Your Good Number

Forget about your good name, it’s the number that tells the world how useful you are to society. That number is your FICO score.

Surely, I’m just being dramatic. One little number can’t make or break that much in our lives, can it?

Well, employers check that score before making hiring decisions. Landlords use it to determine renters’ suitability for their properties. Health care agencies use it to decide if they’ll cover you or not. Creditors, particularly credit card companies, troll constantly for a dip in that score so they can justify raising your interest rate. It’s not a number we can ignore.

FICO is an abbreviation of the company that developed and dispenses these calculations, Fair Isaac Company. It’s a bit sinister, but they consider the formula proprietary, so you aren’t allowed to know exactly what factors into evaluating you.

Fortunately, enough has leaked out about FICO scores (there are actually several different, but similar formulas for different types of queries) that we know more than we used to:

They do not(!) use income level as a factor in calculating your credit-worthiness.
Your score is improved with on-time payments to your creditors. No surprise there.
You score higher if you don’t pay your credit cards off every month. Credit card companies like to collect those interest payments. They call card holders who pay the balance in full every month “deadbeats.” Sticks and stones!
You score lower as your total credit card debt approaches the maximum available to you. This means that if you only have one card with a $3000 limit and $2500 on it, you’ll score lower than the guy with five cards and the same amount charged on one of them.
By all means, cut up your cards if you want to curb your addiction to them, but canceling the account can hurt your score. This is especially true the older the account is. The age of your oldest credit account and the average age of your accounts are part of the formula; the older the better.
Three payments late by 30 days doesn’t look as bad as one payment late by 180.
Suppose you’re loan-shopping and potential creditors check your score on your behalf. You’ll hurt your score with every inquiry.
It’s certainly no boon to your FICO, but if you’ve recently had a bankruptcy, you’ll likely be swamped with credit card offers. They know as well as you do that you can’t declare Chapter 7 bankruptcy again for another six years.

I don’t have to tell you that your score follows you wherever you go. There’s no starting fresh somewhere else. Guard your good name, er, number carefully!