What Makes a Credit Score Rise or Fall?
OUR financial decisions can affect your credit score in surprising ways. Two credit-scoring simulators can help consumers understand the potential impact.
The Fair Isaac Corporation, which puts out the industry-standard FICO scores, offers the myFICO simulator. A consumer with a score of 707 (considered good) and three credit cards would be likely to add or lose points from his score by making various financial moves. Following are some examples:
? By making timely payments on all his accounts over the next month or by paying off a third of the balance on his cards, he could add as many as 20 points.
? By failing to make this month's payments on his loans, he could lose 75 to 125 points.
? By using all of the credit available on his three credit cards, he could lose 20 to 70 points.
? By getting a fourth card, depending on the status of his other debts, he could add or lose up to 10 points.
? By consolidating his credit card debt into a new card, also depending on other debts, he could add or lose 15 points.
The other simulator, the What-If, comes from CreditXpert, which designs credit management tools and puts out its own, similar credit score. A consumer with a score of 727 points (also considered good) would be likely to have her score change in the following ways:
? Every time she simply applied for a loan, whether a credit card, home mortgage or auto loan, she would lose five points. (An active appetite for credit, credit experts note, is considered a bad sign. For one thing, taking on new loans may make borrowers less likely to repay their current debts.)
? By getting a mortgage, she would lose two points.
? By getting an auto loan or a new credit card (assuming that she already has several cards) she would lose three points.
? If her new credit card had a credit limit of $20,000 or more, she would lose four points, instead of three. (For every $10,000 added to the limit, the score drops a point.)
? By simultaneously getting a new mortgage, auto loan and credit card, she would lose seven or eight points.
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