Credit Scoring And Buckets – FICO’s Dirty Little SecretKathy Godinupdated Feb 28, 2011TweetAt GET.com we maintain complete editorial integrity on our content & provide transparent & unbiased information. Companies don't pay us to include their products although we receive a compensation when you successfully apply to products from our partners. See how we make money here.At GET.com we maintain complete editorial integrity.“My score dropped in spite of paying all my bills on time. Buckets are probably the reason says a lady at work. What are buckets?” Mona wanted to know.So Mona called Sue, a mortgage loan officer and a friend. Risk is everything to FICO (FICO), Sue explained. People of similar risks find themselves grouped together.How does FICO do this? Little is known for sure. The best information Sue had went like this:– They separate the people who use cash from those who use credit. Mona used credit.– Clean and dirty files are separated. Dirty files include folks with a 60+ days late, a charge off or collection and a negative public record like bankruptcy or judgment. After her divorce, Mona was guilty on all 3 counts.– Revolving accounts with low balances separated from those with high credit balance. Mona’s balances were very high at one time.– Average age of accounts sorts those with a 10+ years from those under 10. The average age of Mona’s accounts was over 10 years.What does FICO do with this information? Mona was placed in a group (bucket) that included people with similar situations. Mona is compared with people in her group when FICO calculates her score.Mona works hard to improve her score – she wants to buy a house. Paying all her bills on time and reducing her credit card balances improves Mona’s scores. Why all of a sudden a slight dip?Mona improving her credit file caused FICO to change her bucket. People in her new bucket have better credit files than her old bucket. The competition is stiffer and her score drops a little.Don’t worry about it. This is a short-term consequence. Mona should continue paying all her bills on time and reducing her credit card balances. The negative items in her file will cost her fewer points as they get older. The new items will win the day. It just takes time.Editorial Disclosure: Any personal views and opinions expressed by the author in this article are the author's own and do not necessarily reflect the viewpoint of GET.com. The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone, not those of the companies mentioned, and have not been reviewed, approved or otherwise endorsed by any of these entities.