FICO Discloses How Mistakes Affect Your Score

You know that paying your credit card late or going over the credit limit can affect your credit score. But now FICO reveals just how damaging mistakes can be.

FICO assigns consumers a three-digit number between 300 to 850. The higher your score the better, and the more sensitive you’ll be to mistakes. Those with good or excellent credit — so-called prime borrowers — put more points at risk with each mistake.

CreditCards.com put the cost of damage into dollar perspective by running some scenarios:

For a consumer who started with a FICO score of 780:

  • Following a 30-day late payment, the consumer’s car loan rate would jump nearly 3 percent, costing the borrower $26 more each month.
  • Following a debt settlement, the consumer would pay as much as $109 more each month on a home mortgage.

For a consumer who started with a FICO score of 680:

  • Following a 30-day late payment, the consumer would pay $41 more each month for a car loan.
  • Following a 30-day late payment, the consumer would pay as much as $95 more each month on a home mortgage.
  • Following a debt settlement, the consumer would no longer qualify for a credit card.

Previously FICO has been secretive about their formulas and how they affect consumer credit by revealing this information FICO hopes that consumers will understand how their actions contribute to credit standing.

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