Calculation of The United States Credit Score |

Based on standard FICO criteria, we were shocked to learn that the U.S. credit score was…

Calculation of the United States Credit Score

Everyone realizes the significance of monitoring their credit score and ensuring it’s as high as possible, especially with the immense scrutiny of lenders these days. At the same time, we have also heard on numerous occasions about the government’s enormous debt levels, which have grown at an accelerated rate as a result of efforts to get the economy back on track. Now, we have this interesting graphic, which shows what the credit score of the U.S. government would be and how its debt levels affect the score. The pie chart details the various factors that go into calculating the FICO score and the percentage weight of each factor.

Things get off to a good start as the United States benefits from its payment history, which accounts for 35% of the FICO score. The country has had an impeccable loan repayment record for over 200 years. It has never missed a payment or shirked a creditor, whom Uncle Sam pays when they cash in treasury securities. Despite the country’s mounting debt, there is virtually no concern about its ability to continue paying off its debts. Unfortunately, higher taxes will likely be required in order to maintain that perfect streak.

Credit history accounts for 15% of the FICO score and America’s history, which dates back to the Revolutionary War, assures lenders that there is little risk in letting the country borrow money. This section of the illustration also includes a chart depicting debt as a percentage of GDP throughout history. Unfortunately, we’re currently approaching levels not seen in approximately 70 years.

That chart is followed by the country’s debt level, which accounts for 30% of its FICO score. This is where the score is impacted negatively. At the time the image was created, the United States had a debt level totaling $11,804,316,400,237. Yep, that’s nearly $12 trillion and it’s still climbing. That translates to $38,396 per citizen, including children. Ouch!

The next section details the types of credit used, which accounts for 10% of the FICO score. Boosting its credit score, is the fact that the U.S. has borrowed using a variety of credit types, including notes, bonds, and other securities. However, pulling the score down is the fact that it owes millions of different creditors. Topping the list of securities held by the public is notes with a total of $2.79 trillion. That’s followed by bills at $1.86 trillion and bonds at $591.8 billion.

The government loves to borrow from the Federal Old Age and Survivors Insurance Trust Fund, which is the top creditor and is owed $2.2 trillion. Next in line for payment is China to whom America owes $739.6 billion. The Federal Employees Retirement Funds will need to be replenished to the tune of $738 billion. The Federal Savings and Loan Corporation, Resolution Fund is owed $689 billion. Japan has loaned $634.8 billion and the Foreign Oil Exporters are expecting to receive $186.3 billion in repayment.

New Credit / Inquiries accounts for 10% of the FICO score. Unfortunately, the government has taken out trillions of dollars in new credit recently. As of the date the data was compiled, the U.S. had increased debt in 2009 by an astounding $1.2 trillion. That’s after an increase of approximately $1 trillion in 2008.

All this data leads to an approximate credit score for the United States of 620. As you can see on the chart, that is just barely in the “Fair” category. Based on increasing debt levels, an update of this graphic would likely show the score has currently dipped into the “Poor” category. Unfortunately, unlike the rest of us, Uncle Sam will be allowed to continue borrowing despite the disappointing credit score.