Module 3.3: The mystery of credit scores

Learn about the three credit bureaus, FICO vs. “FAKO” scores, how credit scores are calculated, the effects of credit inquiries, and a step-by-step plan to improve your credit score.

Competency: Jump$tart Coalition (2015), Credit and Debt: “Standard 2. Summarize a borrower’s rights and responsibilities related to credit reports” (p. 16).

Introduction to American Personal Financial Literacy, a Udemy course
Module 3.3 video filmed 2016-03-08

Three credit bureaus: Experian, Equifax, TransUnion
When evaluated for new tradeline: hard pulls against 1, 2, or all 3
Mortgages and car loans: typically all 3 bureaus plus extra info
FICO score = acronym for Fair, Isaac, and Company; introduced the score in 1989
FICO model used by all bureaus
FAKO scores = Estimated scores that have no bearing on FICO scores, e.g., Credit Karma
300-850 “classic” range. Above 700 = good, above 750 = very good, above 800 = excellent

Components: 35% payment history, 30% utilization, 15% age of accounts, 10% mix, 10% new credit

WHAT’S MISSING? Utility bills, rent payments, employment history, income, credit limits, and paying your credit card in full versus carrying a balance

Free annual credit report from – NOT FREE SCORES
Some credit cards offer free FICO scores now, such as Discover, Citibank, Barclay, Amex
Can also pay $19.99 per month on for daily updated credit scores
Hard pulls hurt score for 6 months to a year and remain on report for 2 years

New FICO model as of 2015 includes utility payments and address stability, but only for consumers with no existing FICO credit score

By Richard Thripp