BOSTON
Most Americans may have reviewed or seen their credit reports, but almost 70 percent haven’t been privy to a more important measure of their creditworthiness: their credit score.

Such was the finding of a survey by San Rafael, Calif.-based Fair Isaac & Co., whose FICO score has become an industry standard.

Most people don’t have a clue what their credit score is because, until two years ago, the business of calculating and providing credit scores was the exclusive purview of credit-data suppliers like Fair, Isaac and financial institutions.

Under pressure from Congress and consumer groups, all that has changed. Now, credit data suppliers are required to disclose credit information, including credit scores, to consumers.

Anyone with credit accounts and a payment history will have a credit report on file with the three main credit-reporting bureaus: Equifax, Experian and TransUnion.

Due to rising concerns over identity theft and the recent mortgage-refinancing boom, more consumers have checked the information on their credit report. That’s a good thing too, because incorrect or missing information can be a sign that your identity is being hijacked or have a negative impact on how lenders size you up when considering your application for credit or a loan.

But your credit report is just that – a report of all credit accounts, your payment status, the most recent balance of each account and other related information.

What has become more important is your credit score, as lenders place more emphasis on this score when deciding credit approvals and terms and less importance on an applicant’s debt load and income.

The most commonly used credit score is the FICO score, developed by Fair Isaac. Using the information they get from your credit bureau reports, they calculate a score ranging from 300 to 850. About 60 percent of individuals have a credit score of 700 or better.

While there are other similar credit scores calculated and used, the FICO credit risk score is clearly the 800-pound gorilla in this category. More than 75 percent of mortgage lenders and 80 percent of the largest financial institutions use FICO scores in their evaluation and approvals process for credit applications.

While there is no hard and fast number, financial institutions indicate that a FICO score in the 620 range is the cutoff point below which anyone applying for credit may be considered a higher than average risk and therefore will be charged higher fees or higher interest on a loan.

Fair Isaac backs this up with their research that indicates that individuals with FICO scores less than 600 have a 51 percent chance or more of falling 90 days past due, defaulting or declaring bankruptcy in respect to their credit accounts.

Lenders use credit scores because they feel these scores provide a predictive assessment of how customers will perform on loan payments and this allows them to better balance the credit risks they take into their overall loan portfolios.

Consumers should get their credit score months before they intend to apply for an important loan such as a car loan or a mortgage. You need to know your credit score and what you can do to improve it before a prospective lender checks you over for a loan.

Although you have to pay to get your FICO score, there are other credit scores provided for free. Those scores are based on similar factors and are available from sources such as eloan.com.

You can buy your FICO score and one credit bureau report for $12.99 from three providers: myfico.com, equifax.com and transunioncs.com. Experian, which uses the Fair, Isaac credit-score formula, sells its own proprietary credit score for $14.95.

The folks at myFICO.com let me test-drive their FICO score and three-bureau report product, which is comprehensive. It should be, it comes with a $39.95 price tag.

I was surprised to find the difference in the information on my credit reports from one credit bureau to the other. For example, Experian had complete information on 61 percent of my accounts, Equifax had information on 68 percent and TransUnion, which was the most complete, included information on 82 percent of my accounts. My advice: If you want a complete picture of all information reported on your credit accounts, you should get your credit reports from all three credit bureaus.

To know what you can do to improve your credit score, you first need to know the categories of information and their importance in determining your score:

Payment History (35 percent): Having a long history of making payments on time and no missed payments on all credit accounts is one of the most important items lenders look for.

Amount Owed (30 percent): This measures the amount you owe relative to the total amount of credit available. Someone closer to maxing out all their credit limits is deemed to be a higher risk of late payments in the future and this can lower their credit score.

Length of Credit History (15 percent): In general, a credit report containing a list of accounts opened for a long time will help your credit score. The score considers your oldest account and the average age of all accounts.

New Credit (10 percent): Opening several new credit accounts in a short period of time can lower your credit score. Also multiple credit report inquiries can represent a greater risk, but this does NOT include any requests made by you, an employer or by a lender who does so when sending you an unsolicited, “preapproved” credit offer. Also, to compensate for rate shopping, the score counts multiple inquiries in any 14-day period as just one inquiry.

Types of Credit in Use (10 percent): Your mix of credit cards, retail accounts, finance company loans and mortgage loans is considered.

It’s important to note that your credit score ignores your age, your salary, occupation, gifts or support obligations you receive and your assets. For this reason, credit scores are less important for borrowers who work with lenders and credit products that take these factors into account.

To boost your credit score:

1. Pay your credit account payments on time. If you are late, get current and stay current. The longer you pay on time, the better your score.

2. Contact your credit account providers if there are late payments indicated on your credit report. Put the account in dispute and ask to have late payments removed.

3. Pay down balances on revolving credit accounts and credits cards and don’t use them for a few months. This will lower your amounts owed relative to credit limits.

4. Avoid opening new accounts, particularly if you have been using credit for a relatively short period of time.

5. Chat boards and Web sites are filled with tricks and gimmicks you can try to improve your credit score. My advice: Because of the way the FICO score is calculated, what works for one person will not necessarily work for others.

6. It’s counterintuitive, but closing unused credit accounts may actually lower your score. This is particularly applicable when the account you close has been established for a long time.

Individuals who are serious about improving their FICO score should use the FICO score simulator on myFICO.com to determine how various actions can affect their FICO score.

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(c) 2003, MarketWatch.com Inc.

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ARCHIVE GRAPHICS on KRT Direct (from KRT Graphics, 202-383-6064):

SG CREDIT SCORE, 3×4, how your credit score (FICO) is calculated.

FN CREDIT SCORE, 2×3, components of the FICO or credit score, used by lenders to decide who is credit worthy.

CREDITSCORE FICO, 1×3, pie chart shows the five categories FICO credit scores look at and the general weight given to each.

ARCHIVE ILLUSTRATION on KRT Direct (from KRT Illustration Bank, 202-383-6064):

CREDITSCORE illus., 300 dpi, 4×13.25, Dennis Balogh color illustration of man balancing on his money while trying to catch an elusive winged number, representing a credit score, with his butterfly net.

AP-NY-05-12-03 0615EDT

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