FICO Scores: Application – Impact – Repair


FICO stands for Fair Isaac Corporation and is a large portion of a consumer’s credit report, which lenders use in order to determine whether s/he is “credit worthy” – eligible for a loan.  Debt management, therefore, is a critical element.

A FICO score consists of five main areas of a person’s credit:  payment history, amounts owed, length of credit history, new credit and types of credit used.  Payment history, including debt settlement, and the amounts owed make up 65% of a person’s credit score.  The other remaining areas comprise a much smaller percentage of the score.score


While applying for credit cards does lower a score, the amount is typically very small.  However, if a person applies for many credit cards in a small period of time, this could be seen as a higher risk to lenders.  Remember, a FICO score changes constantly due to new information, so a lender will see the score for that time only.

Applying for credit cards, auto, or mortgage loans are often called inquiries.  Interestingly, when applying for multiple auto or mortgage loans in a short period of time, they will usually appear as a one-time inquiry.

Both Chapter 7 and Chapter 13 bankruptcies impact a person’s FICO score negatively. While each bankruptcy is different, they are not initially viewed as being different when it comes to FICO scoring.  This is because they do not want people to think one is more advantageous than the other.  However, there is not an exact amount by which a person’s score is reduced because it is still dealt with on an individual basis.

If a debt goes to a collection agency, even after the debt is paid, it will stay on a credit report for seven years.


Absolutely!  Obtaining and reviewing your credit report is essential.  There is a free credit report that each person is allowed to get once a year.  This is so you can check and make sure everything in the report is correct.  This is very important because people often find that mistakes have been made.  If there is a problem with the information provided on the credit report, it is imperative for you to contact both the credit bureau and the creditor that the issue is with in order to find out what exactly happened.

But beware of free credit score websites.  Many of these sites are not looking out for the consumer’s best interests.  It is always a good idea to make sure a company is BBB accredited and the site has been independently certified as secure before providing any personal information.

In order to improve a credit score it is important to stay current on payments and try to reduce debt.  While often this is easier said than done, staying up to date with payments is the most important part, even if it is the minimum payment.

A person’s FICO score is a vital part of the loan application.  In many cases, the better the FICO score, the better the loan.  Often, a person’s score will determine not only if that person gets a loan, but the interest rate and length, as well as the loan amount.


The recent economic crisis has affected many consumers, especially when it comes to their credit scores.  DebtHowever, it is never too late to begin to rebuild credit and work towards developing a better credit score.

A great way to begin the process is to use the free services and tools found by signing up at  Tour the Knowledge Base for a wide variety of helpful videos, such as Budgeting Like A Pro and then use the Budget-iTsoft to organize and track your income and expenditures.  If you have a poor credit history, take a look at Secured or Prepaid Credit Cards, which examines the options available to those who have had bad credit in the past and for those who are currently trying to repair their credit by proof of action.

Always remember, whenever you require specific financial advice, contact a qualified professional.

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