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The Honolulu Advertiser
Posted on: Thursday, July 28, 2005

Perfect credit score? That's just reaching too far


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For years I've been trying to manage my credit to achieve the Mount Everest of credit scores — a perfect 850.

I've been able to reach the high 700s but, alas, I've never reached the mountaintop.

Actually, I don't really need a perfect score to get the best credit deals. For the most part any score above 700 (FICO, the score used mostly by lenders, ranges from 300 to 850) will likely qualify me for the best interest rates around. In fact, climbing to the best credit score isn't about perfection so much as avoiding the pitfalls that will bring your score down.

Recently I passed out some tips to crack the credit-scoring code. That generated even more questions from a slew of readers also in search of better scores. Read and learn:

Q: I co-signed a car loan for my daughter and she had one late payment. The loan was paid off two years ago. How much does this affect me and when will it clear?A: This is why I advise against co-signing for people — even your children. When a borrower you've co-signed for pays late, that is reported on your credit report. That in turn can lower your credit score.

The effect that a single late payment has on the person's FICO score depends on several things, said Craig Watts of Fair Isaac Corp., the firm that developed the most popular of the credit scoring models.

Watts said the scoring system considers how late a payment was, how much was owed, how recently it occurred and how many late payments are on a person's credit report.

So a 60-day late payment lowers your score less than does a 90-day late payment. But recent late payments and the frequency of late payments count, too.

The good news is your credit score is in constant motion — so with each passing day, negative information has less impact.

And under federal law, credit bureaus must remove negative records from your credit report after seven years.

Q: I have six credit cards open, and five of them have no balance and I rarely, if ever, use them (four have not been used in the past year). Is it better for my credit score to leave those accounts open and not use them, or to close them?

A: It's better for your score to leave those accounts open. One factor in your credit score is the longevity of your credit card accounts. Your score gets a boost from accounts that have been open a long time.

By the way, only 13 percent of consumers have FICO scores in the 800s. But in case you're as obsessed as I am in joining that elite club, just know that lenders generally don't distinguish between people with FICO scores of 720 or higher and those with a perfect 850. If you're in that range, you've reached the top of the mountain.