ficoBy now, most WalletPop readers are aware of how important a good credit score is. But you're not alone if you're confused about what makes up that score and how much each of those components matter. We talked to Barry Paperno, consumer operations manager for FICO, the organization to which the three credit bureaus report, to get the skinny on credit scores.

The Web site has a pie chart illustrating the five aspects of a FICO score and how much weight each carries. Payment history is the biggest slice of that pie, accounting for 35% of the overall score. Payment history is not how long you've had credit or owned credit cards; rather, it's an evaluation of how well you pay those bills. "For late payments, it looks at three areas: recency, severity and frequency," Paperno says. In other words: How recently did you pay a bill late? How late was it? And how often do you pay late?
How can you keep this crucial portion of your score healthy? "It's very simple. Just pay everything on time, at least the minimum payments," Paperno says. He adds, "If you're late, know that once you get or stay current, the longer you keep your accounts current, the quicker your score will recover." This is a huge part of your credit score, so we'll repeat Paperno's advice: Pay your bills on time.

The second-largest part of the score, which makes up 30%, is amounts owed. This is where the credit utilization ratio (which we've written about before) comes into play. In general, it's a good idea to keep the balance to about 25% of the credit limit. All other things being equal, it's slightly better to have a handful of cards with fairly low balances relative to their limits than just one or two cards nearly maxed out.

Next on the list is the length of credit history, which accounts for 15% of the score. The rule of thumb here is simple, says Paperno: Longer is better. There is one common misconception about the length of credit history, though. "That if you close an account, it no longer contributes to your score. That's completely false," Paperno says. The payment history of an account will continue to be looked at for a full decade, after which the account will be erased from your score. (So if you get rid of every single credit card today and don't get any new ones, you might have a tough time trying to get a loan a decade from now.)

The final two segments of the credit pie each contribute 10%: new credit and the type of credit you have. You may have heard that opening a new credit card can damage your score (which is why some people are afraid to ditch the cards that have started socking them with fees and higher rates and find more customer-friendly alternatives). Well, ditch away. It's unlikely that a new account would drag your score down by more than 20 points or so. In terms of different kinds of credit, the only real red flag is not to have all of the same type of credit. So don't have only installment loans, or only credit cards, and so on.

Credit scoring may seem complex, but if you know these basics, you'll be a lot more empowered to take charge of your credit score -- and your financial future.

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Do yourself a "HUGE FAVOR" and carefully read this:

The 21st Century Act: Final Amendments to Regulation CC Section:
"Prohibits" reimbursement of Credit, Loan, and Finance Balances to a "Bank Entity" leaving only "Nonbank Consumers" able to receive reimbursement, as specified on Pages 85 and 86.

The 21st Century Act states on pg. 85 and 86 that "Only Nonbank Consumers can suffer losses and File for
Re-credit or Re-claim on any Accounts under the Federal Reserve System" also “Any Second or Third Party Presenters utilizing a Banks Documentation, Contracts and/or Agreements to seek Claims shall be considered to be that Bank under the Rules and Regulations”, the Expanded Definitions also includes Credit Cards and Home Equity Lines of Credit.
Also on Pages 100 and 101 "In any Financial Claims the Indemifying Bank (Parent Bank) must be Identified".

(Left-Click to Search Link)
21st Century Act: Final Amendments to Regulation CC

This Federal Law signed January 1, 2006 makes it "Fraudulent" and therefore "Illegal" for the 3 Major Personal Credit Reporting Agencies: Equifax, Experian, and TrasUnion to allow the Banks and the Banks "Third Party Presenters" to place any claim of "Negative" or "Potentially Negative" Accounts on your Personal Credit Based upon the fact that they have no "Legal Grounds or Claim" to the Money.

This is an "Unfair Practice" that diminishes our Financial ability to support ourselves and adversely affects our ability to gain work in many areas which breaks "Antitrust Laws".

These Rules also back claims of: "Aiding and Abetting" Racketeering and Extortion (of Finance Accounts and Personal Credit Reports), Pandering (of Credit and Loan Accounts, and Conspiracy to wit), Theft, Fraud, Federal Mail Fraud, and Telephone Harassment. Also "Threatening of the U.S. Financial Infrastructure", which is a "Capital Crime".

In order to engage the Federal Trade Commission to act against this injustice we must File many Claims, as these Reports must be Filed by a large number of people in order for the Federal Trade Commission to pursue
"Legal Action".

(Left -Click to engage Email Address)

This is way easier than "Occupying Wall Street"!

March 11 2012 at 5:08 PM Report abuse rate up rate down Reply

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January 12 2012 at 5:32 AM Report abuse rate up rate down Reply