How Are Credit Scores Calculated? – Part 1 of 6

Fair Isaac (FICO) and Vantage Scores keep their formulas a closely guarded secret. This can be very frustrating for consumers when they see comments on their credit report like “to many revolving debt accounts” and not know exactly what that means.

Payment History Р1 of 5 categories that determine a credit score

35% of a credit score is determined by payment history. This is because lenders want to know a person’s payment history – past and present. This category can be broken down into 3 subcategories:

  1. Recency – This is the last time a payment was late. The more time that passes, the better.
  2. Frequency – One (1) late payment looks much better than a dozen (12).
  3. Severity – The “Hierarchy of Madness” so to speak, rest on the logic that a payment 30 days late is not a serious as a payment 60 or 120 days late. Collections, tax liens and bankruptcies are credit score killers.

Part 2 through 6 will follow in the near future.

For questions, contact Bill Spragg, bspragg@LcaNow.com , 281 804 3333 or Harry Bradley, hbradley@LcaNow.com , 713 419 7151

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