Decoding Your Credit Files and FICO Scores

Get Your Financial House in Order

Your FICO® scores are used by a variety of institutions to assess how much of a credit risk you are. The higher -- or better -- your score is, the less risky you appear to them; conversely, the lower your score, the higher the risk.

These scores can inform everything from how much it will cost you to borrow money (often in the form of your interest rate,) if you're even eligible to borrow money at all, how much you'll pay for auto insurance, whether or not you can rent that new apartment, and more.

To effectively manage your finances, it's important to know how these scores are assessed, what information is used to create them, and how you can ensure that information is accurate.

Instructor Karl Frunz shares his expertise in our How to Manage Your Credit Scores workshop, and has provided additional insight -- as well as a handy, printable guide! -- here to help you navigate your credit reports and scores.

What determines your FICO® credit scores?


It's basically a snapshot of your creditworthiness and is based on the information contained in your credit files, which are compiled and managed by Equifax, Experian, and TransUnion.

You have one FICO® score for each of these firms, and they're determined by the following factors:

Decoding Your Credit Files and FICO Scores | Seattle Central College - Continuing Education

  1. 35% is based on your payment behavior -- Have you made all of your loan or credit card payments on time? Are any of your accounts in arrears?
  2. 30% relates to how much debt you have -- How much do you currently owe to other lenders? How much of your available credit is in use?
  3. 15% regards how long you’ve had credit histories -- How old are your accounts?
  4. 10% comes from obtaining new credit relationships -- How many institutions, and how often, are making inquiries?
  5. 10% relates to the mix or scope of debts you have -- What kinds of loans and credit cards do you currently have?


What information is included in your credit files?

The content of your credit files is both determined and protected by the Fair Credit Reporting Act (of 1970).

Though the three credit reporting firms publish the contents of your credit files in different aesthetic layouts, the law dictates that each credit file must have (and encompass) your information in four sections

  1. Identifying Information: Your name, birthdate, and social security number
  2. Trade Lines: These tell the stories of the debts you've had in the past and those you currently have, including the how you managed and fulfilled those obligations, such as payment history and current balances
  3. Credit Inquiries: This is a ledger of anyone who you've authorized to check your credit (often when you're seeking new debt) or those requested by your existing creditors to evaluate your current debt
  4. Public Records & Collections: Info in this section have the largest impact on your FICO® scores because they indicate financial mishaps and hardships

How can you correct errors in your credit files?

Decoding Your Credit Files and FICO Scores | Seattle Central College - Continuing EducationThe Fair Credit Reporting Act is one of the most powerful consumer protection laws. It delineates both the timelines and processes that the credit reporting firms must follow when you report an error on your credit files.

If your score is low, and you're unable to apply for credit. You can get a credit card for someone with no credit and then use it to build your credit score up.

Each year, you can obtain a free copy of your credit reports from each of the three reporting firms, via the Federal Trade Commission's website

Review your reports annually and, if you find invalid or errant information on any of your reports, you can contact the firm that produced it:

According to the law, the firm(s) must determine within 30 days if the information is accurate or not; correct information will remain on your report, but any errors, transpositions, or incorrect data will be removed and you'll be issued an updated copy of your report.

Quick Reference Guide

Ready to get your financial house in order?

Download this guide and use it as you work on improving your credit scores.