Credit Info

Can You Have Good Credit and a Bad Credit Score?

Two weeks ago, I was reviewing a study that suggested that the contents of credit reports are “predictable” based on your credit scores.  It’s complicated, but the argument was that all credit reports that score 500, 600, 700 (or any other score) look the same.  It was essentially an “all 600’s are created equal” angle.

This assumption is largely incorrect, as there are different paths to most scores near and above 550.  This is because credit scoring systems are multivariate, which means they evaluate a variety of information when calculating a credit score and no single factor determines a good or bad score.  That means different combinations of credit report data can lead to the same scores, which brings me to my key point…

Good Credit Doesn’t Automatically Equal Good Credit Scores

There are a variety of components that make up your credit scores including:

– Payment History (35%) : The presence or absence of derogatory information on your credit reports such as public records, collections, late payments, settlements, and defaults.

-Indebtedness (30%): The type and amount of debt you’re carrying, including installment and revolving debt, and various “debt to limit” ratio measurements.

-Time in File (15%): This is the age of your credit report and the average age of the accounts on your credit report, whether they’re open or closed.

-Account Diversity (10%): The variety, or lack thereof, of the types of accounts on your credit reports.

-Search for Credit (10%): The number of hard inquiries on your credit reports in the past 12 months.

One of the more common mistakes people make when it comes to credit scoring is that they believe you have good credit just as long as you make your payments on time.  Don’t get me wrong, that’s a great first step.  But if you think on-time payments equal a great credit score, you are mistaken.

Paying all of your bills on time and avoiding derogatory credit reporting earns you 35% of the available credit score points, which means you’ll still have to earn the remaining 65% in order to have a truly great credit score.  Let me run some scenarios by you to illustrate my point:

“I’ve Never Missed a Payment”

This is probably the most shocking of all of my scenarios.  Your credit score can be as low as 575 without ever having missed a payment.  Remember: By making all of your payments on time and avoiding other derogatory credit reporting, you’re just earning 35% of the points in your score.  Falling behind up in the other four categories referenced above quickly plummets your scores to a range where you’d expect to see serious derogatory credit information.

“I Have No Debt”

Not having debt is great, but you can still have a score as low as 535, especially if your credit reports are loaded with negative information.  This result dispels the “credit scores are based on your debt” myth that some popular personal finance gurus preach.

“I’ve Never Missed a Payment and I Have No Debt”

This seems to be the best of both worlds, but remember: These two categories account for only 65% of the points in your scores.  You can score as low as 695 having never missed a payment and not having a penny of debt on your credit reports.

The bottom line is this: You have to perform very well across all of the five credit scoring categories in order to earn great credit scores, but you only have to fall behind in one of the major categories to ruin your scores.  The examples given are clearly worst-case scenarios, and there are thousands of various combinations that can earn you scores between 700 and 800.  So, while you can’t have great credit scores with bad credit, you can certainly have poor credit scores with good credit.

John Ulzheimer is the President of Consumer Education at, the credit blogger, and a contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of or Intuit. Follow John on Twitter.