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Guest Blog by Stephen Robert


In today’s world of financial turmoil the scariest part is trying to decipher what those three little numbers mean.  No I don’t mean your weight; I’m talking about your Credit Scores!!  A subject that no one wants to talk about and even less people truly understands.  Well today I’m here to teach you how credit works and make the subject a little less scary!

To start with, we as consumers need to understand that there is a HUGE difference between Credit Scores and FICO Credit Scores.  For example, have you ever gone to one of those “free websites” and gotten your scores?  Looks good right?  But then you go to the bank and the scores are 50 to 100 points lower!?!?  “How could this be happening?” you exclaim!  Well, what you see on those websites are just plain old CREDIT scores.  Credit Scores can be put together and generated by any company that wants to build an algorithm and a scoring model.  These CREDIT scores typicall or texty use 2 years worth of credit history data and can have score ranges from 100 to 1000 points.

The vast majority of banks and other consuming lending institutions, on the other hand, use FICO Credit Scores.  FICO, which is the short name for Fair Isaac Corporation, is the algorithm that most banks in the United States use to determine credit worthiness.  The FICO scoring algorithm analyzes 7 years worth of credit history data and has a scoring range of 300 to 850.  These differences in the algorithms lead to significant differences in the scores.

“So how can I see my FICO Credit Scores?”  You have two options.  If you are trying to qualify for a home loan you can have a mortgage bank or broker pull your FICO scores.  However, this will count as an inquiry and may bring your score down.  The other option is to go to www.myfico.com, the official FICO website, and purchase your scores.  Although you have to pay for them, it will not count as an inquiry and it will not affect your score in any way.  This is the only website that gives you the same information that a bank uses.

Now that you have your FICO credit scores in hand, you may be trying to figure out what it all means.  The FICO scoring algorithm has 5 components that make up the FICO scores.

  • 35% – Past Delinquencies:Past due, late payments, charge-off, collection, judgments, liens, etc.
  • 30% – Debt Ratio: How much money you owe vs. your limit.So if you have a card with a $1000 limit and you owe $900, you are at 90% debt ratio.That high percentage utilization will bring the score down.
  • 15% – Average age of credit file: If you constantly open new accounts then your average age will go down, bringing your score down.
  • 10% – Mix of credit:Mortgage, HELOC, 3-5 credit cards, car loan, student loans
  • 10% – inquiry:Anytime you apply for financing it counts as a credit pull and may bring down your score.

Thank you.

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Stephen Robert
Owner of Bedrock Credit
Credit Education and Restoration 

47 Woodway Road, #1
Stamford, CT 06907
Office: 203.293.6649
Cell: 617.939.3447
Fax: 888.279.8401