Buddy's Tips #006: FICO Scores

I watch my Credit Reports every three months. I am "gun shy" about four things:

1. Information and Credit reporting mistakes and errors
2. Unauthorized credit users
3. Identity theft
4. Failure by the Credit Reporting Bureau to make corrections to my report

In seeking to be watchful, here are some of the things I have learned in protecting my credit:

Fair Isaac Corporation established the concept of evaluating, measuring and scoring credit (e.g., FICO Score). Their Web Site is: www.FICO.com

FICO Scores range from 300 to 850

FICO Score is based on the following:

a. Bill payment history 35%
b. Debt to Credit Limit 30%
c. Length of credit history 15%
d. New account or recent application 10%
e. Mix of credit card and loans 10%
TOTAL 100%

1. The higher the FICO score the better: 721 and above is considered Very Good to Excellent. This is always my goal.

2. Credit Bureaus review and create your FICO Score based on:
a. spending,
b. bill payment history,
c. overall debt load

3. All stores and businesses file reports with the 3 major Credit Bureaus each month. These reports are used to determine my FICO Score.

4. Based on my FICO Score, the rate of interest I will be charged on a loan or mortgage is determined.

5. There are three CREDIT REPORTING AGENCIES that issue credit reports:

Equifax
Experian
Trans Union

Web Site: www.annualcreditreport.com

Telephone Number: (877) 322-8228

6. One technique I use is to request a FREE Credit Report every 4 months from one of the 3 credit bureaus. This enables me to keep track of my credit all year long.

7. Here are some ways I have used to improve and maintain a high FICO Score:
a. I pay all my bills early; always upon receipt. I use an on-line Bill Payer System through my Credit Union. I NEVER pay on time, I always pay before the DUE DATE.
b. I track my Debt versus my approved Credit Limit each month. The lower my debt the better.
c. I have worked hard to pay off all my debts; leaving me with ONLY my mortgage payment. All other debt I create is "selective" as I choose.
d. For a while I was applying for credit to boost my overall credit limits, but I am no longer doing this.

8. I try to protect my credit history by watching:

a. Credit History, itself; and
b. Debt to Credit Limit Ratio
c. Payment history (Although since I pay my bills upon receipt this is not a concern)

9. I don't do this often, as I try to keep all of my credit for "history" sake, but if I have to cancel a card it will be because the Card Issuer is not meeting my needs. The age of the card will not matter if I choose to cancel it. I will have talked with the Card Issuer to discuss my concerns and request a change, etc. If we can't reach a "meeting of the minds", then I will cancel the card. I am the CONSUMER, they need my business, not the other way around.

10. Having a good "mix" of Credit shows I am responsible in handling my credit. So, have a good mix of credit card loans, secured and unsecured loans, and mortgage loans as a part of your credit history. This will work on your behalf.

11. I NEVER miss a payment

12. WATCH YOUR CREDIT CAREFULLY!!! NEVER...be listed as an “authorized user” on someone else’s credit card. NEVER co-sign for another person’s loan. Their FICO Score (spending, credit history and payment activity) will impact your FICO Score.