FICO Roller Coaster - Part 1: FICO Freshen Up in 3 steps

In this series I'll do my best to touch on the following topics:

  • FICO Freshen Up - Quick actions to pump up your FICO in the next 30 to 90 days
  • FICO OCD - Ongoing credit monitoring of your files and scores
  • FICO Battle - Long term battle plan when your reports & scores are in some serious need of cleanup & boost

Part 1: FICO Freshen Up - Quick actions to pump up your FICO in the next 30 to 90 days

OK, in this series (in 3 not so short steps), I'll cover a great gameplan to hopefully make some substantial improvements to your FICO score in the next 30 to 90 days. I've gone through many different levels of understanding about FICO scores. From what the heck they are, what's good, what's bad, to learning some great methods for boosting and keeping mine in the healthy range and the oh so important difference between FAKO and FICO. A great site that I've learned a bunch from in the last year is This site has great set of discussion forums on all different aspects of personal finance. They're main board is probably the Credit Forum. Tons of knowledgeable people pitch in to help their fellow posters deal with the daunting hardships of credit card debt, personal finance tips and tricks, mortgage finance hunting, money management, and more, much more. I highly recommend this site if you want to dive in for a week or more of reading posts and FAQs on how to improve your credit score picture. What I'm touching on here is only the tip of the iceberg. There's so much more to learn there.

Before I got educated at this site, I was playing the 0% balance transfer shell game to reduce the interest hit of my outstanding balances. While this makes good financial sense, if done without attention to FICO, it can wreak short term havoc on your FICO score. Before I did learn about FICO scores and in general how to monitor them and was very fuzzy on how to really make them move. I figured if I kept paying off the balances, that the scores had to go up and they did.

Short and sweet steps

  1. FICO Checkup - Pull your reports and scores and see where you stand. Use for FICO scores, rather than FAKO's.
  2. FICO Boost & Payplan - Pay balances and perform balance transfers (using existing cards only ... no new card requests for balance transfers) to achieve an even utilization ratio.
  3. FICO Monitoring - Monitor your FICO and Report progress as you paydown until you're ready for your mortgage/loan

Details, details, details to the steps

  1. FICO Checkup - Pull your reports and scores and see where you stand. Use for FICO scores, rather than FAKO's.

    What is a good FICO? What's the difference between FICO and FAKO? What's a FICO middle score?

    FICO scores range from 300 to 850. When lenders look at your scores they generally are looking at your middle FICO score. This is the the middle score of your 3 available FICO scores. There are 3 credit bureau organizations that mortgage brokers and most other creditors get your FICO scores from. These are: Equifax, Experian, and Transunion. So, if you had scores of 660, 680 and 700 the score that your Mortgage broker woudl be quoting your rates at would be the middle score of 680. It's funny, but your score can vary in range from any of these three credit bureaus.

    How FICO score affects mortgage rates

    760 to 850 tier 5.78%

    700-759 tier 6.002%

    660-699 tier 6.286%

    620-659 tier 7.096%

    580-619 tier 8.583%

    500-579 tier 9.494%
    (as of March 2007 for 30 Year fixed $300,000 mortgage)

    (from article:
    How credit scores affect mortgage rates)

    A good FICO is basically a FICO that allows you to get a prime rate mortgage. Scores below 660 start to penalize you on getting the conventional prime rate mortgage rates. The general consensus is that a 660 and above gets you rates starting in the prime rate range. As your middle scores move up from 660+, you are on different tiers of improving mortgage rates. With the best generally considered from 760+. So, once you've reached a middle score of 760, it's great to keep improving so that future hits to your FICO won't have a great impact. But, you might not necessarily see any rate improvements.

    So, what the heck is a FAKO? This one threw me for a loop for a couple years. For the last 5 years or so, I thought I had a handle on improving my scores. I could never figure out how the heck the mortgage brokers got such different scores than the ones I was pulling to monitor my credit. I mean I was diligently pulling my credit reports and monitoring them and my scores from all 3 bureaus at Then when I'd apply for a car loan, mortgage, refi, investment property, etc. I'd confidently tell the broker that my middle score should be 670 (etc.). They'd say, well it looks like it's actually 675 or sometimes in the bad direction 665. I'd say, what are three scored you have for me and they'd say for example: 660, 675, 696. I'd say: well, I just pulled them yesterday and they are 670, 675, and 705. They'd say, those are consumer FICO's. We pull a different set of FICOs for banks.

    Geeze, I felt somewhat beaten down by the process. But, I was getting my scores in the general upward velocity and vicinity that I wanted them to be. I just couldn't understand why my scores I'd pull and theirs were so different. Well, on I learned that if you want to monitor your scores and report, use many folks do that to great success. But, once a year/quarter/before refi/etc. pull your score from This is the consumer end of and they publish the real FICO scores that the banks get. The scores that gives you are FAKO scores, they have their own algorithms to give approx scores for the 3 credit bureaus, but they aren't the exact algorithms that uses and that all banks actually get. So, there you have it FAKOs are great for monitoring general trend and vicinity of your actions on your scores, but when you really want to know what scores your creditors/brokers will be pulling you should pull it from .

    Now, I'm sure I heard a couple of people pipe up and say: why even pull reports and scores? Just use
    all the time. Well, it comes down to money my friends ... cold hard cash. and there are others that you can learn about on charges a pretty nominal fee for the year to allow you to pull your updated credit file and scores on a daily basis (yep, updates daily) as well as daily alerts sent to your email when things on your report changes (great for monitoring for Identity Theft). Whereas pulling from costs about $45.00 ($40.00 if you can find promo coupons and there generally are some posted on

    Now that the basics are out of the way, what was step one again? Oh yea, let's pull our FICO and FAKO's and see where we are. You have a couple different options here. First, if you've just recently applied for a Mortgage, Refi, Car Loan, etc. where they pulled your credit report and scores from all 3 bureaus, then ask them to please tell you what your scores are from each of the bureaus and note these. This is basically free if you do it this way :-). Also, ask them if they would please send you your three credit reports (if you can't get these, that's ok, we'll want to pull them anyways).

    So, if you didn't get your scores or reports the freebie way, there are still some economical avenues. You can go online and get your credit reports pulled down for free within 60 days of being declined for credit. Just follow the online links in this post:
    Links to the Free Online CRA Credit Reports For adverse action or declines (i.e. also free if you are unemployed, on welfare, or have any reason to believe your reports are wrong due to fraud).

    You are entitled to pull your Credit Report from all 3 bureaus for free once a year. You can choose to pull a report from one at a time every 4 months (just a suggestion) for free to keep you covered for the entire year when you're monitoring or you can choose to pull them all at the same time from
  2. FICO Boost & Payplan - Pay balances and perform balance transfers (using existing cards only ... no new card requests for balance transfers) to achieve an even utilization ratio

    OK, you got your reports and you know where your starting scores are. 30% of your credit score is made up of the amount you owe. In particular your overall and individual credit line utilization rates figure big time into your credit score. So, if you lower your utilization rate, you increase your fico scores. Payoff your debts and your scores increase. How to calculate your utilization rate? It's the ratio of your debt to credit limit. Or: Utilization = Debt/Available Credit Limit. Example: Platinum Visa with $10,000 limit and $4,000 balance; Utilization = $4,000/$10,000 = .40 (or 40%). The rule of thumb is that you want to have none of your cards above a 50% utilization. This is a signal to your creditors that you are maxing out a credit line and can't manage your available credit limits.

    This one killed me, remember when I said I'd balance transfer to my 0% card offers. Well that was giving me a 80-90% utilization on individual cards (but not changing my overall utilization). The result is my FICO score would tank and I couldn't figure out why. Do a search on 'Utilization' at for lots more examples and explanations. Suffice it to say that one of the most powerful methods of increasing your FICO scores quickly is to equalize your credit card utilization ratios.

    Your action plan is to build up a spreadsheet (paper or electronic) and calculate all of your existing utilization ratios for all your open credit card accounts. Apply your monthly payments to reduce highest utilization ratios first. Apply minimum payments to all others.

    You can also utilize existing balance transfer offers you have (on your existing cards only, don't open new accounts). Use these to move the balances around to equalize the utilization ratios. Example:


    Card Balance Credit Limit Utilization

    Card1 12000 15000 80%

    Card2 0 (BT Avail) 5000 0%

    Card3 5000 10000 50%

    Card4 0 (BT Avail) 10000 0%

    Card5 10000 12000 83%

    after 1 month (with avail balance transfers + $1000 monthly payment)...

    Card Balance Credit Limit Utilization Paid/BT

    Card1 7500 15000 50% 4000BT + $500

    Card2 2500 (BT) 5000 50% -2500 BT

    Card3 5000 10000 50% Min Pymt

    Card4 5000 (BT) 10000 50% 5000 BT

    Card5 6000 12000 50% 3500BT + $500

    after 2 months (with only $1000 monthly payment avail)

    Card Balance Credit Limit Utilization Paid

    Card1 7225 15000 48.17% 275

    Card2 2400 5000 48% 100

    Card3 4800 10000 48% 200

    Card4 4800 10000 48% 200

    Card5 5775 12000 48.13% 225

    Note: The above method is not the most cost effective way to deal with it. If you have no need to have a great FICO score right away. Then play the 0% balance transfer game any way you want to reduce interest rates and attack attack attack your credit card balances with all your avaialble cash payments. Attack the balances with highest interest rates first for the best savings. Once they're all paid off you'll have stellar FICO Scores as your utilization will be close to 0%.

    Caution: No matter what you do, do not close accounts as you do this. You could seriously tank your FICO scores! Read up on about closing accounts. Take a look back at the charts at for what makes up your scores (remember, these are the folks that created the algorithm for all our scoring, so they know). Payment History makes up 35% and Length of Credit History makes up another 15% of your FICO Score. So, closing an account you aren't going to use anymore could hurt you (especially if it's an old account). As long as you're not paying a fee for it throw it in a sockdrawer or in a baggie of water and throw it in the freezer. It's not going to be used that way and is always there if you need it AND it won't kill your FICO Score.

  3. FICO Monitoring - Monitor your FICO and Report progress as you paydown until you're ready for your mortgage/loan

    Go online to or another monitoring service that you're familiar with and monitor your score and credit reports. I like to use and I have the plan to pull unlimited scores and reports daily. It's like $10 or $14/month. You might check with your credit union, employer, etc. to see if they have any recommended credit monitoring options.

    What I do is pull my score weekly or daily if I'm looking for score changes and report updates. I also save my reports and scores daily to hard drive (in html format). This allows me to look from one pull to the next to determine what had an effect on moving the scores. Remember, these are FAKO scores, but the general movement and trend is what you're looking for. You should see your scores going up as your new balances are posted. You can check on your report to see if it reflects the new balances for your most recent payments. You'll notice that as soon as a new balance hits, you'll see an upward movement in your score for that day :-). As you attack those balances and drive that Utlization ration to under 20% you'll notice a huge spike in your scores over that time.

    Once you've done about all you can before you'd like to engage in a mortgage broker, etc. Then pull your scores and you'll know exactly where you stand with what your rates can buy you.

    How FICO score affects mortgage rates
    (as of March 2007 for 30 Year fixed $300,000 mortgage)

    760 to 850 tier 5.78%

    700-759 tier 6.002%

    660-699 tier 6.286%

    620-659 tier 7.096%

    580-619 tier 8.583%

    500-579 tier 9.494%

    (from article: How credit scores affect mortgage rates)

More to come in the upcoming parts to this series. We'll dive into how you can triage and attack the information in your credit report to take away bad references, derogatories, etc. For more information in the meantime on this topic, check out a great primer on credit building by Psychdoc at creditboards: PsychDoc's Credit Repair School

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