760 is the new 720: Angst in the 700 club…
April 24th, 2008 Categories: Real Estate News
That is Suze Orman’s claim and she is apparently right. If you are obsessing about your credit score, you may have reason. Lenders are demanding higher scores because they have been burned by increasing delinquincy rates. Simultaneously, new scoring systems may complicate your efforts to monitor and improve your score.
Fair Isaac is introducing FICO 08 to better predict the liklihood of defaults. One change in the new scoring method is that “authorized users” on your credit cards will now be disreagarded. More emphasis will be placed on having a variety of credit types (installment loans and revolving accounts).
What makes up your FICO number? Payment history accounts for about 35%, while what you owe accounts for another 30%. Other factors are length of credit history and the type of credit used.
What to do?
Get a copy of your credit report
Look for mistakes - according to US Public Interest Research Group, 25% of reports contain errors. Check to make sure that credit limits are noted - an ommission will skew your score.
Don’t increase your limits shortly before shopping for a loan - it can be a sign of increased risk for the lender.
Confine your loan shopping to a few weeks - multiple credit inquiries can damage your score.
Pay your bills on time
Have a good mix of credit products
Get your own credit cards if you are a joint holder.
Don’t max out your available credit
Don’t open up credit card accounts you don’t need.
Don’t close old credit card accounts.
