How Credit Actions Impact FICO® Scores.

How much does missing a payment impact a FICO® Score? What about reducing credit card balances? FICO simulated how different credit events may impact FICO Score 9 for five different credit profiles, but below we'll be featuring two. These representative profiles were selected because they had credit characteristics (payment history, utilization, etc.) that were generally considered typical of the five score categories.

Here are the two credit profiles from the FICO Score spectrum:

Sophia Maria
Current FICO® Score 9 607 793
Number of Credit Accounts 7 21
Years of Credit History 8 Years 19 Years
Revolving Utilization 67% 12%
Total Revolving/Open Balances $5,760 $6,500
Delinquencies 30-day delq. in last year None
Charge-Offs Charge-Off in last 2 years None

Sophia has delinquencies, and she also has the highest revolving utilization. Since payment history (35%) and amounts owed (30%) represent the 2 most important categories of the FICO Score, she unsurprisingly has the lower FICO Score of the two. Maria has a thick and mature file with varying debt and utilization levels.

The key takeaway of the results of five different simulations (below) is: The impact to FICO Score of a given credit action is highly dependent on the starting credit profile of the consumer.

A FICO Score measures credit risk based on a credit file at a single point in time. So when considering why a score changed from a particular credit event, it's helpful to consider what the credit file looked like before and after the event. If the credit file indicates significantly greater (or lesser) credit risk than before, then a FICO Score will change more than if the credit risk is similar before and after the credit action.

Simulated FICO Score 9 after different credit actions.

Credit Actions Sophia Maria
Current FICO® Score 9 607 793
Miss a payment by 30 days 570-590 710-730
Miss a payment by 90 days 560-580 660-680
Reduce revolving account balances by 25% 615-635 795-815
Take out a $5000 personal loan 590-610 770-790
Max out credit cards 560-580 665-685

Here's a breakdown of how the FICO Score 9 change varies based on these profiles:

Missed payments typically have a higher impact on those with clean profiles.

Not surprisingly, missing a payment has a substantial impact on a FICO Score. Both individuals see a substantial loss of points when they fall 30 days behind on a payment, and lose even more points when it hits 90 days past due.

We see that Maria would lose more points for the same missteps as Sophia. That's because Sophia's lower score of 607 already reflects her riskier past behavior of missed payments. So, the addition of one more indicator of increased risk on her credit report is not quite as significant to her score as it is for Maria, who has no reported previous history of delinquency.

Increasing revolving debt typically has a greater impact on those with lower utilization.

Revolving balances and utilization is also heavily weighted by the FICO Score. Maria sees a large score drop when she maxes out her credit cards because her starting credit utilization percentage is relatively low. Sophia's scores decrease as well, but less so since she already has medium to high revolving utilization percentages and that risk is already factored to a degree into her starting score.

Conversely, paying down debt would help both individuals, as their score increases when reducing revolving balances by 25%. Sophia's ability to increase her score in the near future is limited by the recent delinquency and charge-off on her credit file.

Opening new accounts typically has a greater impact on thin/new-to-credit files.

Opening up new credit may affect the FICO Score as it usually results in an inquiry posting and a newly open credit account being reported. This could impact the length of credit history (15% of the FICO Score calculation), search for new credit (10%), and credit mix (10%) categories of the FICO Score.

While this study provides good benchmarks of potential score impact from various credit actions, keep in mind that that this research was done only on select consumer credit profiles. Given the wide range of credit profiles that exist, results may vary beyond what's in the table above. Still, this analysis clearly illustrates how the same action can have different impacts to a FICO Score depending on the starting profile. That's because the change in credit risk represented by these actions is different for each profile.

You can view the full Credit Actions report here.