Scorecards and Your Credit Score

Scorecards are very important to understand, yet they are the least known factors by the general population.

Your Scorecard controls how the five factors that go into calculating your credit score are applied specifically to you. The Scorecard can have a profound effect on your overall credit score.

All borrowers are segmented into 10 buckets known as Scorecards. The segmentation is based on the information on your credit report (your credit history). All factors that we just described in previous sections are taken into account when you are assigned to a scorecard group.

The details of how the Scorecard system works are very sketchy, but we do know a few things. People with a bankruptcy and other public record items on their credit report are assigned a specific Scorecard group and people with very little history are assigned into a different set.

A Scorecard system is designed to make the credit score formula more accurate. Try thinking of it as a rank. You can be at the top level of a bottom rank which might put you into a better credit score value than a person at the bottom level of a medium rank.

As am example, let’s look at a real world situation. Lori had several negative items on her credit report, including a bankruptcy, and as a result her credit score was not that good. She put in the time and the energy into rebuilding her credit score. She was very happy to discover that her efforts were paying off. She knew that soon the bankruptcy will be off of her credit history report and her credit score should be higher. When the 7 year mark passed, she was eager to see her new higher credit score, but when she got the numbers she was extremely disappointed and surprised to find that she actually lost 20 points.

What Lori experienced is a transition from one scorecard group to another with different rules. Having the bankruptcy on her record placed her into the “bottom” scorecard group yet her efforts to improve her credit score helped her climb to the top of that particular scorecard group. However, when the bankruptcy disappeared from her credit report, she was automatically placed into a different scorecard group with stricter standards, so her other credit issues pushed her to the bottom of that new scorecard group. Her overall credit score dropped as a result of this transition from one scorecard group to another.