How Mistakes Affect Your Credit Score

December 8, 2009 | By Kelley Koehler | Filed Under Loans and Financing

Interesting article about credit scores from my lender friend Justin McHood in Phoenix.

FICO (the people who created the industry standard in credit scoring) released information on how much your credit score may go down when something bad happens – something like maxing out a credit card, having a late payment, or having a foreclosure on your record.

You’ll notice that the higher your score, the more you get penalized. For all but one of the credit mistakes listed, the minimum smack-down for people with high credit scores is more than the potential maximum for those with lower credit scores.

FICO says that’s because a lower credit score already reflects riskier past behavior. One more risky behavior is not quite as significant to those with lower scores than to those with high credit scores.

But if that is true, then having a high credit score means you have a history of non-risky behavior. So shouldn’t having one of these credit mistakes happen be considered an exceptional event?

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