Having drinks with friends last Friday, I was astonished to learn that someone has an 800+ FICO score. I know that’s possible, but never knew anyone who achieved such credit success. I decided to do some research that I’ll share with you.
Credit scores matter if you want to open up a new credit card, rent an apartment, or buy a car or home. If you never see yourself doing any of those things in your lifetime, you don’t need to read this post. The standard credit score is called FICO because of some guy named Fair Isaacs who started up a COmpany based on it. Anywho, the FICO range is 620 to 850, the higher the better. Anything higher than 760 is considered pristine, so it’s really not necessary to try and improve it beyond that.
The most important thing to do is pay your bills on time. DUH! I think America needs to start teaching children early about how to manage finances. Are there any elementary schools that do a Finance 101 class? So important, especially if you’re the unlucky progeny of Americans who muck up their lives with credit card debt!
Aside from payment diligence, the goal is to hoard as much unused credit as possible. I actually didn’t realize this until recently. Credit agencies hone in on utilization rate (which is your debt to credit ratio). The lower your utilization rate, the better off you are. Hence, do not close your credit cards even if you’re not using them anymore. Keep them open. Also, call your credit card companies and ask them to increase your limit. I just made some phone calls this weekend.
Go forth and prosper from better credit.