Back by Popular Demand, Even More FICO Score Myths!

Posted on Credit Report 221


It’s the topic that keeps on giving…FICO score myths.  Let’s jump right in…

Closing credit card accounts helps your score – This is all about how much of your available credit you are using, aka your “credit utilization” percentage.  This is determined by the amount you owe compared to your credit limit. Closing a credit card account reduces how much credit is available and can cause an increase in your utilization percentage, and lower your score. Keeping your credit utilization below 10% is the goal.  Leave them open!!

Paying off collections will improve your score – First things first…it is still a good practice to pay the debts you owe, but don’t expect your scores to shoot through the roof.  The reason collections lower your scores is because you have them, not because of the amount you owe on them.  Paying collections doesn’t cause them to be removed from your credit reports so the incident is still there, and painful.

FICO calculated the scores – Believe it or not…FICO scores are not calculated by FICO.  In order to generate a FICO score you have to marry two things…a credit file and a scoring model.  Since FICO doesn’t compile or house credit data, they can’t calculate the scores because they’re missing the credit data.  The credit bureaus are the ones who calculate the FICO scores because they have the credit files and the FICO scoring software.

The credit bureaus control what counts in your FICO score, and how much it counts – Even though the FICO scores are developed off of credit bureau data, the credit bureaus have no input into the score development.  The credit bureaus’ role is to provide the development data.  FICO conducts the analysis using statistical techniques, lets the data speak for itself, and then develops or redevelops their scoring models.  The credit bureaus are the distributor, that’s it.

FICO considers income, net worth and other financial information not on a credit report – The FICO scores are developed using credit report data from the bureaus. This data includes current and historical payments, public records and seeking credit inquiries.  Personal data in the credit report such as name, address, and date of birth are not considered. The FICO score does not use data from other sources other than the credit report.  Income, net worth and other non-credit financial information is not on your credit reports therefore it can’t be used.  FICO is what’s called a “credit bureau based scoring system”, which means it is solely dependent on credit file data.

John Ulzheimer is the President of Consumer Education at, the credit blogger for, 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, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.


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