Understanding Your Credit Score

What’s the score?

The FICO credit score (named for developers, Fair, Isaac & Company) reflects dozens of parameters in one’s financial history. For years, this number was a tightly guarded secret. Congress has now secured your right to know your score- take advantage of it.

  • Score 700 – 850: smooth loan process; best interest rates
  • Score 550 – 699: medium risk; higher interest rates
  • Score 300 – 549: sorry, no loans or credit card


What helps:

  • Pay all bills – and pay on time
  • Maintain 2-4 credit cards
  • Keep balances well below the limit
  • Pay more than the minimums
  • Establish long-term credit history
  • Keep one of your oldest accounts open and active if your credit history is less than 15 years old
  • Get a new credit card if all of your accounts have poor ratings and use it a little to start showing a good payment record


What hurts:

  • Too many credit cards or zero cards
  • High non-mortgage debt
  • Delinquent accounts
  • Frequent job or address changes
  • Charge offs* (bills marked uncollectible)
  • Bankruptcy
*A deal-killer; contact creditor, clear it up and clear it off


Big Three Credit Bureaus
The cost to order a credit report/score ranges from free to less than $30.Equifax Information Services, LLC


TransUnion LLC Consumer Disclosure Center


Know Your Score

Legitimate bad marks on your credit won’t disappear quickly. (It takes seven years; ten for bankruptcy.) However, time and diligence can turn things around. Lenders will give recent responsible activity due consideration.

In our credit-driven society, taking charge of your credit should be an ongoing process. Your FICO score is a snapshot in time, not set in concrete. Review it each year for errors that may have crept in and to monitor your progress. You have the power to know it, raise it, maintain it.

If there are errors or other surprises, contact creditors to make corrections or negotiate settlements. Also, be sure to notify the credit bureau of your dispute.

Ask For Good Faith Adjustments

When you look at your credit report you may see just one or two late payments. Maybe these payments were late because of an oversight or because of a one-time financial problem that has since been resolved.

In this situation, you might get an automatic boost to your credit score by asking for a “good faith adjustment.” Call or write to the creditor, and ask for a courtesy adjustment. If you’ve been a good customer and only have one or two late payments on your account many creditors will remove the late payment from your credit report.

Ways to legally fix your credit

1. If you don’t have a car or home loan, then use a credit card regularly (even for a $20 purchase) and pay it off each month.
2. If married, split up credit card balances and other debt between spouses.
3. If you have credit card debt, put it on an equity line or loan and make sure it’s listed as secured debt. Mortgage debt looks better than credit card debt. But be aware you are putting your house at risk.
4. Check your credit report carefully for duplicate accounts (called trade lines) that got listed when you got a new account number or the credit card or bank was sold. If you have many, dispute them as duplicates. Too many trade lines can hurt you.
5. If you have a short credit history or have a lot of debt, get added on as an authorized user on someone else’s account that has a low or no balance. You don’t need to have a card or use it.
6. Take out an equity line even if you don’t need it and won’t use it.
7. Keep your existing limits on credit cards, don’t request lower limits, even if you don’t need the higher limits. Lower limits hurt you even if you pay off balances every month.
8. If you have substantial credit card debt, keep all of your accounts open, even if you’re not using them. If you need to use each of your accounts once a year to keep them active, then do it.
9. If you have only one credit card or have high balances, consider opening a new account and use it sparingly.
10. Work as hard as possible to pay down credit card balances below 25 percent of your total limits.
11. If you have an old collection item, say a decade old, consider whether you want to pay it off. The clock for reporting it on your credit report starts from date of last activity. Negatives stay on credit reports for 7 years (actually 6 years and 9 months). Statute of limitations for court action may be different.