FICO Just Released How Much Credit Scores Rise When Negative Marks Go Away

A pen ,calculator, credit card on account book.
manop1984/Getty Images
Honest Abe

Disclosure:

Some of the links in this post are from our sponsors. We’re letting you know because it’s what Honest Abe would do. After all, he is on our favorite coin.

Gather around for today’s lesson, won’t you?

We’ll call it Credit Scores 101. Here are the basics:

  • Credit scores range from 300 to 850.
  • That’s lower than 700, which is widely considered to be a “good” score.

Naturally, we know the best way to raise a low credit score is to strategically pay down your debts and to correct false information in your credit history.

Ah, but here’s what we don’t know: What about those black marks on your credit history you can’t do anything about? For example, do you have any late or missed payments on your credit cards or car loans?

Does that bad stuff come off your credit report after a while? And what happens to your credit score when it does?

Now FICO has the answer. The credit scoring company analyzed its own data to get the details.

Delinquencies, like late payments, typically get removed from your credit report after seven years, thanks to a federal law called the Fair Credit Reporting Act.

That improves your credit score. But by how much?

Here’s what FICO found out:

  • People who had a single delinquency removed from their credit report this way saw their credit scores go up an average of 14 points.
  • People who had all of their remaining delinquencies removed from their credit report saw their scores increase by an average of 33 points.

The More You Know

One of the key lessons here: It’s worth knowing what’s in your credit report.

As Money Talks News point out, “FICO’s research highlights the importance of your credit report — knowing what’s in it, checking it regularly and disputing errors and other negative information.”

An easy way to do that is to sign up with a free service like Credit Sesame. This tool shows your balance on any unpaid bills, credit cards or loans. It offers personalized tips on reducing your debt and raising your credit score.

It’s a good way to raise your credit score more than 14 points at a time.

Take the example of North Carolina business owner Kenneth Bain. He signed up for Credit Sesame and found out he had a low credit score of 487. Just seven months later, he’d raised it by a whopping 234 points, to 721.

Bain was surprised to find some very old — and fully paid — hospital bills mucking up his score, as well as some other things that were incorrectly reported.

“I looked at what was there (on my credit report) so I would know what I should change, correct and challenge,” Bain said. “I used Credit Sesame as a compass to tell me where to go.”

So, just to sum up:

  • When an old delinquency gets taken off your credit report after seven years, your credit score might go up about 14 points.
  • Arming yourself with information, paying down your debts and challenging false data in your credit history could raise your score by hundreds of points.

And a better credit score means a lot when it’s time to get a mortgage, a credit card or a car loan.

Mike Brassfield (mike@thepennyhoarder.com) is a senior writer at The Penny Hoarder. His credit score isn’t quite as terrible as it used to be.

Honest Abe

Disclosure:

Some of the links in this post are from our sponsors. We’re letting you know because it’s what Honest Abe would do. After all, he is on our favorite coin.