How Your FICO Score Is Calculated

I am not an expert in consumer debt, so if this is incomplete or incorrect, I welcome comments on this.  However, here is an article from Yahoo Finance on how FICO scores are calculated, and specifically walking through the hits to your score taken for various credit events, ranging from maxing out a card to bankruptcy.  I was particularly interested to see that the better your starting credit score, the bigger the hit in points for each event.  Meaning, if your score started out at 680 and you had a late payment, the hit was 60-80 points.  But if you started out at 780, the same late payment was a 90-110 points hit.

PS.  My feelings about consumer debt are much the same as Megan McArdle’s, particularly as my daughter starts getting to those ages in which “consumption smoothing” looks like a possibly good idea … I’m not about to sign onto the Dave Ramsey program (and I don’t sign onto his investment advice, except in the sense of the importance of savings), but I wouldn’t be unhappy if my child did …  McArdle can retire now, if she likes, on her laurels for having written a post that I took Strong Measures to Persuade my kid to read, where McArdle talked about what it was like to be unemployed and not be able to afford Chinese food with friends, and how she practiced at home saying in the mirror the words, she said, that were about the hardest she’d ever had to say, “I can’t afford it.”

PPS.  Just in case anyone misunderstood, I was complimenting McArdle in talking about retiring now on her laurels, and high praise indeed.

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