Understanding your FICO score.



If you pay a collection account, it will drop your credit score.

If you want to pay a collection account that is currently on your credit report, it will drop your credit score because it makes the date of activity current.  It is best to ask the collection company if they will stop reporting to the bureaus if you agree to pay the bill.

It does not make a difference on the FICO score if you settle the account versus paying the bill in full.

If there is collection accounts to settle, do not let a mortgage credit be run. Experian has a program where they notify the collection companies if your credit has been run.  If you run a mortgage credit report before you settle the collection, you will not get a good deal to settle.  They know you want to purchase a home and in order to do that, you need to pay the collection.

Settle a collection at the end of the month so you will get a better settlement.  Collection companies have quotas they need to meet and if you wait until the end of the month, you will pay less for the debt.


If you have a collection company calling, tell them "do not contact me by phone" if they continue, you can sue them.  If you have a robot calling your cell phone, that is an automatic reason to sue them also.


If you have is accounts to settle, do not let a mortgage credit be run.

Amount of Trade lines you should have:

You should have four accounts in good standing to optimize credit score.

It is best to have a home loan, car loan and two credit cards.  If you don't have a home loan or a car loan, you should have four credit cards.  Student loans if they are not in deferment count as one of the four trade lines active on your credit report.

Credit Card Balances:

It is important to keep your credit card balances under 30% of limit (15% is even better).

If you keep your balance under 30% of the credit limit you will receive 5 points to your FICO score, If you keep your balance under 15% of the credit limit, you will receive 15 points to your FICO score.  Once you go over 50% of the credit limit, it will drop your score 18 points (per credit card).


5-9 inquiries in a two year period will drop your score 20 points.  Don't let anyone run your credit.  You can run your credit on the free websites, show that report to the person you are applying for credit and see if they can do the deal.  If they can, then allow them to run your report through their company.

Don't close credit cards:

Once you have 8 years worth of credit history on your credit report, you get 40 points added to your FICO score.  So don't close credit cards.  If you want to do a "transfer balance" to another credit card, that is ok, don't close the card you moved the balance from.

Don't let the creditor close your account. Use your credit card once every 4 to 6 months they pay off the balance.

Authorized User:

Authorized user still works today.  Example:  Mom has great credit and she wants to help out her son.  She can add him as an authorized user on her credit card, Mom's great credit will go on son's report, son's bad credit will not hop on Mom's report.

Authorized user works for car loans and credit cards.  If you want to open a home mortgage, you need to have your own credit established.

Types of Credit Cards:

If you only have major credit cards (Visa, Mastercard and American Express)  you will get 16 points added to your FICO score.  If you add a department store card to your credit, you will then have 27 points added to your FICO score.

Bank Accounts:

If you have a checking account, it will give you 5 points added to your FICO score, savings account gives you 10 points, if you have both, it will give you 20 points added to your FICO score.

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