Myths Concerning FICO® Scores

Myth: All credit scores are the same

 

Truth:  Not all credit scores are FICO® Scores. Because FICO® Scores are the most widely used credit scores—used in over 90% of lending decisions—they give you a more accurate look at how lenders will evaluate your credit risk when you apply for credit or a loan.

Myth: A FICO® Score Determines Whether or Not I Get Credit.

 

Truth: Lenders use a number of pieces of information about you and about the loan for which you are applying to make credit decisions, including your FICO® Scores. Lenders 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 analysis 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.

Myth: A Poor FICO® Score will Haunt Me Forever.

 

Truth: Just the opposite is true. FICO® Scores are indicators of a consumer’s risk at a particular point in time. Your FICO® Scores change as new information is added to your credit report and as historical information ages; your FICO® Scores change gradually as you change the way you handle credit. For example, past credit problems impact your FICO® Scores less as time passes. Lenders request a current FICO® Score when you submit a credit application, so they have the most recent information available.

Myth: My FICO® Scores Will Drop if I Apply for New Credit.

 

Truth: If it does, they probably won’t drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called “inquiries”) will appear on your report. Looking for new credit can indicate higher risk to a lender, but your FICO® Scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and tend to have little impact on your FICO® Scores.

Myth: Credit Scoring Is Unfair to Minorities.

 

Truth: FICO® Scores consider only credit-related information. Factors like gender, race, nationality and marital status are not included. In fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when issuing credit. Independent research has been done to make sure that FICO® Scores are not unfair to minorities or people with little credit history. FICO® Scores have proven to be an accurate and consistent measure of repayment risk.

Myth: Credit Scoring Infringes on My Privacy.

 

Truth: FICO® Scores evaluate the same information at which lenders already look—the credit report. A FICO® Score is a number that summarizes your credit risk based on a snapshot of your credit report information. Lenders using FICO® Scores may in fact ask for less information, for instance having fewer questions on the application form.

FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries.

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.