How To Help an Ailing FICO Score

September 18th, 2007

Many of us prefer to live in blissful ignorance of certain facts of life: the effects of gravity on the human form, how many calories are really in three slices of deep dish pizza with the works, what our parents did with each other to bring us into this world.

A really easy thing to avoid thinking about is our credit score. It can seem really scary to find out what some faceless entity has determined our credit worthiness is. Even worse, it can be frightening to own up to the fact that we pretty much create our own credit score. Who needs to face that bit of reality?

We all do.

And there is nothing to fear, really. Really. If the news is better than you expect - say, FICO score of 730 - hazzah, hazzah. Pat yourself on the back and keep doing whatever it is you’ve been doing.

If the news is more sobering - a score that looks more like a batting average - then swallow hard, look at how you got there and make some changes.

What can be done? First of all, don’t think you’re the only one. Managing your relationship with money is like any other in your life. It takes work. Lots of it. And diligence. And compromise. And sacrifice. And a sense of humor for when things are rough. Many, MANY people don’t have the credit scores that they want. Folks with plenty of money as well as those who have less disposable income. Medical doctors, bricklayers, financial planners, restaurant owners and even Realtors (yikes!) can struggle to manage their money.

So, take heart. It isn’t a badge of shame. It’s just where you are right now. And a few changes over a few months can make a big change in your scores.

Here are some suggestions:

  • Gather all your bills together.This may be the hardest step, like getting on a scale after the holidays. But you can’t fix what you don’t acknowledge and figuring out just exactly how much you owe and to whom is critical to getting back on track.
  • List your debts from lowest to highest balances. Once you have all your debts in front of you, prioritize payments. At this point if all you can swing are the minimums due on each, do that. And make sure those payments arrive by the due date. Not one day after. The creditor will not give you a break that “the check has been mailed and is on its way”. It must arrive on time or before. This is key.
  • Pay your higher interest rate loans first. Every statement you receive will show your balance and the interest rate you’re being charged. Pay those that are charging the highest rate a bit extra when you can. And if you’re paying anything like 20% interest or more you really must pay more than the minimum due or your balance will not be reduced my much, if anything. You could literally make months and months of minimum payments and after that time owe virtually the same amount of money. Its a rough cycle to get out of. You can try to ask your creditor to reduce the rate. But don’t bet on them doing so.
  • Pay the minimum due plus that month’s finance charge. That way, you’re not paying finance charges on the finance charges. When you get a bit more breathing room, pay twice the minimum due plus the finance charge. It’s all about whittling down your balances.

    • These are just a very few suggestions. If you’re finding that you must use credit each month to cover your expenses, scale back on your lifestyle. Obviously, there are circumstances that can make this very difficult - health issues, for one. But many of us have come to see luxuries as necessities. Again, successful relationships require sacrifice at times. And if you can make your relationship with money and your finances work, you’ll find that so much of the rest of your life seems easier.

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