| A credit score number is often called a FICO score, | | | | means mailing your check at least five days prior to |
| for Fair Isaac Corp., the California company that | | | | due date or scheduling online payment at least 2 days |
| developed the system upon which it is based. Scores | | | | before. Do not wait until the due date or try to |
| range from the 300s to about 900, with the vast | | | | backdate your checks when mailing them late, as this |
| majority of folks falling in the 600s and 700s. The | | | | usually will not work. |
| higher the score, the better. Scores higher than 725 | | | | 3. Work to increase your debt-to-credit ratio. This can |
| are considered good while those which are below 600 | | | | be done by repaying as much as you can of what |
| are considered poor. Maximum credit scores that | | | | you owe on the loans you have, by increasing the |
| range from 750 to 850 are excellent and show | | | | credit limit on the credit cards that you have while |
| creditworthiness of the individual applying for a loan. | | | | keeping the balances low, and/or applying for a new |
| Most people's reports aren't perfect. No matter how | | | | credit card with high limit, but keeping the balance low |
| early you mail that check with payment, it may still | | | | or zero. Just don't go around applying for too many |
| arrive late or get lost, so you should expect to find | | | | cards at once (see #5 below), and don't be tempted |
| some negative information on your report from time to | | | | to spend more money just because you now have |
| time. Mistakes can be made when entering your | | | | more credit available! |
| information into the system at credit bureaus. Lenders, | | | | 4. Protect your credit history. Fair Isaac's model |
| banks and credit card companies make mistakes too. | | | | assumes people who have had credit for a long time |
| In fact, over 60% of credit reports contain some | | | | are less risky. So if you have credit cards or accounts |
| inaccuracies or errors. | | | | that you want to close, think about it first. Canceling a |
| And it's usually not a big deal. Even with some flaws | | | | card will wipe out part of your history and increase |
| on your report you will still be eligible for credit at | | | | your debt-to-limit ratio, both of which will reduce your |
| competitive rates and good terms. Especially if you | | | | score. If you want to cancel several cards, start with |
| have long credit history with a lot of information in your | | | | the newest one first, and then in a month or two see |
| file, your good deeds will lessen the effect of one or | | | | what it does to your score. |
| two negative items. If you are young or a new | | | | If you don't have any history you will not have any |
| immigrant with short history, a negative item will have a | | | | FICO score, because the score is merely a calculation |
| stronger effect on your score. | | | | based on data collected by the credit bureaus. Believe |
| So, what do you need to do to maintain a maximum | | | | it or not having no score can be as bad or even |
| credit score? | | | | worse than having low score. You may find that it is |
| 1. Get a copy of your credit report, review the | | | | really tough to get a loan, or you may have to pay a |
| information in it and, if you find any errors, to have | | | | lot higher interest rate, because the lender does not |
| them corrected. You can have inaccurate information | | | | have a clue whether you are a credit risk or not. |
| removed by either contacting the credit agency or | | | | 5. Do not initiate too many requests for credit, loans or |
| contacting the creditor. The Fair Credit Reporting Act | | | | other debt instruments over a short period. If you have |
| requires all credit-reporting agencies to investigate any | | | | many recent new inquiries, your score will go down. |
| disputed items at no cost to the consumer. The law | | | | 6. Create the right credit mix. Lenders like to see a |
| requires that the creditor verify the entry within 30 | | | | good mix of credit cards, retail cards, and installment |
| days or the information must be deleted from your file. | | | | loans, such as car loans or home mortgages. |
| If your credit report gets corrected, you will receive a | | | | Someone with only a secured credit card is generally |
| free copy of the revised report. | | | | considered riskier than someone who has a |
| 2. Pay your bills on time. This is critical. Paying on time | | | | combination of installment and revolving loans. |