Fall 2008 Online Publication    


Perspectives
    Message from 0809 Chair
    Message from News Chair
Association News
    Remembering Tom Farrell
    State Reports
    Committee Updates
Special Features
    Financial Literacy Tips
    HS Grads Lack $$$ Skills
    Know Your FICO Score
    Defining Purpose
    Enrollment Reporting

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Issue Due Date
Fall
 9/15
Winter 12/01
Spring 04/15
Summer 06/30

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Renee Weekes
Someone's Got Your Number... Do You?

Submitted by:  Sharon Cabeen, Vice President of Financial Literacy, NSLP

When I was a little girl in the 1960's, I remember that my mother would send me to Mickey Froelich's corner grocery store for bread, milk or some other item. I'd grab my stuff, run past Mickey at the front cash register, and he'd say "Good to see you again! Tell your mom to pay me when she can!"

Those were still days when those who "granted" credit often did so based on knowing people in the community and how they typically paid their bills. My mother could walk into our local Sears store, her credit union, bank, or even the corner store and instantly be recognized as someone who could be counted on to pay her bills on time.

But then creditors began to expand their reach through the advent of credit cards and started moving what used to be local branches to regional and/or national offices. The days of knowing each and every customer were gone, and creditors needed a way to track how consumers were paying their bills. That's when the Fair Isaac Corporation created what is now known as the FICO Score.

According to www.myfico.com, "...myFICO is the consumer division of Fair Isaac, the company that invented the FICO credit risk score that lenders use. Starting in the 1960s, Fair Isaac sparked a revolution by pioneering credit risk scoring for the financial services industry. This new approach to lending enabled financial institutions to improve their business performance and expand consumers' access to credit. Today Fair Isaac's FICO score is widely recognized as the industry standard for lenders."

So much for history! Today it is critical that you become a smart consumer and understand what will make your FICO score attractive to creditors. Here are some tips for improving your FICO score:

  • Know how your FICO score is calculated: payment history (35%); amounts owed (30%); length of credit history (15%); new credit (10%); and types/mix of credit in use (10%).
  • Be diligent about ordering and studying your credit reports from all three credit reporting agencies (CRAs) every year. In the U.S., you are entitled to one FREE copy of your report from each of the three CRAs annually. That way you can catch and correct any errors that occur on your reports.
  • ALWAYS pay bills on time—the biggest reason consumers have poor FICO scores is late bill payments.
  • Keep long-term lines of credit/credit cards open—do NOT close them. They show good history with your creditors which bodes very well when you seek new credit.
  • If you have poor credit history, open a couple new accounts with low limits and pay them religiously on time and in full. This will have a major impact in a relatively short period of time. But remember that it took a while to get into trouble with credit, so getting out of it will take a bit of time as well.
  • Keep balance ratios at or below 25 percent of your total limits. Keeping those ratios on individual and total credit available will keep your FICO score growing.

For more information, go to www.myfico.com.

HS Grads Lack Finance Skills Defining Purpose