What are Credit Scorecards?

Scorecards are the heart of any credit scoring system.  A scorecard is actually a credit-scoring model built to evaluate risk on a unique or homogenous population, such as thin or young credit reports.  Most scoring systems have multiple scorecards, because there are many unique consumer types.

Think of a scorecard as a scoring model within a scoring system.  These scorecards put “like” populations together and evaluate them as their own separate group.  There are scorecards for thin files or those with few accounts, bankruptcy, derogatories, and those with clean credit files.  The complete list of scorecards is proprietary to the model developer.

If there weren’t different scorecards, those with clean credit and a long credit history would score the highest and everyone else would have lower scores.  For example, if you had a thin file with few accounts, your score would always be low compared to someone with many accounts that paid them on time and had low balances.  Comparing like populations gives this population an opportunity to be considered based on behavior of that group rather than a comparison to another, better group.

Each scorecard has different score ranges and may have different scoring values for different items.  For example, inquiries might be treated X way in scorecard #1 and Y way in scorecard #2.  The FICO score range is 300 to 850. Credit reports with “clean” history can received the maximum score of 850, while those with collections and bankruptcies would not.  The ranges for the score cards are not publicly available.

You can move from being scored in one scorecard to another scorecard (what I call “Scorecard Hop”) which can cause your score to change.  For example, your filed for bankruptcy and it is reported on your credit report; you have just moved into a bankruptcy scorecard.  Your score will be very different as a result.

A couple of rules of thumb as it pertains to scorecards…you can only be scored in one scorecard at a time.  And, if your credit file moves from one scorecard to another your score will be different.  This can give the impression that one item caused your score to go up or go down, which is the wrong impression.  When you hop scorecards it’s possible that EVERYTHING on your file is being evaluated differently thus being scored differently.

Even though the scoring models are complex, the key to having a high score is paying your bills on time, don’t use very much of your available credit card limits, don’t close credit card accounts, and don’t seek credit unnecessarily.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

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