Over the weekend I completed one of my year-end financial checkup tasks.  I visited MyFICO.com and pulled a current copy of my credit report. This exercise was even easier this year considering the MyFICO promotional code that gives 30% off of their products between now and the end of March (just provide the promotion code “myFICOis9“ when ordering your FICO score report).

I was pleasantly surprised at the bump in my credit score since the last time I checked it. Since paying off all our credit cards, our FICO score has increased about 40 points. It wasn’t bad to start with, but was in the “average” range, and has now moved to “very good.”

Getting our updated credit score was nice, but the real reason I request a credit report at the end of the year (and again in the summer) is to check for any suspicious account activity – new accounts that I didn’t open, balances or personal information that I don’t recognize, etc.

If it has been a while since you last pulled you credit bureau report, I suggest taking advantage of this opportunity offered by MyFICO.com.

How to Save 30% On MyFICO.com Products

1. Visit MyFICO.com

2. Choose “FICO® Standard” in the right sidebar

3. Click the “Buy Now” button

4. Select the credit bureau(s) you’d like to receive a report from

5. Log in or create an account

6. On the “Customer Agreement” page, enter the promotional code “myFICOis9″

7. Verify your discounted order and finalize the purchase.

Simply click the button above to take advantage of this promotional offer from MyFICO.com.

Few things strike up a debate faster than asking what good is a credit score these days?  There are those who totally spurn the idea of some 3rd party determining their credit worthiness.  There are others who worship the mighty FICO, well aware of its ability to save them money on future loans, insurance, and even affect their job hunt.  I fall somewhere in the middle. Still can’t help but wonder, what good is a good credit score?

I would not suggest someone go out of their way to wreck their FICO score, but I also wouldn’t recommend people be too concerned with their credit scores, either.  For far too long we have been beholden to this score, and taken on unnecessary debt in the name of improving our standing.  If you manage money wisely, make smart decisions when it comes to debt – including the type of debt you take on, and how well you repay it – you should have no trouble securing a high FICO score.  And here are a few benefits…

Higher FICO, Lower Mortgage Payment

According to the research at Information Research Services (infomars.com), as MyFICO.com, the difference in a 620 credit score and a 760 credit score means a $197 lower mortgage payment (on a 30-year, fixed rate mortgage of $200,000).  This is based on rates as of March 27, 2009, and may fluctuate some, but you get the idea.  Having an upper-tier FICO score can lead to significant savings in interest on real estate purchases.

Not only will optimal rates be available only to those with higher credit scores, but it could mean the difference in qualifying for a mortgage loan, or having to pay additional points to secure a decent interest rate.  The mortgage industry is probably the biggest supplier of FICO worries because most of us cannot afford to pay cash for a house, so financing is our only option.

Drive Cheaper

For those who opt to finance a new car purchase on shorter terms (36 months), a FICO score greater than 719 saves you about $119 a month over those with credit scores below a 590.  Personally, I don’t plan to ever finance a car again, but if I did I would obviously want to qualify for the lowest rates possible.  Bad enough car payments are as high as they are these days, but toss on another $100 due to high interest charges and it becomes downright ridiculous.

Higher Scores Lead Better Employment?

This is an area where there just isn’t much hard evidence to support FICO’s (and much of the financial press) claim that low credit scores can affect employment.  I’m sure employers in certain industries would be interested to know your FICO score as one piece of determining your overall employment potential, but using FICO as a screening tool has so many limitations.

Credit scores don’t tell employers a thing about the level of education someone has achieved, their savings and other assets, their work ethic, their trustworthiness, etc.  For instance, I used to work with someone who had trouble finding a job in her degree field (accounting) because she had gone through a nasty divorce and her ex-husband destroyed both their credit through running up unpaid credit cards, gambling, and a host of other financial problems.

It was only when she discovered this was going on behind her back that she ultimately asked for divorce, but the damage to her credit was done, as a couple of the accounts were in both their names (her husband forged her signature as a co-applicant).  Even though what he did was a crime, it was a nightmare to get accounts removed from her report, and things continued to “pop up” for months.

Potential employers looking for someone to handle their company’s money may incorrectly toss her resume based on a low credit score, when in fact she was probably more qualified than many other candidates in terms of education, work history, etc.

I’m sure you could dig up an employer or two to own up to using FICO scores for screening purposes, but most won’t.  I’m also sure you’d be hard pressed to find anyone in the banking industry that believes is not true. Again, we’ve been oversold on FICO and its importance in our society.

Don’t get me wrong, I think there is a place for credit scoring in helping insurers and potential lenders determine the risk of a potential customer.  However, I don’t think it is fair to label people with low (or non-existent) scores as bad, as if they deserve to walk around with some type of “Scarlet Letter” reading FICO=607 on their forehead.  Credit scores are but a small piece of the overall picture of someone’s creditworthiness, and to allow it to be the lone determining factor is just plain lazy on the part of lenders.

As consumers, the onus is on us to manage our credit wisely, check our credit reports periodically, and don’t go out of our way to damage, or enhance, our FICO score.  If you find yourself in my friend’s situation, dealing with a low FICO, there are plenty of ways to improve your credit score on your own.  Do not let desperation lead you to one of these “credit repair” places who charge fees for things that you can do yourself.  The number one thing that improves your credit score is time.  Yes, it heals credit wounds, too.

Get your updated FICO score today at MyFICO.com

It looks like Fair Isaac is reacting to this recent lending debacle by improving on its formula for creating the almighty FICO score.  Habitual late-payers will be more heavily penalized, while those of us with the occasional 1-30 day late payment will be spared a few points to the negative.  Of course all this reprogramming isn’t being done for your benefit; it is for the benefit of lenders whose bottom lines were eaten alive by sub-prime customers.

What do the changes mean for you? Unless you plan to run out and acquire new debt, probably not much.  The changes do emphasize the need to implement your debt snowball plan and start paying things off quickly.  Those with higher credit limit utilization (balance to credit limit ratio) will be hit harder in the FICO 08 scoring model, so it pays to drive those high balances down lower.

No more piggyback rides allowed. This may be one of the only positives out of the new FICO changes.  Previously, people listed as “authorized users” still got benefits of having a good credit line, even though they were not financially responsible for the account.  Many of those late-night credit repair crooks used this technique to improve scores.  They would pay a person with good credit to add someone with lousy credit as an authorized user (of course, Lousy never got a card or the number).  By virtue of being paired up with Mr. Credit Pimp, Lousy saw her credit score increase.  Under the new model only an account’s applicant or co-applicant will have their score impacted by account activity.

FICO has really dumbed down the financial industry. I guess in some ways FICO has helped to prevent discriminatory lending practices (after all, it’s just a number, not a sex, race, or age).  However, the negatives far outweigh the positives in my opinion.  Banks used to consider how long someone was on the job, or whether or not they paid their landlord on time, when considering lending money.  An employer would use interviews and a firm-handshake-test to determine if someone was trustworthy.  I remember when I worked in a new credit department of a large financial firm the only things that mattered on an application where FICO and income.

These days we look down on people with poor scores and exalt those with scores in the 800’s. Can you imagine the personals in only a few years?  Male 6′3″/220lbs/760 FICO seeking Female in the 720-760 range.