Chapter 3

Scoping Out Your Credit Score

IN THIS CHAPTER

Understanding the importance of credit scores and credit reports

Unraveling how scores work

Boosting your credit score for better loan terms

When you apply for a loan, lenders try to determine your credit risk. If they decide to loan you money, what are the odds that you’ll pay them back on time? To understand your credit risk, most lenders look at your credit report and credit score. Your score ultimately influences the credit that’s available to you and the terms of any mortgage that lenders offer you.

Most lenders also use a number of other facts about you to make credit decisions. They usually look at the amount of debt you can reasonably handle given your income, your employment history, and your credit history. Based on their perception of this information, as well as their specific underwriting policies and secondary market guidelines and limitations, lenders may approve your loan although your score may be a bit low, or decline your loan application despite your score being quite high. But your chances for getting approved at the best possible loan terms improve when you have a good score and the lender determines that you’re a lower credit risk. This chapter gives you an overview of the importance of your credit score when you apply for a mortgage.

Defining Credit Scores

Today, the credit scoring system that the majority of the top 100 largest U.S. lending institutions use for their risk assessment needs is a FICO score — developed by Fair Isaac Corporation ( www.fico.com ) in 1989. FICO scores range from a low of 300 to a maximum of 850. The three major credit reporting agencies — Equifax, Experian, and TransUnion — provide these scores to lenders.

Understanding your credit score can help you manage your credit health. By knowing how lenders evaluate your credit risk, you can take action to lower your credit risk — and thus raise your score — over time. A better score may mean better loan options for you.

Although FICO scores are by far the most commonly used credit risk scores in the United States, a few lenders may use other scores to evaluate your credit risk. These include

• Application risk scores: Many lenders use scoring systems that include the FICO score but also consider information from your loan application.
• Customer risk scores: A lender may use these scores to make credit decisions about its current customers. Also called behavior scores, these scores generally consider the FICO score along with information about how you’ve paid that lender in the past.
• Credit bureau scores: The three major credit bureaus — Equifax, Experian, and TransUnion — each have developed their own scoring systems. These scores may evaluate your credit report differently from FICO scores, and in some cases a higher score may mean more risk, not less risk, as with FICO scores.

Even though these other measures are important and may come into play when a lender determines your eligibility for a mortgage, the FICO score is still the gold standard. You should understand it as well as you can so you can optimize your FICO score and be likely to get the best loan terms.

Assessing Your Credit History

Your FICO score evaluates your credit report, which is the way most U.S. businesses see your credit history. The report details your credit history as it has been reported to the credit reporting agency by lenders who have extended credit to you. Your credit report lists what types of credit you use, the length of time your accounts have been open, and whether you’ve paid your bills on time. It tells lenders how much credit you’ve used and whether you’re seeking new sources of credit. It gives lenders a broader view of your credit history than one bank’s own records (unless you drew all your previous credit from that one bank).

Your credit report reveals many aspects of your borrowing activities. To give you a fair assessment, lenders should consider each piece of information on your report in relationship to the other report information. The ability to quickly, fairly, and consistently consider all this information is what makes credit scoring so useful. This section briefly highlights what information goes into your credit report and what you need to regularly check to avoid errors.

Expect to pay about $20 to $35 for a lender to obtain a current copy of your standard credit report from the credit reporting agencies. A more extensive report called a Residential Mortgage Credit Report (RCMR) can cost $50 to $75. Chapter 2 tells you how to obtain a free copy of your credit reports if you want to see them before applying for a loan.

What goes into your credit report

Although each credit reporting agency formats and reports information differently, all credit reports contain basically the same kinds of information:

• Identifying information: Your name, current and former addresses, Social Security number, date of birth, and employment information are used to identify you. The agencies don’t use these factors to calculate your score, however. Identifiers match your experience with credit to your identity and file. Updates to your identifying information (such as employer change or name change) come from information you supply to lenders.
• Tradelines: These are businesses or credit grantors where you have credit accounts. Lenders report each account you’ve established with them. They report the type of account (credit card, revolving, auto loan, mortgage, and so on), the date you opened the account, your credit limit or loan amount, the account balance, and your payment history.
• Inquiries: When you apply for a loan, you authorize your lender to ask for a copy of your credit report. This is how inquiries appear on your credit report. The inquiries section contains a list of everyone who accessed your credit report within the last two years. The report you see lists both voluntary or hard inquiries , spurred by your own requests for credit, and involuntary or soft inquiries , such as when lenders order your report before sending you a preapproved credit offer in the mail. (Other soft inquiries can include your creditors periodically reviewing existing accounts and insurance or employment credit checks.) Soft inquiries appear only on your own consumer-requested report; they’re excluded from the credit reports lenders see and don’t count against your credit score.
• Public record and collection items: Credit reporting agencies also collect public record information from state and county courts and information on overdue debt from collection agencies. Public record information includes bankruptcies, foreclosures, suits, wage attachments, liens, and judgments.

Along with the credit report, lenders can also buy a credit score based on the information in the report.

Check your credit report

If your credit report contains errors, the report may be incomplete or contain information about someone else. A recent Federal Trade Commission study reported that 5 percent of consumers had at least one error on one of their three major credit reports that would likely lead to being charged a higher rate of interest.

This typically happens because:

• You applied for credit under slightly different names (Robert Jones, Bob Jones, and so on), or you have several members of your family with similar names. Another common reason is that you changed your name due to a change in your marital status.
• Someone made a clerical error in reading or entering your name or address information from a handwritten application.

• Someone gave an inaccurate Social Security number, or the lender misread the number.

  This type of error could also be a sign of identity theft. If, after checking into this error, you discover that your identity has been stolen, get as much of the problem resolved as you can before applying for a mortgage.

• Loan or credit card payments were inadvertently applied to the wrong account. Years ago, Robert once found that his credit was being negatively affected by a large unpaid delinquent balance at a store he had never patronized and didn’t even have a location in his area.
• Information from an ex-spouse that should not be included.

If you find an error, the credit reporting agency must investigate and respond to you within 30 days. If you’re in the process of applying for a loan, immediately notify your lender in writing of any incorrect information in your report. In Chapter 2 , we tell you how to contact the credit reporting agencies to obtain and fix your credit report.

Understanding How Scores Work

Each credit score is calculated by a mathematical equation or algorithm that evaluates many types of information from your credit report at that agency. By comparing this information to the patterns in hundreds of thousands of past credit reports, the score identifies your level of estimated future credit risk.

For a FICO score to be calculated from your credit report, the report must contain at least one account that’s been open for six months or longer. In addition, the report must contain at least one account that’s been updated in the past six months. This ensures that enough recent information is in your report to calculate a score.

Your score can change whenever your credit report changes. But your score probably won’t change a lot from one month to the next. In a given three-month time period, only about one in four people has a 20-point change in her credit score.

Although a bankruptcy or late payment can quickly lower your score, improving your score takes time. That’s why it’s a good idea to check your score (especially if you have reason to be concerned about your credit history) at least six months before applying for a mortgage. That gives you time to take corrective action if needed. If you’re actively working to improve your score, you should check it quarterly or even monthly to review changes.

The higher your FICO score, the lower the potential risk you pose for lenders. But no score says whether you’ll be a “good” or “bad” customer. Although many lenders use FICO scores to help them make lending decisions, each lender also has its own strategy, including the level of risk it finds acceptable for a given type of loan. There is no single minimum score used by all lenders.

FICO scores can differ between bureaus

Fair Isaac makes the FICO scores as consistent as possible among the three credit reporting agencies. If your information is exactly identical at all three credit reporting agencies, your scores from all three should be within a few points of each other. But that is rarely the case.

Sometimes your FICO score may be quite different at each of the three credit reporting agencies. The way lenders and other businesses report information to the credit reporting agencies sometimes results in different information being in your credit report at two or more of the agencies. The agencies may also report the same information in different ways. Even small differences in the information at the three credit reporting agencies can affect your scores.

Because lenders may review your score and credit report from any one of the three credit reporting agencies, go ahead and check your credit report at all three to make sure each is correct (see Chapter 2 for instructions on how to do that).

What a FICO score considers

The FICO score evaluates five main categories of information. Some, as you’d expect, are more important than others. It’s important to note the following:

• A score considers all these categories of information, not just one or two. No one piece of information or factor alone determines your score.
• The importance of any factor depends on the overall information in your credit report. A given factor may be more important for some people than for others who have a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. That’s why it’s impossible to say exactly how important any single factor is in determining your score — even the levels of importance shown in the following subsections are for the general population, and differ for different credit profiles. Also, the FICO score algorithm is dynamic and constantly being adjusted.
• Your FICO score looks only at information in your credit report. When making a credit decision, lenders often also look at other things, including your income, how long you’ve worked at your present job, and the kind of credit you’re requesting.
• Your score considers both positive and negative information in your credit report. Late payments lower your score, but establishing or reestablishing a good track record of making payments on time raises your score. Unfortunately, a single delinquent account or late payment will negatively affect your FICO score much more than a handful of accounts paid on time will increase your credit score.

• Raising your score is a bit like getting in shape. It takes time, and there is no quick fix. In fact, quick-fix efforts can backfire. The best advice is to manage credit responsibly over time. Try to never be even one day late with your mortgage payment or other tradeline payments.

  If you have a legitimate reason for the late payment, immediately contact your credit provider and discuss the situation and ask them to waive any late penalties. Many lenders will allow a one-time late payment, and some merchants will be willing to waive late charges just by you asking. Now, this won’t work if you’re late multiple times, but suggesting that you’ll pay the full balance due if they close your credit account can be an effective negotiating tool with many credit providers.

The percentages we give you in the following sections are based on the importance of the five categories for the general population. For particular groups — for example, people who haven’t been using credit for very long — the importance of these categories may be different.

The following sections offer a complete look at the information that goes into a FICO score. For a visual graphic of what contributes to your credit score, see Figure 3-1 .

© John Wiley & Sons, Inc.

FIGURE 3-1: How a credit score breaks down.

Your loan repayment history

What’s your track record for repaying creditors? One of the most important factors in a credit score is your payment history; it affects roughly 35 percent of your score. The first thing any lender wants to know is whether you’ve paid past credit accounts on time.

Late payments aren’t an automatic “score-killer.” An overall good credit picture can outweigh one or two instances of, say, late credit card payments. On the other hand, having no late payments in your credit report doesn’t mean you automatically get a great score. Some 60 to 65 percent of credit reports show no late payments at all. Your payment history is just one piece of information used in calculating your credit score.

In the area of payments, your score takes the following into account:

• Payment information on many types of accounts: These types of accounts include credit cards such as Visa, MasterCard, American Express, PayPal Credit, and Discover, credit cards from stores or online merchants where you do business, installment loans (loans such as a mortgage on which you make regular payments), and finance company accounts.
• Public record and collection items: These items include reports of events such as bankruptcies, foreclosures, suits, wage attachments, liens, and judgments. They’re considered quite serious, although older items and items with small amounts count less than more recent items or those with larger amounts. Bankruptcies stay on your credit report for seven to ten years, depending on the type.
• Details on late or missed payments (delinquencies) and public record and collection items: The FICO score considers how late such payments were, how much you owed, how recently they occurred, and how many you have. As a rule, a 60-day late payment isn’t as damaging as a 90-day late payment. A 60-day late payment made just a month ago, however, penalizes you more than a 90-day late payment from five years ago.
• How many accounts show no late payments: A good track record on most of your credit accounts increases your credit score.

THE LOWDOWN ON HOW A FORECLOSURE CAN AFFECT YOUR FICO SCORE

A foreclosure, a short sale (where the lender agrees to accept less than the total amount due on a mortgage), or a deed in lieu of foreclosure (in which a borrower deeds his property to the lender, who then sells it and uses the proceeds of sale to repay some or all of the mortgage) lowers your credit score. If you had the misfortune to personally go through one of these negative credit events, be advised they’re considered extremely serious delinquencies. They show that you failed to honor a credit obligation. Because of limitations in the way this type of delinquency is shown on credit reports, a FICO score generally doesn’t distinguish among them.

The FICO score assesses negatives on your credit report by three factors:

• Recency (how long ago)
• Severity (how late)
• Frequency (how often)

A foreclosure is serious because you became so late in making your monthly payments (severity) that your lender terminates the loan and demands immediate repayment in full. Its impact on your credit score increases if the event was reported a short time ago (recency) or if other items on your credit report are also delinquent (frequency).

How can you improve your FICO score after a foreclosure? Typically, a foreclosure adversely affects your credit report for up to seven years. Because your payment history comprises about 35 percent of your credit score, the best way to improve your FICO score is to get current and stay current on all your other debts.

Even with an improved FICO score, however, don’t expect to get a new home loan with favorable terms for five to seven years after your foreclosure. Fortunately, even homeowners with a foreclosure, short sale, or deed in lieu of foreclosure during the major economic downturn of the late 2000s are now reaching the point where such events won’t be reflected negatively on their credit score. See Chapter 13 for more on foreclosures.

So how do you improve your FICO score? Consider the possibilities:

• Pay your bills on time. Delinquent payments and collections can have a major negative impact on your score.
• If you’ve missed payments, get current and stay current. The longer you pay your bills on time, the better your score.
• Paying off or closing an account doesn’t remove it from your credit report. The score still considers this information, because it reflects your past credit pattern. But closing accounts that you never use can help because the number of lines of credit and the total dollar amount of available credit are factors in the credit scoring algorithms.
• If you’re having trouble making ends meet, get help. This step doesn’t improve your score immediately, but if you can begin to manage your credit and pay on time, your score gets better over time. See Chapter 2 for credit problem-solving strategies.

Amount you owe

About 30 percent of your score is based on your current debt. Having credit accounts and owing money on them doesn’t mean you’re a high-risk borrower who’ll receive a low score. However, owing a great deal of money on many accounts can indicate that a person is overextended and is more likely to make some payments late or not at all. Part of the science of scoring is determining how much is too much for a given credit profile.

In the area of debts, your score takes into account the following information:

• The amount owed on all accounts: Note that even if you pay off your credit cards in full every month, your credit report may show a balance on those cards. The total balance on your last statement is generally the amount that will show in your credit report.
• The amount owed on all accounts and on different types of accounts: In addition to the overall amount you owe, the score considers the amount you owe on specific types of accounts, such as credit cards and installment loans.
• Whether you show a balance on certain types of accounts: In some cases, having a small balance without missing a payment shows that you’ve managed credit responsibly. But keep open only the credit accounts that you intend to use because having a bunch of open credit accounts with no activity can be a negative. On the other hand, closing unused credit accounts for establishments that you intend to continue to patronize that show zero balances and that are in good standing doesn’t raise your score. Closing accounts you may use again in the near future only to reopen them can have an overall negative affect on your credit score. So close those accounts you know you won’t be using for years, if ever, while keeping open any credit accounts that you may use in the near future.
• How many accounts have balances: A large number can indicate higher risk of overextension. Although many stores and online retailers want to lure you into having their specific branded or affinity credit card, it’s better to consolidate all your credit to just a few of the major credit cards that are widely accepted.
• How much of the total credit line you’re using on credit cards and other revolving credit accounts. Someone closer to “maxing out” on many credit cards may have trouble making payments in the future.
• How much of installment loan accounts is still owed, compared with the original loan amounts. For example, if you borrowed $10,000 to buy a car and you’ve paid back $2,000, you owe (with interest) more than 80 percent of the original loan. Paying down installment loans is a good sign that you’re able and willing to manage and repay debt.

How to improve your FICO score:

• Keep balances low on credit cards and other revolving credit. High outstanding debt can adversely affect a score.
• Pay off debt. The most effective way to improve your score in this area is by paying down your revolving credit.
• Don’t close unused credit accounts that you still may use as a short-term strategy to raise your score. Generally, this tactic doesn’t work. In fact, it may lower your score. Late payments associated with old accounts won’t disappear from your credit report if you close the account. Long-established accounts show you have a longer history of managing credit, which is a good thing.
• Don’t open new credit cards that you don’t need, just to increase your available credit. This approach can backfire and actually lower your score. Again, although it’s tempting when your local retailer makes that great offer of an extra 10, 20, or even 50 percent savings on today’s purchases if you just open a credit account with them, don’t do it — unless you’re buying an extremely expensive item (although most of these deals have limits or caps) and you’re able to immediately make full payment for all your monthly expenditures, plus you actually intend to use the card regularly. Otherwise, just ask for a cash discount or use one of your major credit cards that are accepted by most retailers.

Length of credit history

How established is your credit history? About 15 percent of your score is based on this area. In general, a longer credit history increases your score. However, even people who haven’t been using credit long may get high scores, depending on how the rest of the credit report looks.

In this area, your score takes into account

• How long your credit accounts have been established, in general: The score considers both the age of your oldest account and an average age of all your accounts.
• How long specific credit accounts have been established: Extended responsible use of credit accounts with major credit cards and/or major retailers can have a positive effect on your credit score. This is much better than having a lot of accounts that are open for only a short period of time.
• How long it’s been since you used certain accounts: Not using all your available credit shows self-control and responsible use of credit.

If you’ve been managing credit for a short time, don’t open a lot of new accounts too rapidly. New accounts lower your average account age, which will have a larger (negative) effect on your score if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you’re a new credit user, so you don’t want to accept every offer you receive in the mail for a new credit card or open a credit account with every retailer you patronized just for a one-time sign-up bonus.

New credit

Taking on a lot of new debt affects your score, too. About 10 percent of your score is based on new credit and credit applications.

People tend to have more credit today and to shop for credit — via the Internet and other channels — more frequently than ever. Credit scores reflect this fact. However, research shows that opening several credit accounts in a short period does represent more risk — especially for people who don’t have a long-established credit history.

Applying for several new credit cards or accounts also represents more risk. However, FICO scores do a good job of distinguishing between a search for many new credit accounts and rate shopping for one new account.

In the area of new credit, your score takes into account

• How many new accounts you have: The score looks at how many new accounts you have by type of account (for example, how many newly opened credit cards you have). It also may look at how many of your accounts are new accounts.
• How long it’s been since you opened a new account: Again, the score looks at this info by type of account.
• How many recent requests for credit you’ve made: This is indicated by inquiries to the credit reporting agencies. Inquiries remain on your credit report for two years, although FICO scores consider inquiries only from the last 12 months. The scores have been carefully designed to count only those hard inquiries that truly impact credit risk. Inquiries for insurance or employment are soft inquiries and don’t negatively affect your credit score.
• Length of time since lenders made credit report inquiries: The older the lender inquiries, the better. Inquiries more than a year old are ignored. In this case, being ignored is good.
• Whether you have a good recent credit history, following past payment problems: Reestablishing credit and making payments on time after a period of late payment behavior helps to raise a score over time, so can disputing any incorrect entries or even providing a letter of explanation.

Here are some ways to improve your FICO score:

• Do your rate shopping for a specific loan within a focused period of time. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. For more on this topic, see the section “Adding up inquiries ,” later in this chapter.
• Reestablish your credit history if you’ve had problems. Opening a select number of new credit accounts responsibly and paying them off on time will raise your score in the long term.
• Request and check your own credit report and FICO score. It’s okay to do this and it doesn’t affect your score because it’s a “soft inquiry” — as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers, such as www.annualcreditreport.com .

Types of credit in use

The credit mix usually isn’t a key factor in determining your score — but it’s given more weight if your credit report doesn’t have a lot of other information on which to base a score. About 10 percent of your score is based on this category.

In this area, your score takes into account the following factors:

• What kinds of credit accounts you have: Your score considers your mix of credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. Don’t feel obligated to have one of each.
• How many of each type of credit account you have: The score looks at the total number of accounts you have. How many is too many varies on the credit type. You don’t need to have one of each type. Don’t open credit accounts you don’t intend to use just to hype up your total. Think quality, not quantity. Apply only for credit accounts that you know you’ll really need, and always use all types of credit judiciously and responsibly.

How to improve your FICO score:

• Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix or fall for the trap of thinking that more accounts is better. Years ago, common advice was that to build up your credit history, you must go out and buy something you really don’t need just to establish that you can show a good payment history— our advice is to buy only what you have to buy on credit and pay it off as promised.
• Have credit cards — but manage them responsibly. In general, having two to three major widely accepted credit cards and installment loans (and making timely payments) raises your score.
• Note that closing an account doesn’t make it go away. A closed account still shows up on your credit report and may be included in the score.

Adding up inquiries

A search for new credit can mean greater credit risk. This is why the FICO score counts inquiries — those requests a lender makes for your credit report or score when you apply for credit.

FICO scores consider inquiries very carefully because not all inquiries are related to credit risk. You should note three things about credit inquiries:

• Inquiries don’t affect scores very much. For most people, one additional hard credit inquiry takes less than 5 points off their FICO score. However, inquiries can have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk: People with six inquiries or more on their credit reports are eight times more likely to declare bankruptcy than people with no inquiries on their reports.
• Many kinds of inquiries aren’t counted at all. Ordering your own credit report or credit score from a credit reporting agency has no impact on your score because it’s a soft inquiry. Also, the score doesn’t count requests a lender makes for your credit report or score to make you a preapproved credit offer, or to review your account with them, even though you may see these inquiries on your credit report. Requests that are marked as coming from insurance companies or employers aren’t counted either.
• The score looks for rate shopping. Looking for a mortgage or an auto loan may cause multiple lenders to request your credit report, even though you’re looking for only one loan. To compensate for this reality, the score counts multiple inquiries in any 14-day period as just one inquiry. In addition, the score ignores all inquiries made in the 30 days prior to scoring. So if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping.

What FICO scores ignore

FICO scores consider a wide range of information on your credit report. However, they don’t consider the following:

• Your race, color, religion, national origin, sex, and marital status

  U.S. law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act.

• Your age
• Your salary, occupation, title, employer, date employed, or employment history

Lenders may consider this information, however:

• Where you live and how long you’ve lived there
• Any interest rate being charged on a particular credit card or other account
• Any items reported as child/family support and divorce obligations or rental agreements

• Certain types of inquiries (requests for your credit report or score)

  The score does not count any requests you make, any requests from employers or insurers, and any requests lenders make without your knowledge.

• Any information not found in your credit report, including your current salary and occupation
• Any information not proven to be predictive of future credit performance

Interpreting scores

When a lender receives your FICO score, up to four score reasons are also delivered. These aren’t reasons your score was low but rather the top reasons your score isn’t higher. If the lender rejects your request for credit and your FICO score is part of the reason, these score reasons can help the lender tell you why.

These score reasons can be more useful to you than the score itself. They help you determine whether your credit report may contain errors and how you may improve your credit score. However, if you already have a high FICO score (for example, in the mid-700s or higher) some of the reasons may not be helpful because they may be marginal factors related to less important categories such as your length of credit history, new credit, and types of credit in use.

The total number of factors or score reasons that are available and used in the preparation and scoring of credit reports vary among the three major credit reporting agencies. Our recent check found that they currently use between 30 and 34 score reasons.

Getting your score

Because lenders check your score, you may want to see the same score that they see. It’s easy to check your FICO score and to find out specific things that you can do to raise it. The websites for many banks, financial services sites, and credit reporting agencies offer FICO scores for a fee, as does Fair Isaac’s myFICO site at www.myFICO.com . Information you receive includes

• Your current FICO score
• Your credit report on which your FICO score is based
• An explanation of your score, the positive and negative factors behind it, and how lenders view your credit risk
• A FICO score simulator you can use to see how specific actions, such as paying off all your card balances, would affect your score
• Specific tips on what you can do to improve your FICO score over time

In addition, you can see current information on the average interest rates for home loans for different FICO score ranges.

If you do business with one of the larger banks, you may have free access to your FICO score. Just be aware that you may not be getting the best overall deal on whatever services you’re buying from those banks.

Managing your score

Follow the tips in this chapter to manage your credit score efficiently. Improving your score can help you

• Get better credit offers
• Lower your interest rates
• Speed up credit approvals

An important time to check your score is six months or more before applying for a mortgage. This gives you time to make sure your credit report information is right, correct it if it’s not, improve your score if necessary, and ensure your access to the best mortgages available.

If you’ve been turned down for credit, the federal Equal Credit Opportunity Act gives you the right to find out why within 30 days. You’re also entitled to a free copy of your credit bureau report within 60 days, which you can request from the credit reporting agencies. If your FICO score was a primary part of the lender’s decision, the lender will use the score reasons to explain why you didn’t qualify for the credit.