How Credit Mistakes Can Hurt Your FICO Score

The calculation of the FICO score is a complex process. It is hard to predict what the damage on your credit score will be in case you happen to make a credit mistakes such as late payment or defaulting. Different accounts have different information present on them and the result of a credit mistake will also depend on the information that is already present on your credit report. It is acknowledged that the difference in the credit score because of a credit mistake will also depend on the original credit score. The following are some important FICO patterns that you should remember and understand:

· the higher your credit score is the farther it can fall. A person with a higher credit score will lose more points than a person with a lower credit score for the same credit mistake.

· Bankruptcy will hurt your credit score the most since it will affect several accounts at the same time along with your payment history which forms to defy percent of your total FICO scores.

The following are two hypothetical examples of two people with different FICO scores and how the same credit actions affects them differently.

The person with the 680 score has:

· Six active credit accounts, which consist of three credit cards, an auto loan, a mortgage, and a student loan

· Eight years of credit history

· A 40% to 50% credit utilization

· Two late payments, a 90-day late credit card payment from two years ago and one 30-day late payment on the auto loan one year ago

· No accounts have been sent to collections and there are no public records (bankruptcy, foreclosure, etc.)

The person with the 780 FICO score has:

· Ten active credit accounts, which include seven credit cards, an auto loan, a mortgage, and a student loan

· Fifteen years of credit history

· 15% to 25% credit utilization

· No late payments ever

· No collections or other public records

How Different FICO Scores Respond to the Same Mistakes

FICO then tells us how many FICO points each person would lose if they made any of five credit mistakes.

· Maxing out a credit card, the person with the 680 credit score would lose between 10 and 30 points, while the person with 780 credit score would lose between 25 to 45 points.

· Missing one credit card payment (a 30-day late), the person with 680 credit score would lose between 60 and 80 points, while the person with the 780 credit score would lose between 90 and 110 points.

· Debt settlement, the person with 680 credit score would lose between 45 and 65 points while the person with the 780 credit score would lose between 140 and 160 points.

· Foreclosure, the person with 680 credit score would lose between 85 and 105 points, while the person with 780 credit score would lose between 140 and 160 points.

· Bankruptcy, the person with 680 credit score would lose between 130 and 150 points, while the person with 780 credit score would lose between 220 and 240 points.