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More about FICO® Scores & Financial Health

More about FICO® Scores & Financial Health

  • Do employers use FICO® Scores in hiring decisions?
  • Are FICO® Scores used in insurance underwriting?
  • Are FICO® Scores unfair to minorities?
  • How are FICO® Scores calculated for married couples?
  • How can I manage my credit and FICO® Score responsibly?
  • What’s the ideal utilization ratio?
  • Will spending less and saving more affect a FICO® Score?
  • Do accounts that are not on my credit reports affect my FICO® Scores?
  • What are the factors of late payments, and how do they affect FICO® Scores?
  • How long will negative information remain on my credit files?

Do employers use FICO® Scores in hiring decisions?

No. While Federal law allows review of credit reports for employment screening, FICO® Scores are not included with the reports.

Are FICO® Scores used in insurance underwriting?

FICO® Scores were designed to help lenders by rank-ordering consumers according to the likelihood they will become at least 90 days late repaying a creditor within the next 24 months. FICO also offers FICO® Insurance Scores, credit-based insurance scores specifically designed for the insurance industry to help predict future auto and home insurance losses.

Are FICO® Scores unfair to minorities?

No. FICO® Scores do not consider your gender, race, nationality or marital status. In fact, the Equal Credit Opportunity Act prohibits lenders from considering this type of information when issuing credit.

Independent research has shown that FICO® Scores are not unfair to minorities or people with little credit history. FICO® Scores have proven to be an accurate and consistent measure of repayment risk.

How are FICO® Scores calculated for married couples?

Married couples don’t have joint FICO® Scores, they each have individual scores. The difference is that when you are single you usually only need to worry about your own credit habits and credit profile.

However, if you and your spouse open a credit account under both your names, the spending and payment behavior on that account will impact both your FICO® Scores.

How can I manage my credit and FICO® Score responsibly?

Higher FICO® Scores are a result of healthy credit behaviors, and the best way to have higher FICO® Scores is to demonstrate healthy credit behaviors over time. Here are a few tips you can follow.

Pay your bills on time. Delinquent payments and collections can have a major negative impact on your FICO® Scores. If you’re behind on payments, get current and stay current.

Avoid collections. Paying off a collection account will not remove it from your credit report. It will stay on your report for seven years.

Keep balances low. It’s okay to use your credit cards, just be careful about using a large percentage of your available credit — high utilization rates can have a major impact on your FICO® Scores.

Do your rate shopping within a short period of time. FICO® Scores distinguish between a search for a single loan and a search for a mortgage, student or auto loan, in part by the length of time over which inquiries occur.

Have credit and manage it responsibly. Ultimately, having a mixture of credit is a good thing — as long as you make your payments regularly and on time. Someone with no credit cards tends to be higher risk than someone who has managed credit cards responsibly.

What’s the ideal utilization ratio?

There is no single utilization percentage that equates to optimal points. Generally, lower utilization means less credit risk and positive affect to FICO® Scores.

Will spending less and saving more affect a FICO® Score?

While putting more money towards savings is usually a good idea, it’s not necessarily going to affect your FICO® Scores. FICO® Scores do not consider the amount of cash you have, therefore the amount of money you save doesn’t affect your FICO® Scores.

As far as spending less, that could have an effect on your FICO® Scores. For example, if you typically use your credit cards for purchases and you don’t always pay off the balance on those credit cards, then you may notice a change in your FICO® Scores. FICO® Scores factor in the balance on revolving credit accounts.

Do accounts that are not on my credit reports affect my FICO® Scores?

Though your FICO® Scores capture a pretty accurate picture of your credit history, not every account is recorded. Your positive rental and utility payment history may not be listed in your credit reports, however not paying these bills on time can have a negative effect on your FICO® Scores:

  • Reported delinquencies: Even though your good payment history isn’t reported, your landlord and utility companies have the right to report delinquencies to the consumer reporting agencies. If the bill continues to go unpaid your account could be turned over to a collection agency. A collection can show up in your credit reports and can be as harmful to your FICO® Scores as the more commonly reported delinquencies on loans or credit cards.
  • Future referrals: The next time you need to move, your potential landlord is likely to require a copy of your credit report and a FICO® Score. They may also want to contact your current landlord to check if you paid your rent on time. Even if you have a high FICO® Score, a potential landlord could choose another candidate if your current landlord reports late or incomplete payments, since people who consistently pay their bills on time appear less risky.

What are the factors of late payments, and how do they affect FICO® Scores?

FICO® Scores consider late payments in these general areas; how recent the late payments are, how severe the late payments are, and how frequently the late payments occur. This means that a recent delinquencies could be more damaging to a FICO®Score than several late payments that happened a long time ago.

You may have noticed on your credit reports that late payments are listed by how late the payments are. Typically, creditors report late payments in one of these categories: 30-days late, 60-days late, 90-days late, 120-days late, 150-days late, or charge-off. While a 90-day late is worse than a 30-day late, the important thing to understand is that people who continually pay their bills on time tend to appear less risky to lenders.

A history of payments is the largest factor in FICO®Scores. Sometimes circumstances cause people to be unable to keep current with their bills—maybe an unexpected medical emergency or losing a job. Creditors and legitimate credit counselors may be able to provide direction to people when they are having trouble responsibly managing their financial health. Late payments hurt scores and credit standing, but paying off late debt before goes to a collections agency will have a positive effect on a score.

How long will negative information remain on my credit files?

It depends on the type of negative information. Here’s the basic breakdown of how long different types of negative information will remain on your credit files:

  • Late payments: 7 years
  • Bankruptcies: 7 years for a completed Chapter 13, and 10 years for Chapters 7 and 11
  • Foreclosures: 7 years
  • Collections: About 7 years, depending on the age of the debt being collected

Keep in Mind: The older the negative item is, the less affect it will have on your FICO® Scores.


FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries.

Redwood Credit Union and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. Redwood Credit Union and Fair Isaac do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating.

FICO® Score and associated educational content are provided solely for your own non-commercial personal review, use and benefit.

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