FICO Scores

What is a FICO score? If you have a credit card, you have a FICO (Fair Isaac Corporation) score. It is a 3-digit number that determines your interest rates on credit cards, car premiums and home mortgages, it can even affect whether an employer will hire you and if a landlord ill rent to you. The higher the FICO score, the lower the interest rates and vice versa. They run from 300 to 850. Anything below 500 is dangerous. 760 to 850 is awsome.

Debt to credit limit is a big component of the score. This ratio is more important than the actual amount of debt owed. So, for example, if you have a $1000 credit limit and you charge $1000 to the card, you owe the maximum amount so you have a 1:1 or 100% debt to credit limit ratio. This lowers the FICO score. However, paying off the debt on time will positively affect FICO scores. If  you want to close the credit cards, do not do so when you owe 100% of the limit. It is also important to keep the card active so you can use them to your advantage. Charge $5 here and there, for example, pay off the debt and you will have such a low debt to credit ratio and your FICO score will soar. American Express charge cards, however, that require payments in full, do not contribute to the FICO score because they don't have monthly payments toward a credit limit. Any credit cards with credit limits should be paid off within 120 days of the due date to avoid going under water. Just a tip. Remember if you are worried about something, you simply have to do something about it. There is no sense in worrying, just take action. Make decisions powered with knowledge.