Test your credit knowledge

There are approximately 1,900 credit bureaus in the U.S., but only three major bureaus: Equifax, Experian and TransUnion.

A credit score is often referred to as a Fair Isaac, or FICO, score.

False. Closing a credit card account often lowers your available credit, which raises your utilization ratio, and it can lower the average age of your accounts. Older accounts show stability and that you can handle credit wisely.

D) Your middle credit score from Equifax, Experian and TransUnion.

False. A low credit score may increase your property and casualty insurance rates (home and car), though not your life insurance rates. Property and casualty insurers consider people with lower scores to be greater insurance risks and more likely to file frivolous claims. So “if you don’t know insurance, know your insurance agent.”

True. A credit score does not consider income or occupation. Still, a person with a high FICO score and minimal income will likely not qualify for a large mortgage or an unsecured bank loan.

False. By law, a collection account can stay on a credit report for up to seven years, but there is no minimum.

True. Opening a new account will often lower your credit score and lower the average age of your accounts. Applying for too many accounts can be a sign of financial problems. Very few bankers are fired for not making a loan; they are fired for making a bad one. It is better to raise the credit limit on your revolving accounts than to apply for new ones.

False. It is better to lose the Visa or Mastercard, because your liability is limited to $50. With a debit card, you can lose everything in your checking or savings account.

You should know all three scores, since different lenders use different credit bureaus to evaluate your credit. Check your own credit report twice a year, not only to know your scores but to monitor activity on your accounts: credit cards opened or closed, unauthorized activity, unknown charges, new bank accounts, past-due payments, accounts over the limit and signs of identity theft.

D) Over 1,500. There are approximately 1,900 credit agencies in the U.S. All of them buy their information from the “Big 3” and often tailor it to a specific industry, such as auto dealerships, mortgage lenders or department stores.

A) $50. A banker is typically more concerned about a small unpaid debt than a large one. Not paying a small debt is considered a choice. Wanting to pay a large debt but not having the ability to pay is considered a condition. If you have the ability to pay, bankers will often write WNC (willful non-compliance) next to small accounts.

False. A low credit score can eliminate an applicant from consideration for a job, and this is considered legal discrimination. The thinking: if applicants cannot handle their own finances, why trust them with clients’ money? And even in roles that do not handle money, such as marketing or sales, an employee worried about the mortgage, rent or car payment may be distracted from the job.

FICO scores get a medium-size increase when a credit card balance is under 50% of its credit limit. The largest increase comes when the balance is under 30%, and there is a minor increase under 10%.

The five primary factors are payment history (35%), credit utilization (30%), time open (15%), mix of credit (10%) and new credit (10%), and there are subcategories within each. It is easier to go from no FICO score to 600 than it is to go from 600 to 700!

Inquiries. Too many inquiries can cause your credit score to drop 10 to 50 points or more in a single day.

False. All adverse accounts harm your credit, but new items (0 to 24 months old) are more damaging than older ones, because they are weighed more heavily.

FICO (Fair Isaac Corporation) scoring is what over 90% of banks, mortgage lenders, department stores, auto dealerships and credit card companies use to make decisions. Credit Karma provides its members a VantageScore 3.0 score for free, which is a different scoring model from the FICO score most lenders use.

False. Paying it improperly is what harms your credit rating. Never pay a collection without a written agreement, and never pay with a credit card, a debit card, over the phone, with a cashier’s check or with a money order. For your protection, send a personal check with a restrictive endorsement.

The Big 3 are Equifax, Experian and TransUnion. LexisNexis is the fourth, and is used by the other bureaus to report public records such as bankruptcies, judgments and tax liens.

When a new credit card is issued, often at a very low or zero APR. Using it frequently shows you deserve a high credit limit and can handle credit wisely. Then bring the balance down under 30% to maintain your FICO score.