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Carmen: 5 Credit Score Rules and Truths

Tuesday, 30 Jun 2009 | 4:10 PM ET

My favorite Dollar Dilemma regarding credit scores went something like this: “I make over six-figures, my credit should be awesome!” The more we need credit scores, the more misinformation still seems to fester.

No, your salary has nothing/nada to do with your credit score. You could have a better credit score than Bill Gates—really! However, something tells me he’d still get a loan no matter how bad his credit (see Michael Jackson’s debt-load). Here are a few more credit score rules and truths to always keep in your back pocket (and note: since your scores are built off of your reports, I address reports):

  • You need to use credit to build credit. Not carrying a balance and having no debt doesn’t translate into a great credit score—quite the opposite. You don’t necessarily need to carry a balance, but you do need to use your credit in order to build credit. A Catch-22 of life.
  • Great credit is old, aged, like fine wine and cheese. It’s true. The older your credit, the better. This is why you cannot have a perfect credit score until you’re at least 40 years old. So do NOT close credit cards when you’re done paying them off. Just cut them up and let them exist in your credit report as “paid as agreed”, for years and years and years. I’ve got at least 5 cards on my report that I haven’t touched in 10 years. Good cheddar.
  • Credit is not credit, is not credit. There are all different types, kinds and ways to borrow money. The credit report/score overlords like to see a variation, say, revolving debt like credit cards as well as secured debt such as a mortgage, plus fixed debt like a student loan. Manage them each and all well, and you reap the rewards. It shows that you’re responsible with your money—that you can handle all types of borrowing. A skill for sure.
  • No one can fix your score but you. Well, if Uncle George hands you over a wad of cash and you pay off your credit card bills, your score will go up. But, it’s still you, not Uncle George changing your score. Stay away from companies who offer to boost your credit score. Many are supposed law firms who either dispute everything on your report, which puts everything in limbo, which temporarily boosts your score (they then take your money and run) or they ‘buy’ you another social security number, which is illegal. Fix your score yourself and the fastest way to fix it is to pay everything on time every time and bring your balances down. After that, all it will take is time.

More Credit Stories:

  • Q&A: Should I Pay Off Credit Cards to Raise My Credit Score Before Buying a House?
  • Q&A: What is Better for my Credit: Keeping High Fee Card Open or Closing It?
  • Carmen's Strategy: Paying off Credit Card Debt