Credit Yak

Follow Us

Resources Page

How FICO Scores Work

Your FICO score is calculated by a computer algorithm that evaluates many sources and types of information on your credit report when you apply for credit. By analyzing the information and patterns in your credit profile to patterns in millions of past credit reports, your FICO score provides lenders a consistent and reliable assessment of how risky it may be to lend you money.

The FICO SCORE has a range of 300-850, with 300 representing an extremely high credit risk and 850 representing an extremely low credit risk. When a lender receives a FICO score, key “score factors” are delivered with the score. These key score factors are the top factors that affected the score. Credit Strong provides you with the top two factors that are currently impacting your FICO credit score.

FICO’s research shows that people with a high FICO score tend to:

  • Make all payments on time each month
  • Keep credit card balances low
  • Apply for new credit only when needed
  • Establish a long credit history

The following is a more detailed description of each category provided by FICO, with a detailed breakdown of each category. As you review this information, keep in mind that:

  • FICO scores take into consideration all of these categories, not just one or two.
  • The importance of any factor (a piece of information) depends on the information in your entire credit report.
  • FICO scores look only at the credit-related information on a credit report.
  • FICO scores consider both positive and negative information on a credit report.

DIY Credit Repair: The Go-To Guide For Fixing Your Credit

Hiring a credit repair company to resolve the issues dragging down your credit score can be expensive. According to Forbes, most people pay anywhere from $60 to $200 a month for a minimum of six months while a credit repair service works on fixing your credit. 

Step One
Get Your Credit Reports
To get started with fixing your credit, you’ll need to pull your credit report. There are three major consumer credit bureaus – TransUnion, Equifax, and Experian. The information each bureau has in your profile may not always be the same. In addition to discrepancies on what is in your profile, each bureau calculates your score slightly differently.
Step Two
Make A List
Before reviewing your credit reports, make a list of your existing debts and the details for each. This helps you verify that each of the reported accounts on your credit history belongs there and is accurate. It’ll also come in handy later in the credit repair process when eliminating debt. You might end up pulling out financial records to make sure you’re not missing anything. A lot of information can also be found within your online financial accounts. Make sure you consider credit cards, personal loans, mortgages, student loans, car loans, and collection accounts.
Step Three
Review Your Credit Report
After pulling your credit reports, it’s time to review each one in detail. Use the list you put together in step two to ensure each account recorded on your credit history belongs to you. You also want to check that all the entries contain accurate information. Make sure the account balances and credit limits are correct. Verify the account numbers are all correct as well. Review the payment history for each account listed to make sure on-time payments weren’t recorded as late payments.
Step Four
Dispute Errors
Credit report errors happen more often than you think. According to the Federal Trade Commission, one in four consumers found errors on their credit reports impacting their credit score. Five percent of consumers in the FTC study had errors that caused them to qualify for less than favorable terms on new credit and loans. Don’t let an error cost you extra money in interest and make it seem like you have bad credit.
Step Five
Pay Bills On Time
Once you get errors out of the way, there’s one less thing standing between moving from bad credit to good credit. Next is working on your payment history. One of the keys to DIY credit repair is consistently making your monthly payments on time. Unfortunately there’s no shortcut here – the longer you show good payment history, the better off you’ll be. Your payment history tells potential lenders how likely you are to repay your debts. It makes up 35% of your credit score. When you miss a payment or make a late payment, it can stay on your credit report for seven to ten years.
Step Six
Pay Down Credit Cards
Your credit utilization ratio is worth 30% of your credit score, which makes it the second largest percentage of your score. Your credit utilization rate refers to the revolving credit balances you keep compared to your credit limits. If you have a credit card with a limit of $10,000 and it has a balance of $4,500 you’d have a credit utilization of 45%. Most credit pros suggest having a credit utilization below 10%. When you look at your list from step two, are your credit card balances close to their limit?
Step Seven
Think Before Applying For New Credit
If you’ve gotten this far in fixing your credit, you’ve done a lot of work. Repaying debts, straightening out your monthly payments, disputing errors, and reviewing your credit history with a fine-toothed comb – great job! Don’t ruin your hard work by being careless with new credit applications. Anytime you apply for new credit a lender will perform what is called a ‘hard inquiry.’ The inquiry stays on your credit for two years. It can also drop your credit score up to five points.
Step Eight
Try To Increase Your Credit Limits (To Decrease Credit Utilization)
Other than paying down your revolving debts, there are other ways to decrease your credit utilization. The better your credit utilization is, the closer you are to getting out of bad credit. One of the easier steps to take is asking your credit card issuers for higher credit limits. Many times the approval for this depends on your payment history with the credit card company. Depending on the card issuer, this might also create a hard inquiry. Not for all of them though. If you do get approved for a higher c
Scroll to Top