Credit Score: It’s Not What You Make, It’s What You Do With It

Think about it–no matter how much you earn, it won’t make your credit score go up. No matter how little you earn, your score won’t go down (unless you fail to pay your bills).

A credit score reflects only how skillfully you manage debt. It doesn’t care if you’re The World’s Best Dad, have the strongest marriage, the most prestigious job, live in a lovely neighborhood, or are 20 years old or 120. It only cares how you manage debt.

The more available credit you have compared to how much you’ve used, the better. A credit limit of $3,000 with a balance owing of $25 is great. A limit of $3,000 with a balance owing of $2,900 lowers your score.

The more you don’t use what you have, the better your credit score. That may feel a bit contrary, like life is saying, “Here’s a bag of marshmallows, but if you don’t eat them you win!” Available credit isn’t like money, standing by for you to spend it. It’s more like those well-trained dogs that will sit with a treat on their nose and not eat it until allowed.


Focus and Goals

Years ago I knew someone who was intensely focussed on the goal of paying off his mortgage very early. This is an admirable goal, but he was so intense about it, his kids were doing without and the family didn’t have any fun.

Goals need to stay in balance. Sure, make advance principal payment on a debt, but also go to the discount movies once in a while.

If you hyper-focus on building up a savings account, there’s a risk you might spend more on the credit cards. If you have to put a bit less in savings to avoid accumulating consumer debt, so be it. Keep the balance.



When Exactly is the Last Minute?

When making a last-minute credit card payment by phone, the definition of “last minute” matters. Does the company consider the day to end when they close at five, or at midnight? Are they assuming Eastern time or some other time zone?

Even if you usually pay ahead of time, it couldn’t hurt to call and find out when their “last minute” is, and make a note of it. Things happen sometimes, and you may want to know at some point in the future.

If it happens that you miss the last minute and incur a late fee, it can’t hurt to call and explain what happened. Maybe they’ll reverse it, especially if you have a strong previous payment record.


Thinking of Co-Signing a Loan?

Think about this: three out of four co-signers end up paying the debt themselves.

Co-signing isn’t just a recommendation or a personal reference. It’s a financial obligation.

Even the most conscientious person can lose their job or get sick, and then you’re stuck with either paying their debt or taking the hit on your own credit report.

Uh-Oh, Check Your Credit Report Real Soon

You may have heard the latest Big Bank scandal. Under pressure to get customers to open all kinds of accounts, Wells-Fargo employees have been opening accounts that people don’t know about. Some of the victims had only the briefest interaction with the bank, and ended up with credit cards and other accounts they didn’t know about. Some of those accounts incurred fees, and others will have damaged a person’s credit score.

It might be a good idea to go down to your nearest branch and ask one of the desk people to search their records for any accounts in your name.

If you haven’t done it lately, a free check on your credit report could show you any nefarious activity:

Another free source is

Don’t fall for the name in, it’s only free with a paid membership.


Your Credit Score, Find it, Fix it

Having a good credit score can save you money. It makes you eligible for lower interest rates when you need to borrow money. It can make your insurance rates lower. Some employers now use credit scores as part of deciding whom to hire. The FICO credit score scale runs from 300 to 850. Above 700 is good, above 750 is excellent. is a good free resource. They show you most of what a credit report would show you, right there online. Some credit cards will show you your FICO score on their websites.

Everyone is entitled to one free credit report from each of the three bureaus every year. You can get them at http://www.annualcredit or (877) 322-8228. (Do NOT confuse this with the site with the catchy ads. Their report is only “free” with a paid membership.)

The three credit bureaus can be contacted at:

Different bureaus may have different errors. If you’re getting ready to apply for something big like a mortgage, you’ll want to check all three. If you’re not, then checking different ones a few months apart will monitor your credit more closely than one yearly request of all three at once.

Finding and correcting errors on your credit report is an important first step to improving your credit score. In the identifying information section, look for wrong spellings of your name and for names that aren’t even yours. Look for an address you never had, wrong birthday and wrong social security number. This part is very important, to prevent suffering for someone else’s bad credit. If you have a common name, or are a Jr. or a Sr., this is vital.

In the credit accounts section, look for anything you will want to dispute with the credit reporting companies. These include:

  • Accounts that aren’t yours
  • Negative entries (except bankruptcy) that are more than seven years old
  • Negative entries your spouse received before your marriage. (Positive ones can just as well be left there.)
  • Entries that show as past due even after it was wiped out in bankruptcy
  • Negative entries that aren’t true. It’s your account, but you never paid late.
  • Watch for repeats: sometimes the original creditor reports an account and then a collection agency reports the same account.

In the credit inquiries section you’ll see a record of anyone who asked about your credit, such as if you applied for a credit card. Having too many of these will look bad. If you find any that you didn’t authorize or that are more than two years old, you can dispute them. Your own inquiries about your own credit don’t count against you.

In the public records section you can dispute any paid tax liens or judgments that are over seven years old. You can dispute bankruptcies more than ten years old that don’t have a specific code such as chapter 7, chapter 13, etc.

Send the list of disputes to the credit bureau. They then have to check with the reporting entity to verify it. If the creditor doesn’t respond, or admits it’s inaccurate, the bureau will remove the entry from your record.

If the creditors don’t update their records, they may send in the same wrong information again the next time they report to the credit bureau. For this reason, it’s smart to do this kind of cleanup just before applying for something important. That way any stubborn errors won’t have come back yet during your application process. Then follow up at least every year to make sure the errors stay gone.

What if you have a negative item which is true, but there are reasons for it such as illness or divorce? You are allowed to send a one-page letter to the credit bureau with a request that it be made part of your file. An effective letter will explain briefly and calmly what happened. Most importantly, it will show why such a thing is unlikely to happen again in the future.


What if you have no credit history or have bad credit? One option is to get a pre-paid credit card. You pay the company up front and your limit on the card is the amount you paid them. This allows you to have a credit card on your credit record, without getting in over your head spending too much with it. They do charge fees for this, so do the math to see if it’s going to be worth it to you. Having a bank account and a phone or other utilities in your name is also a good start to building or rebuilding credit.


Marie Brack is the author of Frugal Living for the 21st Century: Adventures in Using Your Money Wisely. It’s available on in both Kindle and paperback versions.