WSJ: How to Boost Your Credit Score

[question everything]

How to Boost Your Credit Score

Increasingly, Employers, Others Check Your Ranking; Do You Really Need That Store Card?
By CHRISTOPHER CONKEY
Staff Reporter of THE WALL STREET JOURNAL
November 19, 2005; Page B1

It might be the most important number you don't understand. Credit scores -- the arcane calculations pored over by everyone from mortgage lenders to auto dealers to decide how much they're willing to trust you to pay them back -- are growing in importance as their use spreads beyond traditional lenders to wireless-service providers, insurance companies, and even employers.

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The costs of a having a bad score add up fast. Scores range from 300 to 850, with 700 or so marking the point below which it can be tougher to get the best price on a loan. For instance, on a typical $150,000, 30-year mortgage, a person with a score of 639 would face annual payments nearly $2,000 higher than someone with a score of 760, according to Fair Isaac, the company that pioneered the standard FICO credit score in the late 1950s.

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The most important way to raise a credit score is a no-brainer: Pay bills in full and on time. In fact, your history of making payments accounts for 35% of your overall FICO score... The second biggest priority for anyone looking to bump up their score is to maintain a low "credit utilization" level... In plain English, maxing out credit cards will send a score plummeting... In other words, it's usually better to carry smaller balances on several cards than to pile everything onto one card. The third-most-important strategy, which makes up 15% of the score, is to build up a lengthy credit-using history. This means it's usually better not to close out all those old cards, as keeping them open adds to the credit record. Moreover, keeping otherwise-dormant accounts active will help lower the balance-to-limit ratio, as the limits are factored into the credit-utilization formula. Time, in this case, is literally money, which gives older adults a built-in advantage over high-school graduates.

The final 20% of the score is divided equally between two categories: new accounts and diversification. Unlike keeping old accounts open, taking out new lines of credit raises red flags because it makes the consumer look riskier. This is why it's best to avoid those retailers' cards during the holidays. (Unless, of course, a temporary decline in credit score is no big deal.) Consumers get credit for having a variety of loans, so it's better to have an assortment, including installment plans like auto loans or mortgages, than just simply credit cards. That seems counterintuitive -- after all, shouldn't fewer loans make you look better to prospective creditors? The answer, in short, is that creditors feel that consumers well versed in a variety of credit types pose a lower risk.

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Write to Christopher Conkey at [e-mail]

URL for this article:
http://online.wsj.com/article/SB113236756411202164.html (subscription)

[Hugin]

1. Thanks...

It's a shame we're all being boiled down to a number.

But, it's important people recognize the trend and take steps
to control it.

[progressivebydesign]

2. What they won't tell you about credit scores...

If you do some lengthy research, you'll find that the SECRET formula to calculate the scores includes: How many people in your NEIGHBORHOOD have declared bankruptcy, whether you are divorced, single, or married, and so on and so on. It's NOT an innocent interpretation of your credit history. That is bullshit being fed to unsuspecting consumers. There is racism involved, redlining, everything that you'd suspect is in there. It's not fair and because they CLAIM it's proprietary, they are not forced to reveal the TRUE way the numbers are calculated. Thank your corporate whore Congresspeople and Senators for their complicity in destroying the American family via credit scores.

Bob Seger said it best... "I feel like just a number, a cog in a great big wheel, like a tiny blade of grass in a great big field". He wrote that song decades ago, but it's truer now, more than ever.

Add the insult of MYSTERIOUS credit scoring forumalas to the new UNIVERSAL interest rate (wherein your perfect payment record on one account is suddenly discounted completely by ONE late payment on another account, thereby raising your interest rate on BOTH accounts to a USURIOUS 30% or more!!!) Gotta love corporate America, the lobbyists, and our millionaire legislators who are feeding at the trough.

[question everything]

3. What really bothers me is that HR personnel seeks this

before even they'd consider you. Several weeks ago we had a thread where a DU member said how she had to put medical history on application forms and once revealing that she is a cancer survivor, this would be the end.

I suppose the old days, when a candidate had a chance to talk about himself/herself during the interview process are long gone.

Today our applications and resumes are being scanned for "key words" - both negative and positive. And since the alternative is to be outsourced, we bite it and go along.

Or we start our own "business" struggling to make money to support our family, but at least we preserve our dignity.

What chance are there for, say, felons who paid their dues, to earn money so that they won't have to resort to crime, again?