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Credit Scoring: The Fickleness of FICO

Plastic Prison • Credit Tips And Tricks • Get Control of What You Owe • No Easy Way Out Of Credit Card Debt • Penalty Fees, Interest Rate Hikes, and Misleading Contracts Await Credit Card Shoppers • "Convenience Checks" Carry a Heavy Price Tag • New Forms of Credit Scoring • Understanding Credit • Credit Bureaus: Who You're Dealing With • Reading Your Credit Report • Credit Scoring: The Fickleness of FICO • Credit Knowledge: A Long, Hard, Struggle --- News • House to Hold Hearings on Credit Card Interchange Fees • Confronting a 'Culture Of Debt' • Feds Back Tighter Credit, Debit Card Rules • Director Takes Aim at Banks in New Film, 'Overdrawn!' • Floating Due Date Snags Chase, Citibank Customers • Congress Takes On Credit Card Interchange Fees • Consumers Lobby Congress to End Credit Card Abuses • Congress Takes On Credit Card Abuses • Credit Counselors Go Risque With their Message • Credit Card Debt Climbs Worldwide • As Credit Delinquency Rises, So Does Credit Relief Scrutiny • Congress Calls Out Credit Card Companies • College Students Warned Against Credit Card Trap • High-Fee, Low-Credit Charge Cards Prey Upon the Poor • Senate Bill Would Curb Abusive Credit Card Practices • Fed Proposes Tighter Controls On Credit Card Rates • Senate Panel Slams Abusive Credit Card Practices • Congress Targets Credit Card Companies For Reform • Report Finds High Debit Card Overdraft Fees • Bank, ATM Fees Continue To Rise • Credit Card Fees Rise, Disclosure Statements Inadequate • Free Credit Reports Mark First Anniversary • Credit Card Debt Sinking Many Older Consumers • Experian Launches New Credit Score; Critics Unimpressed • Credit Cards Target Students • Credit Card Companies Fear "Perfect Storm" • Credit Bureaus Introduce New Scoring System • More Banks Using Universal Default to Hike Interest Rates

The most important aspect of a credit report is credit scoring. Your credit score is a number (usually three digits) that indicates your overall ranking and potential to lenders, creditors, et cetera. The score is created from a mathematical formula developed by the Fair Isaac Corporation, or "FICO score" for short.

For reasons known only to them and the Powers That Be, each credit agency uses its own variant on the FICO score, calculated in essentially the same fashion. Therefore, you can have three or four different credit scores -- a different score with each CRA, and yet another differing score from FICO. The Equifax agency recently entered into a partnership with the FICO site, myFICO.com, to provide the most accurate scoring record possible via their "Score Watch" product, but even their combined score can differ from Equifax's own reported scores.

The scores between FICO and the three agencies can vary widely -- I've seen differences of 25 to 100 points between individual scores. If the notion of a completely random system of mathematical calculations that has no set standard, and is governed by one company only, frightens you, well, it should.

Your credit score can change daily, based on a multitude of factors. Inquiries into your report can raise or lower it, as mentioned earlier. How often you use your credit card, or even if you have one, can impact your score. Being turned down for a loan or credit can cause your score to take a serious dive, particularly if you apply for too many loans or cards in too small a space of time.

If you want to get a rough estimate of your credit score without having to pay through the nose, many of the aforementioned CRA's and consumer sites offer "free scoring estimators" that provide just that -- a rough estimate of your credit score based on the data you input. Keep in mind that these estimators often have pre-selected conditions of data. Bankrate's scoring estimator, for instance, presumes that you already have credit cards and/or loans to pay off, so if you don't, it won't provide you with anything resembling an accurate score.

Next: Credit Knowledge -- A Long, Hard, Struggle

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