FICO Score: What It Ignores and What Hurts It

Learn key tips to share with your members about what their FICO score does and does not take into account.


A few months ago, we shared Five FICO Score Factors Your Members Need to Know. Many of our readers posted this information in their newsletter and requested more member education articles. Our readers' requests support some frightening statistics.

A recent survey by Educational Services in San Francisco shows that about 97% of people have no idea what their credit scores are, and 86% did not check their reports in 2006 despite it being free. This week, I invite you to share with members more information about their credit scores.

First, members should know what a FICO score ignores:

  • Demographic Profile: Race, color, religion, age, national origin, sex, marital status
  • Employment: Salary, occupation, title, employer, date employed, employment history
  • Current Interest Rate: Any interest rate being charged on any loan on your credit report
  • Credit Counseling: Any participation in a credit counseling service of any type
  • Types of Inquiries:
    • “Consumer-initiated” – requests you make to check its validity
    • “Soft” – promotional inquiries made my lenders to make a pre-approved credit offer <
    • “Administrative” – inquiries made by lenders to review your account with them
    • “Employer” – Inquiries that are marked as coming from employers

Second, members should understand what items will negatively impact their FICO score:

  • Late payments and derogatory public records
  • A low level of “percent available” on individual revolving accounts* and total revolving accounts
  • Closing revolving accounts (especially those that have been open a long time)
  • Having a lender lower the limit on a revolving account or not report the limit on a revolving account
  • Multiple new accounts in a short period of time
  • Making payments on old (more than seven years) bad debts
  • Having loans at “second tier” finance companies

If you would like to re-post information from this article, please cite Callahan and Associates, the author’s name, and Brett Christensen as sources. This information is excerpted from the training webinar, The Number One Member Education Opportunity, hosted by Brett Christensen and sponsored by Callahan and Associates. For complete information, click here.

*Revolving Account - Requires a specified minimum payment each month, provides a maximum amount that you can charge and allows you to carry a balance. Major credit cards are an example.




Jan. 22, 2007


  • A real piece of work for people like us who would intend to know more of Credits & Credit ratings especially sitting thousands of miles away from America
  • Great questions Joan! I consulted with Brett Christensen, the consumer lending expert who hosted a Callahan sponsored webinar on FICO Score training, and here's what he had to say: "I would recommend that a person NOT close any revolving credit card accounts when doing a balance transfer. You want to keep them open so that their limits will report on your credit and thus help your capacity calculation. Closing cards is not a big deal if you have high limits on cards and very low balances, but it can really ding a score if a member has credit card balances at all (and a balance transfer implies that they do have balances). The bottom line is that I would not ever close one of my credit card accounts."
    Mary Royston, Author
  • Mary, this is an excellent article. While I do not deal directly with our members it is good information to have. Personally speaking, I have a question that maybe you can answer - when moving debt from one credit card to a 0% credit card, is it recommended to cancel the credit card you no longer want or need? Also, what if there are a lot of accounts to cancel? Thanks!
    Joan Kampo, First Atlantic FCU