Credit scores don't change each passing day. Like a book on a shelf, they're only good when someone uses them. Yet they are very much like your reputation. They can be trashed in one crazy night. And it takes a lot longer to recover than it does to ruin,
The folks at Fair Isaacs, where the FICO score comes from, note that today's gold standard is 750, not the 720 that once was.
Two factors drive down a score: major delinquencies or foreclosures, and the amount of credit that you use. Delinquencies will kill a credit score longer than any other problem and will haunt you for the seven years they are allowed to remain by law. However, the impact diminished with each passing year as long as you do the right things: pay on time, keep balances low, and take on new credit only when you need it.
If you've maxed your charge accounts, what you owe is roughly figured into a third of your score, so maxing out puts it way down. But there's a quick fix: pay it down quickly, and that score pops up like a bobbler in water.
FICO scores look at three parameters: frequency, or how many delinquencies you have; severity, or how late the payments are; and recency, or how close they are to the day your score is figured.
The biggest thing to avoid is closing accounts. That will only drive down the amount of credit you have, closing the gap with the amount of credit you've used. That's bad.
What else? The new cards that will inevitably be offered during the holiday season. Will that additional 10 percent discount you get for a new account really make or break your finances?
Source - The Denver Post
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