Healthy credit score requires occasional card exercise

NEW YORK (2/14/07)--If you have a paid-up mortgage, a beefy salary, and no debt, you might think your credit score has to be stellar, right? Think again. Without some activity, your credit score could lack serious muscle (The Wall Street Journal Jan. 31).

About 50 million Americans don't qualify for the most commonly used credit score because, well, they've been too responsible. They haven't used their cards. They pay with cash instead of credit. They save up for cars instead of taking out a loan. And all this responsible behavior means they may not have enough of the activity that lenders need to see on a credit report--hence a low credit score, or none at all.

Why should you care? Because if you're hit with an emergency, you suddenly may need a home-equity line of credit or a personal loan. With a low credit score, you may not get the loan, or you may get the loan but at a much higher interest rate than someone with a good score. And, remember that your credit history also affects the rate you pay on insurance.

Even if you've been responsible with your credit cards, these tips can help boost your score:

• Dust off your cards. Some lenders deem you "unscoreable" if there's been no activity reported to the credit bureaus on any of your accounts for six months. How much activity is enough? Purchasing a tank of gas is probably sufficient. Then pay it off when the bill comes due.

• Know the score. The most widely used credit score is FICO, which ranges from 300 to 850. The typical score is 723, and a score of 750 or higher probably will land the best rates available. A score less than 700 won't get great rates. And if it's less than 620, getting approved may be tough.

• Avoid point-droppers. Actions that lower your score include paying bills late, keeping high credit-card balances, filing bankruptcy, and canceling cards that wind up increasing your utilization rate.

• Order three reports--over a year's time. Federal law allows you to order one free credit report a year from each of the three main credit-reporting agencies: Equifax, Experian, and TransUnion. To order your free reports, go to annualcreditreport.com.

• Get your score. While you're at annualcreditreport.com, you can order your credit score from Equifax for $7.95. Or, go to Fair Isaac's site at myfico and get your FICO scores from the three credit bureaus for $15.95 each. When you get your score, you'll be told why it isn't higher.

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