I really don't understand this FICO stuff......

[alaskachik]

Okay - this makes no sense at all. I have no bad credit at all. I have never paid late. EVER!! There is not one negative item on my credit report. I currently only have 2500.00 of debt - a conns account. My credit cards all have zero balances - I have 2 Visas and 2 Mastercards, one Walmart Card, one Macys Card and one Home Depot Card. Like I said, they have zero balances. When I use them, I pay them off. My truck is paid off. I don't have a mortgage. I have a 6 figure income. Why is my FICO score only a 640? That is crazy. I am really not happy about this. It doesn't seem right. My FICO score should be excellent.

[SCoach]

Well, I am not credit expert, but there are a few things here that are hurting you.

1.  Keeping your cards at zero is great for personal finance reasons, but not so great for your credit score.  So pick a card or two, and let it show a balance.  A couple hundred dollars.  Let the statement close with a balance, then pay it off as usual.  Repeat that for a few months and your score should improve.  When you leti your cards report at zero, it looks like you are not USING them, which doesn't strengthen your score.  This was a tough one for me, because I always pay everything off... I had to learn it was an issue of TIMING, and not a behavior change.

2.  Mix of credit.  It appears that your only active credit is cards.  FICO scores are helped by having a MIX of credit.  Car loan, mortgage, credit cards, etc.  If you only have one type, it brings your score down.

3.  How old are the credit cards you have?  The older they are, the more it helps your credit score.  

4.  Your debt to income ratio is likely helping you a lot.  Not much you can do there.

Sounds like you have your fiscal house in order.  Just a few tweaks and you should see your scores improve quickly.

[CashOnDelivery]

Try using the FICO simulator. It'll tell you what areas you can work on to get a higher score. However, it's a tool so results may vary.

[thom02099]

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@alaskachik wrote:

Okay - this makes no sense at all. I have no bad credit at all. I have never paid late. EVER!! There is not one negative item on my credit report. I currently only have 2500.00 of debt - a conns account. My credit cards all have zero balances - I have 2 Visas and 2 Mastercards, one Walmart Card, one Macys Card and one Home Depot Card. Like I said, they have zero balances. When I use them, I pay them off. My truck is paid off. I don't have a mortgage. I have a 6 figure income. Why is my FICO score only a 640? That is crazy. I am really not happy about this. It doesn't seem right. My FICO score should be excellent.

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The short answer?  Your file is rather thin.  You don't mention your AAofA, so if your credit cards are fairly new, there's limited basis for judgement on your risk factor. If they are older, carrying a zero balance across the board is hurting you.  Ideally, you should show utilisation in the area of <9%, with 5-7% anecdotally being the prime util rate. 

Keep in mind that FICO is not a tool for determining how pristine your payment history is.  That's one factor.  But the primary purpose of a FICO score is to determine what your RISK FACTOR is, what is the risk to the lender that you will pay back the credit that they (the lenders) grant.  If you carry a zero balance/PIF always, have no auto or personal loans, and no mortgage, there's a limited basis for what a FICO score can be generated.  Yes, there are posters here who say that you can (a) get high FICO scores with only credit cards/no mortgage/no personal loans and (b) get high FICO scores with NO credit cards/only mortgages/personal or auto loans/etc.  That's anecdotal information as well, the bottom line is that, in general, having a good mix of credit history will improve one's score.  Yes, your truck payment history will count, but since it's not open/is paid off, it's simply a closed TL.  A FICO score is a snapshot of your credit AT THAT GIVEN MOMENT IN TIME. 

I see that you are a new member here.  Welcome to the forums!  You might want to check out the stickies at the top of the page for a better understanding of FICO (and for that matter FAKO as well) scoring.