We all know about this all-powerful "judge & jurry" system out there called FICO, but until just recently we had little idea at what the rationale was for the punishments that were distributed. We're not idiots. We know that late payments hurt your credit, but how do they actually come to the number that banks rely on so heavilty when deciding your rates.
This past Thursday, the "damage points" data was revieled. It's a very broad and vague description, but I found it quite interesting so I thought I would share. You can read the full article here. What I find interesting is that you take a bigger hit for late payments if you have good credit than you would if your credit was just average. Every one makes mistakes some times. It seems wrong to hold people who have good credit to a higher standard as if it's just expected from "average" people and some how less offensive.
None of this will matter when we're completely debt free and no longer rely on the all-powerful FICO. After all, your credit score doesn't matter much when you pay in cash. In the mean time, however, it makes for some interesting reading.