The problem I most often run into when talking basic personal finance metrics like FICO scores, credit reports, and overall creditworthiness is that many people fail to realize that your FICO score is based on pure statistical evidence with no consideration for judgment and does not allow for human emotion. So a recent “Come to Jesus” moment on repaying your debts on time for the last year may sound like a good sales pitch to give your car salesman or mortgage broker, but will likely fall on deaf ears if your FICO score is in the lower two quartiles of the U.S. population.
One point I didn’t know:
Is it true that every time you apply for a loan it hurts your score?
“It depends on the kind of product you’re shopping for,” says Greene. With car loans, for example, Fair, Isaac understands that people shop for rates. “If you apply for five different car loans within a couple of days, we understand that you’re looking to buy one car at the best rate. And there’s no adverse impact on your credit score.”
On the other hand, when people apply for five different credit cards in the space of a week, they’re usually seeking to open multiple accounts simultaneously. “In those situations we will take a few points off someone’s FICO score because we’re worried they’re sending a signal that they need too much credit.”
Good to know the FICO scoring algorithm can detect certain things automatically based on recent activity, and not penalize us for it.
Source & Credit
Dan Gross, Aaron Task, & Fair Isaac CEO Mark Greene
FICO Questions Answered: Fair, Isaac CEO Reveals 3 Key Ways to Improve Your Score