Thursday, November 20, 2008
More advice on FICO scores -- and maybe some new concerns
AOL today offers a practical column on “Walletpop” by Lita Epstein, “Eight Myths About Your Credit Score”, link here. There is some pretty good and surprising advice. For one thing, the best credit score might not come from paying all balances off every month. A utilization ratio of 10% to 20% might be better. Credit card holders should bear in mind that payment histories tend to get reported to the three main credit card companies just before the billing statement is generated. Walletpop also offers other similar earlier pieces on credit score advice.
Also, card holders should not voluntarily downsize their credit limits – that will lower scores. Credit card companies may do that for you! If you cancel a card, cancel a newer one rather than an old one with long payment history.
The article does provide some discussion about what happens with wrong information or identity theft.
I was working for Chilton Credit Reporting in the 1980s when it developed interfaces to Fair Isaacs, then called "risk predictor." (Chilton is now "Experian.")
So far, credit scoring does seem limited to financial behavior. Other kinds of “private” background gumshoeing and investigating of people could look at things like Internet and social networking activity, as I’ve discussed on other blogs. There is something worrisome to me about this, as, this September, new kinds of blogger’s insurance got offered (see Sept. 28, 2008 on my main blog). It promotes the idea that a blogger (or at least an uninsured amateur) could be at an unpredictable long term risk for incurring judgment or at least expense in defending frivolous litigation, and that could create the perception that the person is a weaker credit risk. I haven’t seen anything like this happen yet, but the thought itself is scary, because it sounds all too logical.