Worshiping At The Altar of the FICO

This past weekend, the Today show on NBC, had a story entitled, "7 ways to improve your credit score." It is clear from not only the title, but also their guest that they are worshiping at the altar of the FICO score.

So what are the 7 tips?

1. Fix your credit report
   

The fastest way to raise your score is to fix errors on your credit report. Go to www.annualcreditreport.com to get a free report from each of the three credit bureaus every 12 months. It’s important to fix mistakes on all three credit reports. You have a separate credit score based on each bureau’s report, so your scores could be very different if one report contains errors.
- Kiplinger’s Personal Finance magazines, Kimberly Lankford on NBC's Today Show


I personally agree that if there is errors on your credit report, they need to (and must) be removed. I am a big proponent of checking all 3 credit reports once each year.



2. Pay your bills on time
   

   About one-third of your credit score is based on your payment history. If you’re having trouble paying the total balance, pay at least the minimum by the deadline. Making that deadline is more important to your score than the amount you pay (although the more you pay off, the less interest you’ll owe). If you do miss the deadline, pay up as soon as possible, the later you are, the more you’ll hurt your score.
   - Kiplinger’s Personal Finance magazines, Kimberly Lankford on NBC's Today Show
   

   This is a commonsense no brainer. If you are late paying your debts, utilities and other bills, it is going to negatively affect your credit. Always, let me say that again, always pay your bills on time.
   
   
   
3. Keep your balances low
   

   Another big part of your score is the share of available credit you’ve used. Lenders get worried if it looks like you’re maxing out your cards. Keep card balances below 25 percent of the credit limit, 10 percent is even better. It’s the amount you charge that counts, even if you pay the balance in full every month.
   - Kiplinger’s Personal Finance magazines, Kimberly Lankford on NBC's Today Show
   

   If we are going to be debt free, why do we need to keep low balances? This is one area, where this lady and the banks are trying to keep you in debt, by trying to tell you closing the account will negatively affect your credit. The only reason banks want you to keep any balance at all, is so they can relieve you of your hard earned money and make themselves richer.
   
   
4. Don't close old accounts
   

   Keeping old accounts with a good record can help because the age of your oldest card and the average age of your cards are key elements of your score. Closing accounts also lowers your overall credit limits, which makes it look like you’re closer to maxing out your available credit. If you do want to close some accounts, especially ones with high annual fees, close only one every few months and don’t close any accounts within six months of applying for a loan.
   - Kiplinger’s Personal Finance magazines, Kimberly Lankford on NBC's Today Show
   

   I pretty much answered this one in my last response. As Dave Ramsey has repeatedly said on his show, the only thing a good FICO score shows is that you love debt. If we are going get out of debt, we don't need a score at all. Plus, if you want to get a mortgage and don't have credit, you can still get that mortgage. Mortgages being the only debt Dave Ramsey, backs away from being critical on, can be obtained by using a mortgage broker that uses manual underwriting.
   
   
5. Pay off old debts
   

   Even a small library fine or disputed electric bill can crush your credit score if the debt goes into collection, dropping a high score by as much as 100 points. Now that more municipalities and utilities are sending small, old bills to collection agencies, I’ve been hearing from many more readers whose scores dropped significantly because of a very old bill for less than $100. Even if you pay off the bill after it’s gone to collection, the damage is already done. Negative information generally remains on your credit report for up to seven years, but the impact on your score lessens through time. Don’t lose track of small charges that can come back to haunt you, and pay the bills off quickly before your score suffers.
   - Kiplinger’s Personal Finance magazines, Kimberly Lankford on NBC's Today Show
   

   Yes, I agree. Going back and paying off debts that may have gone to collection is not only a legal obligation but us a moral one, because we are to honor our agreements.
   
   
   
6. Order your credit score
   

   You can’t get your score for free, but you can order it when you get a free copy of your credit report at www.annualcreditreport.com. Or you can go to www.myfico.com and get your score directly from Fair Isaac, which created the popular FICO score. Some credit bureaus also offer their own versions of credit scores, which can give you a general idea of how your record stacks up, but most lenders use the FICO score when setting your rates.

   
   
   I have even heard Dave Ramsey talk on his radio show about going to www.myfico.com and checking his FICO score. In his case it is 0 on all three credit bureaus. Meaning he doesn't have an "I love debt score," because he doesn't.
   
   
   
7. Don't ignore your score
   

   Buying or refinancing a house is the biggest reason to be concerned about your score. But your credit score also affects your credit-card rates and terms, car-loan rates and auto and homeowners insurance premiums. Insurers found that people who have low credit scores are more likely to have insurance claims, and your score can have a big impact on your premiums in most states. Potential employers and landlords may also check your record. Don’t worry about micromanaging your score, you’ll usually look good with anything above the high 700s. But your score can affect your personal finances at any time.

   
   OK, I have gave my thoughts on this. Unless you are going to make the banks richer and go into debt again, I strongly urge you to ignore your score. You can get a mortgage by using a manual underwriter rather then a bank that leans purely on the FICO score.
   
   With that said, I do know my scores. Last Month, the last month WaMu checked my credit from the old Providian Credit Card that i just paid off, they put me at a 688 with TransUnion.
   
   However, on April 14th of this year I logged into and got all 3 FICO's. I must say there is quite a bit of difference and I haven't been late on anything recently nor have I applied for any new debt.
   
   *** TransUnion 619 *** Equifax 550 *** Experian 624 *****
   
   Two of the three did however, have a public record on them that even though it was paid and the lien released had not been removed from my credit reports. In fact, the state actually just sent me the court papers dated some 3-years after they were to have been filed. Go figure.
   
   

Finally, Suze Orman who most recognize as a person who worships at the altar of the FICO score, has a product called, the Suze Orman FICO Kit Platinum that is available when you sign up with myFICOscore.com. The video below is from VideoCreditScore.com, and is an intereting review of the product. While I certainly to hold to the belief of fixing your "I love debt score," unless you want to put yourself into debt further (or again as the case may be), it is certainly worth viewing.






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