Common myths about your FICO score

Posted by Gary Abely, CPA, CFP®, AIF®

Even if you don’t need credit, your FICO score is still important to monitor.  A FICO score is used not only by creditors to evaluate your credit worthiness, but also by insurance carriers, landlords, and even employers.  Your score could impact your ability to land the job you want, rent the apartment you wish to live in, land a favorable mortgage rate or obtain the lowest cost insurance quote.  It turns out that people with higher credit scores are also less apt to get in auto accidents and more likely to be reliable at work.  It turns out those who avoid financial delinquency also avoid some of life’s other risks as well.

How to obtain your FICO score

You can obtain your credit score, FICO number, for free from a number of sources.  Many credit unions and banks give their customers free access to their FICO scores.  Unsure, just ask your credit union or bank.  Many credit card companies also offer free access to FICO scores through FICO’s Score Open Access (with some companies providing your score on monthly statements).  Websites such as, and also offer free credit scores.  Credit counselors may also provide free FICO scores while providing education on credit management.  Visiting a credit counselor will not affect your credit score.  Also, checking your own credit score does not affect your score.

Common myths about your FICO score

  • Closing old, unused accounts will improve my credit score. (The opposite is often true as closing accounts has the effect of changing your debt to available credit ratio.  If you desire to simplify your accounts by reducing them, try to close newer accounts first.  Longstanding credit relationships help your credit score).
  • My “poor” FICO score will stay with me for 7 years. (Your FICO score is constantly adjusting. As you pay off debts timely and manage debt responsibly, your score will adjust accordingly).
  • If I payoff a delinquent account first it will be removed from my credit record and will no longer affect my score. (Negative records such as late payments remain a part of your credit record and can impact your score for many years even if debt is paid off in full).
  • Carrying a balance on my credit card helps my score. (Each month you should endeavor to pay off your credit card on time and in full. Carrying a balance on your card only helps your bank).

Your FICO credit score is calculated based upon five weighted factors:  Payment history (35%), Amounts owed (30%), length of credit history (15%), New credit (10%) and Types of credit used (10%).  Credit utilization also known as “Amounts owed” should be kept to 30% or lower of your overall credit limit.  In other words, if you have one credit card with a limit of $2,000 and charge $1,000 monthly, your utilization is too high at 50%.  In this example, you would likely improve your score by obtaining an increase in your credit limit with the existing company or applying for an additional credit card and splitting the charges between two cards.  Other than paying your cards on time, this is the easiest factor to manage to improve your score.

What to do if your FICO score is incorrect

Finally, if you have your FICO score and believe it may be wrong or be based on incorrect information, you should obtain your free annual credit report.  This may be obtained at
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