FICO Credit Score Impact Table

Oct 13, 2025 by wbrum.org 37 views

Understanding Credit Score Changes: A Case Study

In the world of personal finance, credit scores play a crucial role in determining an individual's creditworthiness. A good credit score can lead to better loan terms, lower interest rates, and increased access to credit. Conversely, a poor credit score can result in higher interest rates, stricter loan terms, and even denial of credit. In this article, we will explore how credit scores change in response to various credit events, using a real-life example to illustrate the concept.

Francis's Credit Score: A Case Study

Let's consider the case of Francis, who has a previous credit score of 659. She has applied for a store credit card and also purchased a new car. We will use the FICO credit score impact table to calculate her new credit score.

FICO Credit Score Impact Table

Credit Event	FICO Score Impact
New Credit Account	-40 to -60
Credit Account Closure	0 to 10
Credit Account Inquiries	-5 to -10
Credit Account Payment History	0 to 100
Credit Account Utilization	-20 to -40
Credit Account Age	0 to 100
Credit Account Type	0 to 100
Credit Account Balance	0 to 100
Credit Account Credit Limit	0 to 100
Credit Account Credit Age	0 to 100
Credit Account Credit Mix	0 to 100
Credit Account Credit History	0 to 100
Credit Account Credit Utilization	0 to 100
Credit Account Credit Score	0 to 100

Calculating Francis's New Credit Score

To calculate Francis's new credit score, we need to consider the impact of the store credit card and the new car purchase on her credit score. Let's assume that the store credit card has a credit limit of $1,000 and Francis has used 50% of the credit limit. The credit card account utilization is 50%, which has a negative impact of -20 to -40 on her credit score.

The new car purchase has a positive impact on Francis's credit score, as it demonstrates her ability to manage a large loan. Let's assume that the car loan has a credit limit of $20,000 and Francis has used 20% of the credit limit. The credit card account utilization is 20%, which has a positive impact of 0 to 10 on her credit score.

Calculating the Impact of the Store Credit Card

The store credit card has a negative impact on Francis's credit score due to the high credit utilization ratio. Let's assume that the credit utilization ratio has a negative impact of -25 on her credit score.

Calculating the Impact of the New Car Purchase

The new car purchase has a positive impact on Francis's credit score due to the large loan amount and the low credit utilization ratio. Let's assume that the credit utilization ratio has a positive impact of 5 on her credit score.

Calculating Francis's New Credit Score

To calculate Francis's new credit score, we need to add the impact of the store credit card and the new car purchase to her previous credit score. Let's assume that the impact of the store credit card is -25 and the impact of the new car purchase is 5.

Francis's new credit score is calculated as follows:

Previous credit score: 659 Impact of store credit card: -25 Impact of new car purchase: 5 New credit score: 659 + (-25) + 5 = 639

Conclusion

In conclusion, Francis's new credit score is 639, which is a decrease of 20 points from her previous credit score. The store credit card has a negative impact on her credit score due to the high credit utilization ratio, while the new car purchase has a positive impact due to the large loan amount and the low credit utilization ratio. This case study illustrates the importance of managing credit utilization ratios and maintaining a good credit history to achieve a good credit score.

Recommendations

Based on this case study, we recommend the following:

Maintain a low credit utilization ratio to avoid negative impacts on credit scores.
Avoid applying for multiple credit cards in a short period, as this can lead to a negative impact on credit scores.
Make timely payments on credit accounts to demonstrate good credit history.
Avoid closing old credit accounts, as this can lead to a negative impact on credit scores.
Consider consolidating debt into a single loan with a lower interest rate to improve credit utilization ratios.

By following these recommendations, individuals can maintain a good credit score and achieve better loan terms, lower interest rates, and increased access to credit.
Understanding Credit Score Changes: A Case Study and Q&A

In our previous article, we explored how credit scores change in response to various credit events, using a real-life example to illustrate the concept. We calculated Francis's new credit score after she applied for a store credit card and purchased a new car. In this article, we will answer some frequently asked questions about credit scores and provide additional insights into managing credit scores.

Q&A: Understanding Credit Score Changes

Q: What is a credit score, and why is it important?

A: A credit score is a three-digit number that represents an individual's creditworthiness. It is calculated based on their credit history, including payment history, credit utilization, credit age, and credit mix. A good credit score can lead to better loan terms, lower interest rates, and increased access to credit.

Q: How is a credit score calculated?

A: A credit score is calculated based on the following factors:

Payment history (35%): On-time payments, late payments, and accounts sent to collections.
Credit utilization (30%): Credit card balances, credit limits, and credit utilization ratios.
Credit age (15%): Length of credit history, including old and new accounts.
Credit mix (10%): Types of credit accounts, including credit cards, loans, and mortgages.
New credit (10%): New credit accounts, inquiries, and credit applications.

Q: What is a good credit score?

A: A good credit score is typically considered to be 700 or higher. However, credit scores can vary depending on the credit scoring model used and the individual's credit history.

Q: How can I improve my credit score?

A: To improve your credit score, focus on the following:

Make timely payments on credit accounts.
Keep credit utilization ratios low (less than 30%).
Avoid applying for multiple credit cards in a short period.
Monitor credit reports for errors and dispute them if necessary.
Consider consolidating debt into a single loan with a lower interest rate.

Q: What is the impact of a store credit card on my credit score?

A: A store credit card can have a negative impact on your credit score due to the high credit utilization ratio. However, if you use the credit card responsibly and make timely payments, the impact can be minimized.

Q: What is the impact of a new car purchase on my credit score?

A: A new car purchase can have a positive impact on your credit score due to the large loan amount and the low credit utilization ratio. However, if you fail to make timely payments, the impact can be negative.

Q: How can I avoid negative impacts on my credit score?

A: To avoid negative impacts on your credit score, focus on the following:

Make timely payments on credit accounts.
Keep credit utilization ratios low (less than 30%).
Avoid applying for multiple credit cards in a short period.
Monitor credit reports for errors and dispute them if necessary.
Consider consolidating debt into a single loan with a lower interest rate.

Q: What is the difference between a credit score and a credit report?

A: A credit score is a three-digit number that represents an individual's creditworthiness, while a credit report is a detailed document that includes information about an individual's credit history, including payment history, credit utilization, credit age, and credit mix.

Q: How can I obtain a copy of my credit report?

A: You can obtain a copy of your credit report from the three major credit reporting agencies: Equifax, Experian, and TransUnion. You can request a free credit report once a year from each agency.

Conclusion

In conclusion, understanding credit score changes is crucial for maintaining a good credit score. By following the recommendations outlined in this article, individuals can improve their credit score and achieve better loan terms, lower interest rates, and increased access to credit. Remember to make timely payments on credit accounts, keep credit utilization ratios low, and monitor credit reports for errors.