FICO Scores Explained: Essential Information from Elaine Cozart

Show Notes

• Guest: Elaine Cozart
• Host: Tara Alderete
• Publication Date: April 1, 2025

Highlights

• 2:01 | Elaine explains the importance of your credit score.
• 4:10 | Elaine breaks down the important components of a FICO credit score and how scores are impacted by your credit usage.
• 11:13 | Tara and Elaine discuss the best ways to improve your credit score.
• 19:45 | Elaine talks about FICO’s efforts to bring credit education to students and young adults.

Episode Transcript

Note: Transcripts are machine-generated and may contain errors.

Tara: Hey there. This is Tara Alderete with MMI. Today on the show we have one of our partners, Elaine Cozart from FICO. Elaine is a consumer empowerment consultant. We've partnered with FICO for some time now. They're fabulous partners and I'm so excited to talk to her today. Here at Money Management International, we believe that financial challenges aren't meant to be faced alone and financial wellness is a journey. On this podcast, we hear stories of people whose lives have been changed by MMI.

And we also hear from the dedicated partners helping to make a difference. These stories are unique, personal, and inspiring. Stay tuned. We're sharing each guest's long story short. Elaine, welcome to the show.

Elaine Cozart: Thank you so much, Tara. It is so great to be here.

Tara: You're very welcome. I'm excited to talk to you today. I think think what you have to share is going to be so valuable for our audience and I'm really excited to jump in and get started. But before we do that, could you just tell us a little more about yourself and your role at FICO?

Elaine Cozart: I am really passionate about credit education and so within my role here at FICO, I work with credit counseling organizations like MMI and lending organizations like banks and credit unions and other financial institutions to, to help them either launch their credit education programs to their customers or to help them enhance those credit education programs. So I really get to use my passion in my role here.

Tara: I love it. And so much of that education I know is around credit scores and what they mean. So I want to talk a little bit more about that FICO score, that credit score, essentially. I know that FICO, the Fair Isaac Corporation, is basically an analytics company and you guys create a three digit score. So could you tell us just a little bit more about that and why it's important?

Elaine Cozart: That three digit score is really a summary of your credit history and it is a picture of your credit in that moment that that FICO score is pulled. So why is it important? It's really important for consumers to understand how lenders view them when they apply for credit. So. So the FICO score was created really probably for many purposes, but the top two for the purpose of this conversation is as a benefit both to lenders and consumers. And the benefit that it brings to lenders is those three digit numbers represent a particular level of risk that an applicant might pose to them if they were to accept that applicant as a new customer. For consumers, what the FICO score does is it helps to remove the personal bias in the lending process. So the FICO score is based on the credit information or a consumer's behaviors and habits with credit over time versus considering where they live, what color their skin is, where they pray. You know, all of those kinds of discriminatory factors.

Tara: That makes perfect sense to me. There are so many people, so many consumers applying for credit. Lenders would need a way to be able to say, here are just the facts. Are you a good risk? Are you not a good risk? And then let's move from there. So that makes perfect sense to me. When I think about managing your credit score or even improving your credit score, I know sometimes it can feel like I have no idea where to start to do that. I want to talk a little bit more about that. I know that there are five basic pieces of a credit score components, if you will, and I know that those are payment history, the amount that you owe, credit length, how long you've had, your credit inquiries, and mix of credit.

Could you tell us just a little bit more about those components? Are any of those components more important than the others? And what should folks know about that?

Elaine Cozart: Yeah, absolutely. There's a lot there. So what I would like to start with is within those five categories, the two that weigh the most in the score are going to be payment history and amounts owed. So payment history, think of that as you know, are you paying your credit obligations on time as agreed, every single month? So. So the FICO score is going to look at whether or not there were any delinquencies, how long ago the delinquency happened, how severe was it? 30 days, 60 days, 90 days? Also, how many accounts went delinquent? So that's credit history that weighs about 35% of an individual's FICO score and then amounts owed accounts for about 30%. So one of the things that I've heard you say is if you do the math, those two categories are 65% of your score. And I love that because those are the largest percentage of your score. So within amounts owed, the FICO score is looking at within credit cards and within installment loans, it's looking at how much do you owe.

If we look at credit cards separately, the FICO score is looking at how much you owe in relation to your limit. So if you have a $1,000 credit limit and you owe, you have a balance of $500, then you have a 50% utilization. You're utilizing 50% of your credit of your available credit. So the FICO score is looking at that, and it looks at each account individually, and then it looks at Accounts as a whole. So. So it's really important for consumers to understand within those two categories, the best thing that you can do is pay your accounts as agreed on time every month and keep your balances as low as possible.

Tara: So that brings me to a question that I wanted to ask you. I heard you say that payment history is the biggest piece, right? 35%. So let's say that I have paid on time consistently for 20 years, never missed a payment, and something happens and I missed two payments in a row. Am I going to be penalized? Or will the system sort of look at me and say, oh, she's been a really great payment payer for 20 years and she just had a problem, we're going to let her slide. How does that work?

Elaine Cozart: You have to keep in mind that the FICO score is a picture of your credit history in the moment that that score is pulled. So what I mean by that is your score can change from literally from one day to the next. It doesn't always, but it has the ability because lenders and creditors are reporting information to the credit reporting agencies. So Again, Equifax, Experian, TransUnion, reporting to them typically every month. And not everybody reports on the same day or at the same time. So you could look at your FICO score today and then look at it again tomorrow or next week or next month and it could be different because new information could have been presented. So when you talk about having 20 years of on time payment history and then suddenly having a delinquency or two, those delinquencies are going to weigh very heavily on the score because it's looking at how you are managing your credit today. You know, in this moment in time.

Tara: Tell folks how to get their score. How do I get my official FICO score? Is it free? Is it the same score everywhere I look? What do I need to know about that?

Elaine Cozart: Yeah, so there are a couple things in there that I want to address. First and foremost. Yes, there are many ways that you can get your FICO score for free. One is if you're working with a credit counseling organization like MMI, they will pull your credit and include your FICO score and you can see your score that way. But if you're not in need of credit or financial counseling in the moment, many lenders, banks, credit unions, financial institutions are sharing FICO scores with their account holders. So check with your bank, your credit union, anybody that you are have a financial credit relationship with, to see if they have that option.

Tara: Okay.

Elaine Cozart: So another place that you can get your FICO score is through myfico.com so that's my F I C O dot com and the myfico program is a monthly subscription where you can get your Equifax credit report and your FICO score based on Equifax data. MyFico will push that out to you every month. And that particular subscription is free to consumers, so anybody can sign up for it. We're not going to ask for a credit card so you don't have to worry about like a limited period. So that is another way that you can get your FICO score for free and you get that monthly monitoring. Second, another program that is very similar to that is through experian.com you can get your Experian credit report every month and your FICO score based on Experian data for free. So we highly recommend that consumers sign up for both programs so that they can see at least two of their three credit reports and scores on a regular basis.

Tara: Perfect. So it sounds like it is very important for consumers to keep track of their credit score because as you said, it is a snapshot of your credit in that moment in time. So it makes sense to me if a lender is looking at my credit to determine whether or not they're going to lend me money and what the interest rate is going to be, I would want to make sure that I am tracking my score to make sure that I sort of know what I'm up against when I do go for a loan.

Elaine Cozart: And I just wanted to add to that. You mentioned keeping track of your score. It's really important for consumers to keep track of their FICO score specifically because 90% of the top lenders are using the FICO score in their day to day lending business. So it's really important to pay attention to the FICO score specifically. And if you see a score, it says credit score. If it doesn't say FICO score, it most likely isn't and therefore is probably not the score that a lender is going to use to determine whether or not they're going to lend you money or offer you a credit card.

Tara: Oh, that's great information. Okay, so we want the official FICO score and I can get that@myfico.com or I can work with my lenders and oftentimes they'll give it to me for free, my creditors. So it brings me back to this important question that I want to ask you because we get it a lot. So something has happened, we all run into this and my Score is not necessarily where I want it to be. Is it possible for somebody to increase their credit score and how can they go about doing this?

Elaine Cozart: Yeah, so that's a really good question. There are definitely ways to improve your credit standing. And when you improve your credit standing, you can see an increase in your FICO score, but it takes time. So it's very important to make sure that you're paying your bills on time every single month. If you are having difficulty achieving that, contact your lender immediately. Contact your lender before that bill is even due. Because if you can make some kind of an alternate agreement with that lender, then there is a chance that they would not report it as delinquent. But you have to work with the lender.

So pay your bills on time every month. Keep your balances low. There are three other categories that I hadn't touched on, and one is credit history length. So the longer you have credit, typically the better that is for your score. Now, where that can be a challenge is if there's somebody who is constantly applying for new credit. So you go to the department store, oh, you get an extra 10% off if you apply for a credit card. Well, that's going to be a credit inquiry and it's going to be a new piece of credit. And if you do that every time it's offered to you, then your credit history average will remain low.

So the FICO score is going to look at not only your, your longest account open, but it also looks at the average length of time of all of your accounts and how recent your most recent account was opened. So you want to avoid applying for credit when you don't need it. And that speaks to the next category, which is inquiries. So inquiries, there are two different types. There's a soft inquiry that many creditors are pulling on a regular basis without, you know, without you realizing it. But that does not harm your credit. They're just doing a soft inquiry to see what is happening with your credit standing. And then it's the hard inquiries where the consumer is requesting new credit.

Those are the inquiries that can have a negative impact on the FICO score. And so apply for credit only when you need credit. And then the last category is credit mix. If consumers have a mix of both installment and revolving credit, that tends to benefit the FICO score. However, FICO does not recommend opening new credit just to have credit mix. It only accounts for 10% of the score. So if you have one card and that's all you use, or you have one loan and that's all you need that don't open new credit just to have more credit.

Tara: So it sounds like the best thing you can do is manage what you have. And if I, if I'm hearing you correctly and I'm thinking about managing what you have, and I'm looking at possibly increasing my credit score and that biggest component is payment history. Do we see debt as a factor? Like, is paying down debt something that is going to help somebody increase their credit score?

Elaine Cozart: Absolutely. Keeping your balances low is the best for the FICO score. Now if you have an auto loan and you're paying it on time as agreed, you don't necessarily have to make extra payments payments on that. It's the credit cards that can really be an issue for some consumers if they're, you know, really living off of their credit cards. So those are the balances that we want to keep as low as we possibly can.

Tara: Okay, that makes sense to me. So I want to ask a follow up question about this. If our amounts owed are 30% of your overall score, it's a big consideration. And especially when we're thinking about credit cards where we have the opportunity to increase that balance every month. Speaking of debt, I did wanted to ask you because it is a common thing. It's one of the things that we focus on in this podcast is really sort of the notion that debt is this bad, weird thing that only affects you and it's just not true. All of us have debt, many of us have debt, yet we don't talk about it. So I did want to ask you at MMI here, we're doing several different things to try to break down that stigma, especially using this podcast as a tool.

How is FICO working to educate consumers on the facts and how credit can be used as a tool, a positive financial tool, instead of something that's like, oh, credit, right.

Elaine Cozart: Yeah. Considering debt, a four letter word is really unfortunate. But if you think about it, you know when you can have assets that appreciate, like real estate, if you buy a home that is an asset that you still, you need credit to have that asset. Right. So it's really important to really just understand how to manage credit the best that you can. And what FICO has been doing for over 11 years now, we've had the FICO Score Open access program. I mentioned earlier that you can see your FICO score through your lender. And in addition to seeing your score, you also see your top two factors that are negatively impacting your score.

So those are the top two things on the credit report that are negatively impacting your FICO score. So that's really good information for consumers to pay attention to and especially for them to act on. Additionally, there's a lot of other credit education that comes with those FICO scores through the lenders. But again, there's the my FICO website. I think that's site has been open for over 15 years. So in addition to having a subscription, there is a ton of great credit education on that site. In fact, when you, when you go to myfico.com in the upper right hand corner, there are several different links and one of them is education. There are financial calculators, there are blogs.

There are descriptions of the five categories. What do they mean? How can I manage my credit according to these five categories? So lots of really good information there. And then we have a third program where FICO goes into communities and provides workshops for consumers to teach them about credit. And you actually have participated with us in that, haven't you? It's been really wonderful. So really getting out and talking with consumers about their experiences and helping to guide them with information and then also being able to recommend MMI for counseling for those folks who just, you know, really need that additional help. They're not able to improve their credit standing on their own.

Tara: Right. So I know, and I know FICO has some great programs. Like you said, we're, we've been lucky enough to partner with you on one of them. And, you know, I wanted to ask you. It seems like more and more I've been seeing articles about millennials and money and younger folks and how they might be tackling their financial situation or debt differently than generations before them. So are there any specific programs aimed at youth that FICO has available?

Elaine Cozart: Absolutely. Thank you so much for bringing that up. I mentioned going into communities and teaching adults about credit education. We also have a full financial literacy program that is free of charge and available to any organization that wants to offer credit education to youth. The program is really geared toward high school students, but we've offered the workshop to, you know, upper middle school, kind of seventh, eighth grade. And they get it. They, they understand it. They're, you know, they talk about how they're able to talk to their parents about credit and saving and managing their money and all of those kinds of things because of this workshop.

So the financial literacy program is FICO's score a better Future Fundamentals. And again, it is a free curriculum that organizations can have access to simply by going to FICO.com sabf that's as in Score A Better future. So that is available as well.

Tara: I'm going to ask you to sort of do a recap on all these resources because we've talked about so many great ones before we do that and sort of wind down. Just remind us one more time how consumers can get in touch with FICO or learn more about credit. Credit scores, FICO scores, all that good stuff.

Elaine Cozart: The first way that consumers can have access to their FICO score for free is to ask their lender. So again, banks, credit unions, any financial institution where they have an account and, and especially if they have a credit account, they should be able to see their FICO score with their top two key factors that are impacting their score and lots of other credit education. So the lender is one. Counseling organizations like MMI, they will share the FICO score and lots of great credit education that we have provided to those organizations specifically about the FICO score. Next would be myfico.com to again sign up for a free subscription where they get their credit report and FICO score every month, as well as lots and lots of great tips as far as contacting FICO. Within the my FICO website there is a contact button and they can reach out and if they have questions specifically about the FICO score, they'll be able to answer it. If they have questions about their own personal financial situation, it would be best for them to contact MMI.

Tara: Well, you actually did a great job of answering both questions at once. And so people are going to go to myfico.com and from there they can access tools and resources and calculators. They can chat with you, they can get in touch, they can reach out to their existing creditors or lenders for their FICO score and they can also contact us here at MMI. So lots of great avenues and resources for people to keep up on what that credit score is and what their credit says about them and then effectively manage it. I have loved talking to you today. I feel like, you know, we've had this partnership for a while and every time we are together we have a conversation. I feel like I learned something new. So I am so happy that you are able to join us today to, you know, just to share some of this knowledge because there's so much good stuff and it changes, right? So folks, go to myfico.com, take advantage of those free, wonderful programs and resources and really start to use your credit as a financial tool to get you where you want to be.

Elaine, is there anything else that you'd like to share with us.

Elaine Cozart: I just want to say thank you again for having me. I greatly appreciate MMI, both as a partner, but also as an organization that is really making a huge impact on the communities that it serves, just with counseling and so many tools and resources. So thank you so much for your partnership.

Tara: Thank you again. Fabulous to talk to you today. Thank you so much. Thanks for listening to this episode of Long Story Short brought to you by Money Management International. To learn more about our work and how we're helping people in all walks of life repay debt, balance their budget, and find lasting financial peace of mind, visit moneymanagement.org.

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