Credit Score Testimonial

A Personal Look at Credit Score

When an old fraternity brother asked me to be his best man, a friend suggested I join a local public speaking group to help me write and become comfortable delivering my toast. I had no idea what to expect from the group. I was afraid it would be full of guys like me and none of us would have a clue how to make a speech, let alone help each other.

I was wrong. The group was full of men and women of all ages, some of them excellent speakers and few others like myself who were just learning. I thought I would only attend the meetings until the wedding, but I was mistaken on that count as well.

The group helped me immensely with my toast for Joey and Becky's wedding, both in the writing and delivery, but more and more I found myself actually listening to the speeches others were making. In particular, just two weeks before the wedding, a man I'd seen at the group a few times stood up and delivered a short talk on credit scoring. Within a few minutes, I could tell he really knew what he was talking about.

He said many people have misconceptions about how credit scores are derived. "While you may think that paying off your credit cards every month will raise your score," he explained, "in actuality, carrying a small, manageable balance month to month will do more to improve your score." I was surprised to hear that, but it only made me pay even more attention to his speech.

"Also," he continued, "if you have collections accounts that are a few years old, making a payment on them can actually lower your score temporarily since it brings them to the forefront of your credit. You see, your credit report operates somewhat like a timeline, with older items often having a smaller impact on how you're scored. Making a payment on a collections account raises that account to a much more recent position. That usually causes the credit reporting agencies to put more emphasis on it when figuring your score."

I looked around and found that I wasn't the only one listening carefully to the speech. The man's name tag identified him as Nathan, and he had just about everyone's attention as he continued.

"To establish good credit," he said, "the biggest favor you can do for yourself is to have two or three open trade lines that are current on their payments. Credit cards count as trade lines and so do mortgages, auto loans, boat loans, accounts with department and retail stores and signature loans, just to name a few. The longer you've had a trade line open with a solid, on-time payment history, the better. Even one late payment can hurt you. Also, when you're talking about credit cards specifically, you don't want to be using a high percentage of your credit limit. Being close to or at the max of that limit can hurt you as well."

I was really impressed with Nathan's expertise. He continued, "Resist the urge to hop from one credit card to the next. I know it's tempting to transfer your balances to a card with a zero-percent introductory period and close or stop using the old card. While that won't necessarily bring your score down, it will keep you from establishing any long-term payment histories. That means the credit reporting agencies have less to base a good score on."

When Nathan was finished, several of us congratulated him on both his speech and his expertise. I made sure he was planning to continue attending our meetings and asked him to join me for lunch the next day so that he could tell me more about credit scoring.

My toast to Joey and Becky at their wedding went off without a hitch, and I was happy to have spent the time polishing it in the public speaking group. Later as I was congratulating Joey personally, he had just enough time to mention to me that he thought he was going to have to open up a new credit card to pay for everything on their honeymoon. I told him to call me before he left. As his best man, I had some more wisdom that I wanted to pass along.