The Strangest Little-known Fact About Your Credit Score

iStock_000002294619XSmallYou know your credit score matters – it’s the yardstick by which you are evaluated and judged by lenders, landlords, employers, and even would-be spouses.

The FICO credit score assigns each consumer a score from 300 to 850. And while they don’t reveal the mathematical formula used to assign that score, it’s common knowledge that your use of credit determines your score.

Consumers wanting to improve their credit scores have long wondered how much different activities would raise or lower their scores. And no one will say, perhaps because the answer is: “It depends.”

The truth is, the impact that an activity will have on your credit score depends upon which scorecard you are on.

FICO scoring uses 12 different scorecards that categorize consumers into groups of their financial peers. If you’ve had a bankruptcy you’re on one scorecard, while you’ll be on a different scorecard if you’ve had late payments but no bankruptcies. If you have a clean credit record but little credit use, you’ll be on a different scorecard from a consumer with clean credit and extensive use.

The number of points assigned to a given activity varies depending upon the scorecard you’re on. A credit application will “cost” a young person with little credit history a different number of points than it will cost a consumer who has been using credit for 30 years.

While this alone seems ridiculous, it gets worse. Your score is partially determined by comparison to others on your scorecard. So here’s what happens:

Say you’ve had a bankruptcy. You’ll be on a scorecard with others who have had a bankruptcy. Say also that you’ve worked hard to build and maintain a good credit record ever since. Your score might be at the top limit allowed for people on your score card. Then you reach the magic 10 year mark and the bankruptcy comes off your credit report.

It seems like that would be a good thing – that it would raise your score. But instead it could lower it, because you’ll automatically be moved to a score card with people who have not had bankruptcies – and you might not compare as favorably. You move from the top of one group to the bottom of another – and your credit score goes down.

The good news is that by maintaining good financial habits you can eventually rise to the top of the next scorecard.

In the meantime, do keep track of your credit scores on a regular basis. Get your free credit report with scores today and see where you stand. Then keep working toward a score of at least 760 – which will get you the best rates next time you need credit.

Author: Marte Cliff

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Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.