FICO FACTS – Score Building

FICO Pie Chart

A. Opening Accounts & Credit Inquiries – This is really important to know during holiday seasons. While it may seem a good idea to sign up for all the new credit cards at the mall or to get that discount on an on-line purchase, it is not a good idea. In fact by opening several new credit accounts to get the discounts, you can degrade your scores for years to come.

 B. Wrong Type of Credit Card – Department Store and Gas credit cards are a nice convenience but they do not reflect as positively on your credit as does a mainstream bank issued credit card.

 C. Wrong Type of Credit -Finance companies are not considered main-stream lenders. Having to use a finance company will reflect negatively on your credit and your credit scores.

 D. Closing Accounts – By closing accounts you lose credit history. It is seldom if ever wise to close an account. You may not like the attitude of the company. Don’t shoot yourself in the foot. A longer time with good credit is vastly better than the alternative.

 E. Late Payments – It is simply not worth the aggravation of having a late payment of any kind. A mortgage late payment is particularly damaging. Avoid late payments. If a late payment occurs, contact me for counseling on how to mitigate such.

 F. High Credit Card Balance to Available Credit Limit – It used to be that you could have 30% of your available unsecured credit in use. With some it is still fine. With those that have updated to FICO 08, 10% is the optimal credit in use.

 G. Exceeding Credit Limits – Do not exceed your high credit limits. You control this. Manage your limits carefully.

 H. Paying a Collection Account – Do not pay a collection account. There are other ways to settle a legitimate collection debt without doing further harm to your credit scores. Contact me for suggestions on how to do this.

 I. Paying a Charged-Off Account – Do not pay a charge-off account. Yes you still may owe this debt but like the collection account there are other ways to settle a legitimate debt without doing further harm to your credit scores. Again, contact me for the how to do this. It differs on a case by case basis.

 J. Paying Off All Credit Cards Monthly – Nope. This is an ok practice if you have had Grade A Credit for a decade or so. For all others, we are best advised to maintain a small balance on our credit cards. Manage the interest and fees so they are reasonable and manageable. Keep the overall balance to 10% (only – ever) of the available credit.

K. Not Using Credit – Credit is either a use it or lose it proposition. A good practice is to utilize each open line every 3- 4 months. While establishing or reestablishing credit, maintain a minimal balance and make the minimum payment while regularly alternating usage between 3 or 4 bank cards.

Image Credit: myFICO

Financially SpeakingJames Spray RMLO, CNE, FICO Pro | CO LMO 100008715 / NMLS 257365 | June 6, 2010

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

6 comments on “FICO FACTS – Score Building

  1. Jim Garland says:

    Excellent information to have and learn. Is it possible to set up a way to tweet this info from this link, and even post it on Facebook if one wanted to? It would be a great way for others who read this blog to share it with others quickly.

    Keep it up!


    • jamesspray says:

      Thank you, Jimmy. I’m pleased you find the information helpful. By all means feel free to post my blog’s URL to FB.

      I welcome all comments and questions.


    • jamesspray says:

      May have found a way to do this today. We’ll see with the next post . . . Monday is a specialized topic for those who’ve had to bankruptcy, foreclosure, short sale or deed in lieu of foreclosure or as in many cases two of the above all of which involve bankruptcy.


  2. […] need to begin reestablishing your credit. You want to do this wisely. For a good start refer to my comments of 6/6/10. Be informed.  Plan ahead and act not in desperation. Desperation leads to failure. The […]


  3. […] better). Secure this savings against a Visa or MasterCard with your credit union. Use no more than 30% of the balance within any month. The use of 10% is best. Keep in mind you must use the credit. You […]


  4. […] your credit. For a great start and for everyday guidelines on building good credit refer to my comments of June 6, 2010. Be informed.  Plan ahead and act not in desperation. Desperation leads to […]


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