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I recently purchased Quicken 2007 and I’m wondering why Intuit didn’t include any kind of FICO simulator.   There are plenty of areas to enter credit card info, interest rates, credit limits, and more so you’d think Quicken could take these numbers and simulate a score for you!

I’m working on creating my own FICO simulator and it doesn’t seem as daunting a task as I initially thought.  From the info I’ve gathered, FICO score is broken down by:

35% Borrower’s History
30% Debt
15% Credit length
10% Credit Type
10% Pattern of credit use

Assuming 850 points is a perfect score then

Borrower’s History  = 297.5 max
Debt                      = 255 max
Credit Length         = 127.5 max
Credit Type            =  85 max
Pattern ?               =  85 max
Total                      850 points

With some of the categories, I feel fairly confident so I’m assuming I receive:

297 points for having good history – Never late on any payments over the last 10 years
127 points for credit length – The oldest account showing is from 1996; assuming good?  Not sure how opening/closing credit card accounts factors in.
85 points for credit type – Not sure about this but I have a mix of Home, Auto, Student, Credit Cards (all paid off except Home & credit cards)

I am a bit at a loss for how Debt and Pattern are calculated
85 points for Pattern – any ideas?
255 points for Debt – This one is perhaps the trickiest.

Adding my theoretical points (297+127+85) I get 509 and assuming I get half of the “Pattern” score that brings me up to 551 (considered sub prime!)

Clearly, Debt is a big factor (almost half) of your credit score.  I’ve read that anything about 50% utilization on a credit card is considered bad so how do we determine how bad that is?

If I currently have ~$73,000  in credit lines in 5 credit cards.  I have an AMEX with no limit and not sure how this fits in

Limit              Available         % Used

CC1       10,000                9,000             10%
CC2       18,000              18,000               0%
CC3       28,000                3,750             87%
CC4       12,500                3,750             70%
CC5         4,400                3,565             19%

Total        72,900             38,065            48%

Now the issue is does FICO use the overall total debt load or individually rate each one?  What are some theoretical ways to rate debt?

A total of 255 points are available for debt load so can it be that you lose 25 points for every 10% increase in debt load?  This would only work if the assumptions are based on total debt vs total available credit.

No debt = 255 points?
10% debt = 230 points?
20% debt = 205 points?
30% debt = 180 points?
40% debt = 155 points?
50% debt = 130 points?
60% debt = 105 points?
70% debt =  80 points?
80% debt =  55 points?
90% debt =  30 points?
100% debt = 5 points?

If somewhat in the ball park, then 50% debt load gets me another 130 points to bring my score to a total of 551+120 = 671?

If the debt factor is calculated individually then the math gets more complicated but not impossible.

The whole point of doing this exercise is to try to determine how badly FICO score gets “damaged” doing arbitrage deals.   As you can see, I have 40k in available credit that is just sitting there not doing anything for me.   You have to wonder what good credit lines are if you can’t use them without seriously damaging your credit score.

The more I think about how the FICO is calculated the more I think that it is seriously flawed.

There is no consideration given to how much a person has in savings.  A person with 70k in credit card debt with $0 savings is a much greater risk, in my opinion, than someone with 70k in credit card debt and 70k in savings.

There is no consideration given to income levels.  Again, a person with 70k in credit card debt with 30k in income is a significantly higher risk than someone with 70k in debt with 150k income level.

Ultimately it may not matter since a the new WAMU credit card grants you access to your FICO score every month.  I’ll try to periodically post how my FICO score is affected when doing arbitrage deals.