Missed payment are judged based on three factors. The first is the severity. Basically, it comes down to how late were you when you finally paid the account. The longer it took you to get current the greater the negative effect on your credit score. The second factor is how often do you pay late. The more you pay late the larger risk you represent and the more it will hurt your credit score. The last factor is how recent was your last late payment. Since the FICO score formula gives more weight to recent events over the past, the more recent it is the larger the negative effect.

The question is if you have an excellent credit score will one payment really hurt your credit score? The answer is yes. The reason is the FICO score formula looks for any sign of distress. Since a person with excellent credit has one or none late payments a single late payment is a red flag. For a person that always pay late, they are already expected to pay late again. Well, not really but it carries less of an effect.

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You might think the phrase credit score means a specific number that everyone uses, but really it is a very general term.  It actually is very generic, just think of what was stated above that there is 1000 different credit score models.  So in a lending situation you should ask what scoring model the creditor is using.

But the question is which ones or one should you really care about?  If there is an answer it would be your FICO score, which is the most widely used and trusted score today.  Chances are if you are going to a large purchase such as a home, your FICO score will be what your lender uses.  Now, this is a rule of thumb and there are exceptions.  And if you are not sure what they are using it is ok to ask.

So beyond the fact the FICO score is the most popular credit score model, it also makes up the general basis for the reasoning behind credit scores.  Meaning the same general areas of the FICO score calculation are found in other score.  So your payment history will carry the largest weight followed by your debt to credit ratio.  Etc..

Also, since a FICO score is just a brand of credit score, it is open to re branding.  This is the case with other scores you might of heard of such as the Beacon Score.

That leads to the fact if know where you are at on the FICO score scale you should have a pretty good idea where you fall with the other scores.  But it always does hurt to ask what your lender is using for a credit score model.

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What has happened in the credit market and the old way your score was viewed.

The best account of this could be the new times writer, Edmund Andrews, who just released a book on the crisis, “Busted: Life Inside the Great Mortgage Meltdown”. He not only reported on the subject but was personally experiencing it. The synopsis of his story is the fact that he had a good credit score and earned a decent salary. But behind the scenes he had very large child support payments causing him to only live on a few thousand dollars a month.

When he applied for a mortgage, the broker at the time gave him a $500,000 approval. The monthly payment alone was close to what he was taking home each month after his child support payments. Why then did he get approved for a mortgage? First, the lender had less than reliable lending practices and second he had a good credit score. He further remarks when he went deeper in debt his credit score actually got better.

Now, this might not be the exact circumstance with each default, but has many of the common trends in default that we are seeing today. The fact someone who really couldn’t afford a loan got it. And this was based purely on the credit standing and they had a job.

How these defaults will cause a change to your Credit Score in 2009

First is the view of what is a good credit score in 2009 will change. Usually this level is somewhere above 700 plus and can range up to 750. This range might shift higher or might even be subdivided into smaller groupings of scores.

Also, a good credit score in 2009 will not be enough to get a mortgage. You will have to prove that you can really afford what you are buying not just represent it. Lenders will have stricter guidelines that they follow and a good credit score and a job won’t get you approved any more.

There also might be a look into the underlying reasoning and how to improve based on an examination of the crisis. These findings might lead to a change in the credit score formula or more specifically the FICO score calculation.

How to get a good Credit Score in 2009

The same rules apply as they do in the past on how to get a good credit score. Pay your bills on time, keep your debt to credit ratio low and the list goes on here is a list of different articles to read on tips to improve your credit score

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