PsychDoc's Credit Insider Guide to... CREDIT SCORES Part #4: SECRET DECODER RING NEEDED by Randy Padawer, Ph.D. Secret decoder ring needed. Needless to say, the underlying arithmetic upon which FICO scores are based is kept top secret by the Fair Isaac Corporation. Put simply, if they gave away their for-profit secret sauce, somebody's business plan would likely be threatened. Moreover, there are problems with the secrecy. First, with so much at stake (mortgages, insurance policies, certain employment categories, car loans, and more), consumers rightfully want to know specifics regarding how to improve their scores. Fair Isaac's pat answers, stuff like "just pay everything on time, and pay down your debt," just doesn't satisfy. In fact, disappointingly, sometimes paying down debt simply has no scoring impact at all. For example, paying off an installment loan almost never helps a score, while paying down revolving credit card debt almost always will. Similarly, paying off a debt that was previously charged-off will also likely have no positive impact. (That said, doing the right thing merits other worthwhile life rewards.) For these reasons, Fair Isaac's summary statements which masquerade as score-enhancing advice often accomplish nothing. Second, with certain government jobs and federally overseen home mortgages riding on the proprietary for-profit FICO product, one would think that Congress would demand more transparency regarding a credit score's actual construction. And, of course, when citizens make enough noise about the matter, that will surely come to pass. Government dependence upon Fair Isaac provides another compelling reason for eventual systemic change. Next > Section #5: Improve Your Score   Randy Padawer (PsychDoc) is a clinical psychologist whose research interests range from personality testing to consumer credit. He has been featured in publications as diverse as the Journal of Personality Assessment, the Journal of Consulting and Clinical Psychology, and Smart Money Magazine. Dr. Padawer co-wrote the best-selling "FICO 850" seminar for The Motley Fool, and he has consulted for Lexington Law Firm and others regarding consumer behavior and credit reporting. (This article was reprinted with permission from Lexington Law) AND NOW, A WORD FROM OUR SPONSOR... Repair your credit reports by removing negative items. From bankruptcies to charge-offs to tax liens, we have deleted over 700,000 such items to date. To get started today, simply go to: http://www.lexingtonlaw.com/Home.php?tid=388.0.1577   Related articles: CREDIT SCORING: Part #1: Good Intentions Part #2: What Happened? Part #3: Shoddy Math Part #4: Secret Decoder Ring Needed Part #5: Improve Your Score CREDIT REPORTS & CREDIT BUREAUS: Part 1 - The Nature Of Credit Bureaus Part 2 - Your Credit Report Is Reviewed Carefully Part 3 - Including A Credit Statement Is Helpful Part 4 - Negative Items Must Remain For 7 Years Part 5 - Seeking Help In Repairing Credit Is Unlawful Interesting Sidenote - The Wild Wild West!
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