Understanding Credit – Is FICO the Whole Story? - FFC

Understanding credit – is FICO the whole story?

Most people know a little bit about credit scores and understand that having a good credit score is important for a variety of reasons. Without a good credit score, it is difficult to borrow money, get insurance and even find a job. But a person’s credit score is not the only factor lenders consider when evaluating credit. Other application factors and calculations can often be the deciding factor.


FICO scores are a primary driving factor in the decisioning models of most lenders. The FICO score is calculated based on the following factors:

35% of the score is based on payment history. Have payments been made on time? Late payments will drop a FICO score quickly.

30% of the score is based on the amounts owed. How many accounts have balances? How much of the credit limits are used? Having “maxed out” credit cards or other accounts can hurt a FICO score. Keeping balances below 50% of card limits is a good idea.

15% of the score is based on the length of credit history. The longer a person’s history of making payments, the better the score can predict future behavior.

10% of the score is based on new credit. This includes how many accounts have recently been opened, how many inquiries are on a person’s credit in recent months and whether or not new accounts have been opened since any prior delinquency. “Shopping” a customer’s credit to multiple lenders may affect their score.

10% of the score is based on the types of credit used. Is there a good mix of installment loans, credit cards, car loans, mortgages, etc.?

For a full explanation of FICO scores, visit Myfico.com


FICO scores tell a big part of the story, but application factors and calculations can be just as important. Lenders look at things like:

Job time: How long has the customer been employed? Does he or she show stability?

Residence time: How long has the customer lived at his or her residence? (Again, it may be a sign of stability)

Job type: What type of job does the customer have? Is it seasonal? Commission-based? Is there growth potential?

Amount of unsecured or credit card debt: Is the customer borrowing too much? Is this a sign that he or she can’t make ends meet?

Debt ratio: How much does the customer pay in monthly payments compared to his or her income?

These types of application factors and calculations can play a big role in a lender’s decision. A customer may have a very high FICO score but also have a high debt ratio. Lenders may say that the customer simply can’t afford another payment. Or someone may have a high FICO score but have excessive amounts of unsecured debt. Paying bills on time is good, but overextending oneself is a path to trouble. Excessive unsecured debt is often a predictor of a future bankruptcy.


As dealers, how can you get the best possible approvals? It is not always just about the FICO score, so make sure credit applications are filled in completely. List all sources of income. Get joint applications whenever possible on married couples. Even if one spouse has weaker credit, there may be a debt ratio issue if only one spouse’s income is listed. Give the underwriter every option to consider. And if your customer tells you something about his or her situation (for example, he was in a car accident 3 years ago and had a lot of medical bills but is now working again), let the underwriter know. It can often make a difference!


At Foundation Finance Company, we look at the whole picture to try and give our dealers as many approvals as possible. By giving us a complete application and by disclosing any “unusual” situations, you have the best chance to get your sale approved. If you have any questions on our credit approval process or loan programs, give us a call at 1-855-241-0024.

Foundation Finance Company offers water treatment financing, home improvement financing, HVAC financing, vacuum financing, jewelry financing, furniture financing and more. If you have any questions on what we’ll finance, give us a call at 1-855-241-0024.


P.O. Box 437
Schofield, WI 54476

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