Increase your Fico score

The FICO Score has a range of 300 to 900 points. This score is arrived at by using scoring models and mathematics tables. Whenever you are applying for credit or purchasing or renting a property, your FICO score will be looked at to assess your credit worthiness.

Your good FICO score can be unfavorably influenced by your past payment history, balance owed, length of credit history, amount of new credit, and the type of credit used.

Pay all your credit cards and outstanding bills and watch your FICO score start to increase.

If you think that you may apply for credit sometime soon, it would be advisable to increase your credit status. The best way to have good credit history is always pay your bills on time. You can also consider contacting a non profit credit counselor.

It goes without saying that maintaining your credit card balances, and if possible, paying your bills regularly are good ways to keep your credit score good. It actually would lower your score.

Adding accounts too rapidly may be read as “you are not able to handle your credit responsibly”. Quite a few credit inquiries in a small time could lower you FICO score as you are attempting to open multiple new accounts.

The types of credit accounts for 10 per cent in your FICO score. These consist of credit cards or retail cards and loans such as installment loans, mortgages and car loans. You can loss as much as 20-40 points for such credit.

Your FICO score

FICO scores are calculated by examining the answers to number questions, based on the information in your credit and on your income-to-debt ratio. A good FICO score would be at least 650. Perhaps you're familiar with the FICO scoring system used by credit companies to determine a potential client's creditworthiness.

First, let's define the acronym FICO. When they're all added up, that number represents your FICO score. Paying all your bills on time will raise your FICO score. FICO places a 30 percent emphasis on the amount of money you owe and your available credit. FICO also asks the total amount of credit you have at your disposal.

Some 15 percent of your FICO score comes from the length of your credit history. Simply put: the longer you've been using your credit, especially if it's been with the same companies, the higher your FICO score will be.

FICO puts a 10 percent value on the overall mix of your credit. The more types of loans you've had, the better, as far as your FICO score. If you've had car loans, credit card payments, various types of installment loans, and a mortgage, you'll receive a higher FICO score.

Your FICO score also gives you a 10 percent premium if you've sought new credit within the past year. Your FICO score can determine the percentage rate of your car or home loan, and may even get you a lower rate on your credit cards.

New scores gauge risk of borrowers with little or no credit

Fair Isaac says studies validate FICO Expansion scores

Fair Isaac Credit Services Inc. says a recent study of its FICO Expansion scores -- which are used to qualify borrowers who have little or no information on file with credit bureaus -- demonstrates they are a reliable tool for predicting risk, and match up closely with the company's traditional scores.

Fair Isaac created the FICO Expansion score in 2004, to augment what is now known as the "Classic FICO" score. The FICO Expansion score is intended to help lenders gauge the risk of about 20 percent of the population with thin or no credit bureau files.

That population includes recent immigrants and young adults who make up a significant proportion of the first-time home-buyer market.

Fair Isaac says its study of the performance of FICO Expansion scores -- conducted with the cooperation of more than a dozen of the largest lenders in the mortgage auto finance and credit card industries -- proves they are a reliable measure of risk that calibrate well with the Classic FICO.

In the study, FICO Expansion scores consistently assigned lower scores to borrowers who later had more delinquencies and charge-offs, and higher scores to consumers who ended up with fewer delinquencies and charge-offs, the company said.

There was a close correlation between the Classic FICO and FICO Expansion scores in their ability to predict the odds of a borrower becoming delinquent. Both assign scores of 300 to 850, with a score of 300 representing the highest-risk borrower and 850 the lowest.

"This whole set of data we worked through reinforced that the risk associated with a score of, say, 650 on the FICO Expansion equates well to a Classic FICO 650," said Fair Isaac Vice President Lisa Nelson, who oversees the FICO Expansion program. "That's a key component when you are out talking to the mortgage industry."

For complete article visit Fair Isaac says studies validate FICO Expansion scores

Check Your Credit Report

By Kimberly Lankford

If I request my credit report, will it hurt my credit score?

No. Your request for your own credit information won't affect your score. In fact, it's a good idea to check your credit reports and your score at least once a year to make sure there aren't any errors. You can order a free copy of your report from each of the three credit bureaus (Equifax, Experian and TransUnions) every 12 months at AnnualCreditReport.com.

Your credit report may include a long list of inquiries from yourself, lenders and prospective employers. But the FICO credit score compiled by Fair Isaac only counts inquiries when you actually apply for a loan.

Now that more people shop online for mortgages and car loans, the scorekeepers realize that you might be applying to multiple lenders at one time to compare rates. As a result, the FICO score ignores all mortgage and auto inquiries made in the preceding 30 days. If clusters of inquiries have been made more than 30 days ago, the score counts all inquiries made within one "shopping period" as a single inquiry. For the older version of the FICO score, this period is any 14-day span. A newer version of the score expands the shopping period to 45 days.

Keeping score with your credit score

Whether you know it or not there are people keeping track of your numbers. No, it's not the number of times you started a diet this year or the number of sit-ups you've done this month. In fact, it is not your weight, cholesterol, or golf handicap. But three different credit bureaus track your credit history and that information is used to calculate and report your credit score.

Why should you care? Your credit score may determine whether you are offered a loan, preferred interest rate, an insurance policy, or even a job. Many businesses use your credit score as a way to assess your ability to handle your financial responsibilities. Think of your credit score as your financial GPA. Your score could range from 300 to 850. Of course, the higher, the better.

What should you do? Here are a few suggestions to help you keep tabs on your credit score:

1. Get a free credit report each year. Congress passed a law that requires the credit bureaus to provide you a free credit report each year. Go to www.AnnualCreditReport.com. You can request a free report from the three reporting companies Equifax, Experian and TransUnion. However, to actually get your FICO score you must go to www.MyFico.com. There is a $45 charge for this service that provides the three credit reports and the FICO score. After the initial check-up you may not need to pay for the FICO score information again unless you are planning a major purchase that involves a loan or you are applying for a new job.

2. Check the report for accuracy. Mistakes are common on the credit reports. Check the accuracy of the information including your previous jobs, your previous addresses, and the accounts that are listed. Check to make sure that any accounts that you thought you closed are actually closed. If there are accounts that should have been closed contact those companies to close the accounts. For other errors, contact the reporting bureau in writing.

3. Know what things affect your credit score. There are many factors that make up your credit score. The two most important are your payment history and the amount owed. Always pay all of your bills on time if at all possible, even if it means only paying a minimum amount. Even one late payment can impact you in a negative way. Set up automatic payments from your checking account so you don't inadvertently miss a payment. Also, keep your debt to available credit ratio to a minimum. Try not to ever max out a credit card and never go above a spending limit. Also, do not open up too many credit accounts. This goes against your score.

A little knowledge and planning can go a long way toward helping you keep a good financial score.

Don McLeod, CFP is an Area Director in Retirement Solutions and Services at GuideStone Financial Resources.

By DON MCLEOD
Guidestone Financial Resources