Access to Credit

Does a FICO® Score alone determine whether I get credit?

No. Most lenders use a number of factors to make credit decisions, including a FICO® Score. Lenders may look at information such as the amount of debt you can reasonably handle given your income, your employment history, and your credit history. Based on their review of this information, as well as their specific underwriting policies, lenders may extend credit to you even with a low FICO® Score, or decline your request for credit even with a high FICO® Score.

How is a credit history established?


There are a few ways to establish a credit history, including the following.

  • By applying for and opening a new credit card, a person with no or little credit history may not get very good terms on this credit card—such as a high annual percentage rate (APR). However, by charging small amounts and paying off the balance each month, you won’t be paying interest each month so the high APR won’t hurt your financial position.
  • Those unable to get approved for a traditional credit card may be able to open a secured credit card to build credit history, provided the card issuer reports secured cards to the consumer reporting agency. This type of card requires a deposit of money with the credit card company. Charges can then be made on the secured card, typically up to the amount deposited.

With both traditional and secured credit cards, keeping balances low, paying off balances each month, and not missing payments are important for responsible financial health management.

How can I better understand my financial health?


Your FICO® Scores reflect credit payment patterns over time with more of an emphasis on recently reported information than older information. Below is some general information about shaping your financial future:

  • The key score factors provided with your FICO® Score represent the main areas of credit practices that impact your financial health.
  • Consumers with a moderate number of credit accounts on their credit report generally represent lower risk than consumers with either a large number or a very limited number of credit accounts. Opening accounts solely for a better credit picture probably won’t impact a FICO® Score and, in some instances, may even lower the score.
  • People who continually pay their bills on time tend to appear less risky to lenders. Collections and delinquent payments, even if only a few days late, can have a major negative impact on your FICO® Scores.
  • People who stay caught up on amounts due and continue to pay their bills on time are generally viewed as less risky to lenders. Especially after missing payments, getting back on track with paying bills on time will have an impact on your financial health. Older credit problems have less impact on your FICO® Score than recent ones, so poor credit performance won’t haunt you forever. The impact of past credit problems on your FICO® Scores fades as time passes and as recent good payment patterns show up on a credit file. And your FICO® Scores weigh any credit problems against any positive information that indicates that you’re responsibly managing your financial health.
  • Creditors and legitimate credit counselors may be able to provide direction to people who are having trouble responsibly managing their financial health. Seeking assistance from a credit counseling service will not hurt FICO® Scores.
  • High outstanding credit card debt can negatively impact your FICO® Scores.
  • Paying down total revolving (credit card) debt, rather than moving it from one credit card to another, is a responsible financial health management practice.
  • Most public records and collections stay on a person’s credit report for no more than seven years—though bankruptcies may remain for up to 10 years. However, as these items age, their impact on a FICO® Score gradually decreases, and people can re-establish a good credit history with ongoing responsible financial health management.
  • People who show moderate and conscientious use of revolving accounts, such as having low balances and paying them on time, generally demonstrate responsible financial behavior. Having credit cards and installment loans (and making timely payments) will positively impact financial health. People with no credit cards, for example, tend to be higher risk than people who have managed credit cards responsibly.
  • Typically, the presence of “inquiries”¾the number of requests from a lender for your credit reports when you apply for loans¾on a credit report has only a small impact, carrying much less importance than late payments, the amount owed, and length of time a person has used credit. FICO® Scores consider recent inquiries less as time passes, provided no new inquiries are added. Too many “inquiries can negatively affect a FICO® Score. However, FICO® Scores treat multiple inquiries from auto, mortgage, or student loan lenders within a short period of time as a single inquiry because when purchasing a house or a car it is customary to shop for the best rate, resulting in more inquiries.
  • Closing unused credit cards as a short-term strategy to increase a FICO® Score can actually have the opposite effect and lower a FICO® Score.
  • For people who have been using credit for only a short time, opening a lot of new accounts too quickly can lower a FICO® Score.

How long will negative information remain on my credit files?

It depends on the type of negative information. Here’s the basic breakdown of how long different types of negative information will remain on your credit files:

  • Late payments: 7 years
  • Bankruptcies: 7 years for a completed Chapter 13, and 10 years for Chapters 7 and 11
  • Foreclosures: 7 years
  • Collections: Generally, about 7 years, depending on the age of the debt being collected
  • Public Record: Generally 7 years, although unpaid tax liens can remain indefinitely

Keep in Mind: For all of these negative items, the older they are the less impact they will have on your FICO® Scores. For example, a collection that is 5 years old will hurt much less than a collection that is 5 months old.

Do FICO® Scores change that much over time?

It’s important to note that your FICO® Scores are calculated each time they’re requested; either by you or a lender. And each time a FICO® Score is calculated, it’s taking into consideration the information that is in your credit file at a particular consumer reporting agency at that time. So, as the information in your credit file changes, your FICO® Scores can also change.
How much your FICO® Scores change from time to time is driven by a variety of factors such as:

  • Your current credit profile—how you have managed your financial health to date will affect how a particular action may impact your scores. For example, new information in your credit file, such as opening a new credit account, is more likely to have a larger impact for someone with a limited credit history as compared to someone with a very full credit history.
  • The change being reported—the “degree” of change being reported will have an impact. For example, if someone who usually pays bills on-time continues to do so (a positive action) then there will likely be only a small impact on his or her FICO® Scores one month later. On the other hand, if this same person files for bankruptcy or misses a payment, then there will most likely be a substantial impact on their score one month later.
  • How quickly information is updated—there is sometimes a lag between when you perform an action (like paying off your credit card balance in full) and when it is reported by the creditor to the consumer reporting agencies. It’s only when the consumer reporting agency has the updated information that your action will have an effect on your FICO® Scores.

Keep in Mind: Small changes in financial health management can be important to obtain a certain FICO® Score level or to reach a certain lender’s FICO® Score “cutoff” (the point above which a lender would accept a new application for credit, but below which, the credit application would be denied).

What if I’m turned down for credit?

If you have been turned down for credit, the Equal Credit Opportunity Act (ECOA) gives you the right to obtain the reasons why within 30 days. You are also entitled to a free copy of your credit reports within 60 days, which you can request from each of the consumer reporting agencies. If a FICO® Score was a primary part of the lender’s decision, the lender may use the key score factors or reason codes to explain why you didn’t qualify for the credit.

How do I get my free credit report?

You can get one credit report from each of the three major consumer reporting agencies once every 12 months.

Can I transfer my credit files from another country to the US consumer reporting agencies?

Credit files and credit histories do not transfer from country to country. There are legal, technical and contractual barriers that prevent a person from transferring their credit files or history to a different country. Unfortunately, this often means that a new immigrant to the US will need to establish a new credit history.

Why did my lender lower my credit limit?

Some banks are lowering credit lines and closing credit card or revolving accounts that have had little or no recent activity. These actions can hurt your score if they result in higher credit utilization (proportion of balance to credit limit); therefore, preserving credit lines by keeping credit card accounts open and using them frequently—while, at the same time, maintaining low balances—can help a score from being negatively affected.

Do I need to keep my utilization ratio below 30% to have no impact on my score?

There is no single utilization percentage that equates to optimal points. Generally speaking, lower utilization means less credit risk and positive impact to FICO® Scores.

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Redwood Credit Union and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. Redwood Credit Union and Fair Isaac do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating.

FICO® Score and associated educational content are provided solely for your own non-commercial personal review, use and benefit.