My FICO

I am sure that for certain people, what I am about to note is common knowledge, however, for me it was a lesson and paradigm shift away from the conditioning of being broke. Within the last six months, I have taken my Fair Isaacs Credit Organization (FICO) score from the low 600’s to above 700. How did I do it? I simply paid my bills on time.

You see, what I used to think is that as long as I paid the current bill before the next bill was due, that the payment was not late. You see, the habits and conditioning of me being broke for so long, lead me to hold off paying my bills as long as possible. I used to figure that as long as I paid within that “Grace” window, beyond which it goes on your credit rating as a late payment, that my credit would not be penalized. However, I was wrong.

I guess what I did not know was that you are rewarded for on time payments, just as you are penalized for late payments. Consequently, if you pay in the grace period, it does not count for or against you in the calculation, except for the fact that you can never reach the upper range of score without a good history of on time payments. If you were never reported “late” to the credit agencies, and never reported “on time” your score will never get above the 600’s. That was my problem. I had a habit, formed from being broke, of paying bills before they were reported late to the credit agencies.

Your credit score is one of the most important numbers in your financial life. Over a lifetime, having a good credit score can literally save you tens of thousands of dollars in interest charges. In the environment that I was reared the importance of good credit was not taught and certainly the hints and tricks of the “secret algorithm/formula” used by FICO were no where to be found. Consequently, the synergy of lack of information and deprivation of cash lead to behavior that some would characterize as irresponsible. However, my personal definition of irresponsibility is when one if fully informed and understands the consequences, yet makes the bad choice and can’t live with it.

I used to be so broke, that only recently have I started filling my car up with gas. I used to never put more than 5 dollars in my car at a time. I would prefer to have money in my pocket than gas in my car. Plus, the car I was driving was likely to break down and I did not want it to break down on a full tank of gas that I could not use, which would be a waste of money, I rationalized. Even when I stopped struggling and begin to earn a decent wage, I continued that habit for a few years, as well as the habit of waiting until the last minute to pay my bills.

This Oped is mainly informational to those who may be as in the dark as I was about credit and how to potentially improve on your score. Over the last few years, I have had more than enough money to cover my expenses several times over. However, the old paradigms formed from the lack of information and struggling did not end until I was looking to refinance out of a ballooning Adjustable rate mortgage (ARM). I was looking for a way to improve my score and could not understand why my score was not improving, despite not having late payments (by credit union reporting). This is when I learned more about the FICO calculation.

Hopefully, some people who are struggling with low credit scores and falling victims to predatory lending and high interest rates, will read this a learn of a quick way to boost your credit score. Knowledge is power. For those who think I believe that I know it all….this should be an indication that I do not. However, thinks I don’t know about…..I don’t talk about…unlike some people. A little knowledge can be very destructive. The reason being is that the biggest threat to a truth is often a greater truth.