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Credit Score Blueprint: Everything You Need to Know

Credit Q&A

Question: Should I mix personal and business expenses?

Answer: There’s no easy answer to this question. While credit experts used to advise keeping business and personal expenses separate, this recommendation has changed since the 2009 passage of the Credit CARD Act, which provides certain protections to consumer credit cardholders. Since the CARD Act doesn’t apply to business credit cards, using a personal card for your business expenses can be, in some ways, safer. On the other hand, if you have high business expenses, you may want to keep things separate, since high balances on your credit report can cause you to appear overextended. Then again, there’s a possibility that business expenses can appear on your credit report even if you keep your business and personal accounts separate – some issuers now report business credit card information to the CCRs.

Question: Should I request a lower APR?

Answer: There didn’t used to be any downside to calling your credit card company and asking for a lower interest rate, but current credit issuer practices are such that asking for a lower APR may trigger an account review. If the issuer doesn’t like what it sees in your review, it may actually raise your interest rate and/or reduce your credit limit. Therefore, before asking for a lower APR, check to make sure that your credit report and that specific account are both in good standing.

Question: Is it OK to run up a high balance on a card with no preset spending limit?

Answer: Some credit cards, including American Express cards and some high-end charge cards advertised as having no present spending limits, do not report credit limits to the credit bureaus. Besides AMEX, other examples include Visa Signature and MasterCard World cards (these cards do have monthly limits, although cardholders can exceed them and pay them off in the next bill.) When the FICO scoring system encounters an account with no preset spending limit, it will usually bypass/disregard the card for credit utilization calculation purposes, and your score will not be affected. However, in some cases, FICO scoring formulas may use the account’s highest balance on record, instead of the credit limit, to calculate your credit utilization. In these cases, customers who spend around the same amount every month may appear to be approaching their limit and receive lower scores than they deserve.

Therefore, if you have a card with no preset limit, it’s a good idea to, one month, run up a balance that’s a lot higher than usual. Your credit score may go down that month (depending on whether that particular FICO scoring algorithm bypasses the card or considers your highest balance as your credit limit), but it will improve in the following months. Just make sure you avoid interest charges by paying off the balance in full the following month. Also, do not employ this strategy if you’re planning to apply for a large loan within the next month. Check your credit report to find out which, if any, of your cards don’t report a credit limit.

Question: Is it possible to have too much credit?

Answer: While rare, you may be turned down for new credit if you already have a lot of available credit. Creditors may find it suspicious that you’re applying for more credit, especially if your income level isn’t sufficiently high to justify additional credit availability.

Question: Which FICO score do lenders use?

Answer: It varies with each creditor. Some creditors will use only one of the credit bureaus to access your information. Some may consider the average of your 3 FICO scores, while others may focus on your high, low, or middle score. Others use filters which ignore certain types of items on your credit report, such as past due medical bills. As a result, two creditors will rarely come up with the same score for you, even when pulling the same data from the same credit bureau (As previously mentioned, special credit score calculation “filters” also include auto-enhanced and bankcard-enhanced scores).

Question: How late does a payment need to be before a creditor reports it?

Answer: Creditors typically don’t report a missed payment to the credit bureaus until it’s at least 30 days past due. Legally however, creditors may report a missed payment as soon as it’s one day late.

Question: Where can I find my Experian FICO score?

Answer: Because of the legal battle between FICO and Experian, consumers are no longer able to access their Experian FICO score (however, lenders still can). Instead, Experian.com gives you their “PLUS” Score.

Question: What are FICO scorecards?

Answer: Your FICO score places you in one of ten FICO “scorecards” or ranks of creditworthiness. Within these scorecards, your credit-related behavior is judged against other consumers in a “Bell curve” fashion. It is, therefore, theoretically possible for your credit score to rise or fall due to credit data changes among other people in your same scorecard.

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