FICO Score Killers

There are five primary components that will kill your FICO score:

  1. High credit balances.  50 percent of debt to available credit is the mark to be under.  Aim for 45 percent debt.  With 35 percent of your FICO score affected by this component, this gives you the best opportunity to crank up your score.
  2. Late payments.  Late payments equal big hits.  So many times when we’re young we don’t care if we can’t or don’t want to make a payment to Sears for the car tire we can’t afford anyway.  Plus, young people aren’t typically educated about the repercussions of late payments and buying a home.  The FICO system has three categories for late payments: 30 days late, 60 days late, and 90 days late.  As you can guess, 90 days is a much greater ding than 30 days late.
  3. Not enough credit. Having just one credit card that you pay off in full each month is responsible but not good for raising your credit score.  The FICO system wants to see you can be responsible with a variety of credit lines.  After all, you are asking for a lot of money.
  4. Short length of credit history. To begin maximizing your FICO score, you’ve got to have 24 good months of history.  Less than that shows an inexperience with handling credit and it will adversely affect your ability to borrow.
  5. Closing accounts. There are exceptions as we’ve noted in the FICO boosters, but typically the longer an account is open the better your score.  When an account is closed, the debt to available credit goes down, so think it through prior to closing a credit line.

FICO reporting errors happen all the time.  Whether it be a credit line that doesn’t belong to you, or an error on the name of the borrower altogether, errors can kill your FICO score.

FICO Score Killers Tip

Obtain your credit report far in advance of your home loan application so you have time to clear up any killer FICO reporting errors.