Female Businesswoman meeting with client

FICO & The 8 Secret Credit Scores

Calculating FICO
35% – Payment History
30% – Amount of Debt
15% – Length of History
10% – Types of Accounts
10% – New Accounts and Inquiries 

Transaction Scores

Transaction scores, are scores used by your credit card company. Every time you use your credit card a transaction score is calculated and is part of what is used to determine if a charge will be approved. It is also used to detect fraudulent activity on your account.  

Behavior Scores

A “Behavior Score” is used by your creditors to analyze the use of our credit accounts. It lets a creditor know how you are utilizing that account, where you shop and how you pay your bill. Do you carry a balance? Are you generating profit for their company? Are you headed for a financial crisis? It is also used by your creditors in their determination to raise or lower your credit limits.

If a creditor sees that your balance has risen but you are now only making your minimum payments, don’t be surprised if they lower your limit. This is what your behavior score was created for, to analyze the behavior of your account so that companies that issue credit to you can protect their interest. 

Collection Scores

Did you know that collection companies have a score that they are calculating just for you? Most of us have had a collection account at some point in our life. What you may not be aware of is that collection companies use a “Collection Score” to analyze your current financial situation, determine the likelihood that you will pay them and if you should be at the top of their call list.

Application Scores

Have you ever applied for a credit card and been denied even though your credit score was high? If this has happen to you then chances are your application score was low.

As you may have figured out by now, you have a lot of different credit scores that are being calculated everyday. Your “Application Score” is just one of them and it can play a major role in you being approved for a new loan or credit card, and what terms or interest rate will be offered to you. 

Improving Your Application Score

“Application Scores” are based on information which includes; how much you earn, how long have you been with your employer and how long have you been at your current address. 

Although credit issuer’s can all have their own methods to calculate your “Application Score” the best way to improve your score is to make sure you fill in all the blanks on the application. Leaving out information on the application can count against you and cause your application score to go down.

Bankruptcy Scores

It is always a good thing to have a high credit score. However, the same is not true for your “Bankruptcy Score.”

When a lender considers extending you credit, they will also calculate a score to determine the likelihood that you will file bankruptcy. Because of the changes in bankruptcy law and the tremendous number of bankruptcies filed since 2005 lenders have become much more cautious when extending credit.

Lowering Your Bankruptcy Score

Here are a few tips to help keep your “Bankruptcy Scores” low and your financing easier. 1. Don’t apply for, or open too much credit in a short period of time. 2. Make your payments on time every time. One of the factors the scoring model is looking for is recent delinquencies. 3. Keep the balances on your credit card accounts low. The typical bankruptcy consumer statistically utilizes 65.99% of their revolving credit. 

Response Scores

Have you ever asked yourself, “why am I getting so many credit card offers?” The answer is your “Response Score.“

Credit card companies use “Response Scores” to determine how likely you are to respond to their offers and whom to target. This gives them the ability to design and implement more effective strategies to grow their customer base and design cross-marketing campaigns to increase their revenues. So the next time you start receiving credit card offers in the mail you can say, ah, “Response Score  

Revenue Score

The “Revenue Score” is designed to predict your spending behaviors for the next 12 months and allows companies to expand offers, increase mailing campaigns and identify which clients have the greatest likelihood of increased usage for low-balance accounts.  

What is a Revenue Score Designed to do?

A “Revenue Score” is actually designed to tell a company how much potential profit they can make from extending credit to you.

Companies have been using what they call dual strategies for years. Simply put, it means that they are not just looking at your credit score. They are looking at your credit score and one or more of the other secret credit scores at the same time in their decision to give you a loan or extend credit to you. 

Attrition-Risk Scores

 An “Attrition-Risk Score” looks for indications that you may be shopping around. Example: You have a credit card that you have used regularly in the past and you have kept a balance on the card that made the credit card company profitable. But now, you are continually lowering the balance, your spending less with that card than you did in the past and you have an inquiry from a new company. Your “Attrition-Risk Score” just changed.  

Making the best of Attrition-Risk

This kind of change may spur your credit card company to send special offers to you, raise your limit, send you convenience checks or upgrade your account. They want to keep your business, especially if you are a low risk customer that always pays on time. 

Understanding how credit works and the scores that are being calculated to determine your credit worthiness is important.  Arming you with that knowledge is our goal!

-Jacklyn Shapiro