Credit Scores/Credit Report

FICO Facts

1

What do the letters FICO stand for?

Fair Isaac Corporation

2

What is the usual range for a standard FICO credit score?

300 - 850

3

What does a credit score help a lender estimate?

How likely a borrower is to repay their debts/ credit risk

4

Which is NOT directly used to calculate a FICO score: income, payment history, or credit mix?

Income

5

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

Report = detailed credit-account history; score = numerical summary of credit risk

FICO Percentages

1

What percentage is PAYMENT HISTORY?

35%

2

What percentage is LENGTH OF CREDIT HISTORY?

15%

3

What percentage is CREDIT MIX?

10%

4

What percentage is AMOUNTS OWED?

30%

5

What percentage is NEW CREDIT?

10%

Credit Card Terms

1

What does APR stand for?

Annual Percentage Rate

2

What is a credit limit?

The maximum amount a lender allows you to borrow on the card. 

3

What is a minimum payment? 

The smallest amount required by the payment due date to keep the account current.

4

What is the term for the extra money a credit card company charges when you borrow money and don't pay off your full statement balance?

Interest

5

What is the difference between a debit card and a credit card?

A debit card uses money from your bank account. A credit card allows you to borrow money that you must repay. 

Factor Detective

1

A borrower consistently pays bills on time. Which FICO factor is affected most directly?

Payment History - 35%

2

A cardholder uses $900 of a $1,000 limit. Which factor is affected most directly? 

Amounts owed/ credit utilization - 30%

3

Someone opens three new cards this week. Which factor is most directly involved?

New credit - 10%

4

A person has kept the same credit account open for 15 years. Which factor is involved?

Length of credit history - 15%

5

Someone responsibly manages both a car loan and a credit card. Which factor is involved?

Credit Mix - 10%

Real-Life Credit

1

A card limit is $1,000 and the balance is $200. What is the utilization percentage?

20%

2

A card limit is $2,000 and the balance is $1,500. What is the utilization percentage?

75%

3

True or False: Paying only the minimum usually avoids all credit card purchase interest.

False; the unpaid balance may accrue interest. 

4

Sarah has a credit card with a $1,500 limit and currently owes $600. How much available credit does she have, and what percentage of her limit is she using?

$900 available, 40% utilization

5

Michael owes $500 on a credit card with a $1,000 limit. He makes a $200 payment. What was his credit utilization before the payment, and what was it afterward?

Before: 50%. After: 30%.

Credit Myths

1

True or False: Using a debit card helps you build your credit score. 

False: Debit cards use money you already have, so ordinary debit card purchases don't build credit. 

2

True or False: Checking your own credit score will lower it.

False: Checking your own score is a soft inquiry and doesn't hurt your credit. 

3

True or False: You must carry a balance on your credit card and pay interest to build good credit.

False: Paying your full statement balance on time can build credit without paying interest. 

4

True or False: Making a lot of money automatically gives you a high FICO score.

False: Income isn't one of the five factors used to calculate a FICO score. 

5

True or False: Once you have a bad credit score, you're stuck with it forever. 

False: Credit scores can improve over time with responsible credit use, including making payments on time.