoretically possible for a child support "account" to actually be a Blue. However, fall behind and it is reported as 30, 60, 90, etc. days late. | If you fall behind, most child support agencies have a Mob-like mentality, so you may not be able to do anything to avoid your arrears being reported by these government wiseguys. |
| Bankruptcy | You file Chapter 7 or 11 bankruptcy | This is the worst event for your credit score, doing anywhere from 75 to 200 or so points of damage, as a bankruptcy indicates a total financial collapse on your part. Bankruptcies are also the slowest Red to erode...but they do decay over the course of years. There is life after bankruptcy--many filers report getting their FICO scores back up into the mid-600s in as short as two years after a bankruptcy discharges. | Fix the situation that led to filing bankruptcy in the first place. Once you're solvent, get right back into the saddle again and get some Blues to balance out this evil king of Reds. The silver lining here is that a bankruptcy permanently eliminates dischargeable debts, and lets you get back on your feet. This is yet another reason to have and maintain credit card accounts in good standing...if you manage to pull through a bankruptcy with at least three or four steady Blues, you will recover far more rapidly. |
| Soft Pulls (where you pull your own credit report) | You pull your own credit report | These do nothing to your FICO, creditors reviewing your credit report don't even see them, and soft pulls drop off after two years. | Nothing to manage...pull your credit whenever you see fit, as often as you like, and it has no effect on your FICO score. |
This rounds out the list of raw data (credit report entries) considered by the scoring system. Now come the variables computed using that data. Variables that have a direct relationship to FICO (in other words, increasing the variable increases your FICO score) are Blues (highlighted accordingly). Variables with an inverse relationship to your score (in other words, increasing the variable decreases your score) are Reds, and are highlighted accordingly.
More Inputs
II. Variables Calculated From Credit Report Entries
