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Knowing score often difficult in credit game

Published Sep. 13, 2005

You may want to think twice before applying for that credit card.

The mere process of doing so could hurt your credit thanks to something called FICO.

That's a common name used to describe a consumer's credit "score."

The score is a three-digit number, from 400 to 800, which measures a consumer's credit worthiness: the higher the score, the higher the consumer's credit rating.

Such scores are widely used by lenders to determine whether you qualify for a home mortgage and what interest rate you will pay. The scores are based on a number of factors, including the number of inquiries that have been made on a consumer's credit report.

Yet, most consumers know little about the existence of these scores. And even fewer know how these scores are affected by applications for everything from credit cards, to car loans and mobile phone services, consumer experts say.

That troubles Fran Oreto, a Hudson real estate appraiser.

A former financial loan officer, Oreto knew about FICO scores.

It never occurred to her that most others did not.

That is, until a neighbor of a property she was appraising shared his problems getting a mortgage refinanced.

"He told me he couldn't find a good rate even though he had been to several banks," she said.

Probably had something to do with his FICO score, Oreto thought. "He didn't know what a FICO score is."

The man also didn't know that each bank to which he had applied might have contacted a credit bureau, generating an "inquiry." Multiple inquiries, or "hits" as some call them, can lower your credit score.

Oreto wasn't surprised.

"It hit me that this is silly," she said. "People don't realize what goes on with their credit rating. The public needs to be better informed."

Harold Stephenson, west Florida division president for Credit Care Counseling Services Inc., a nonprofit bank-financed organization that provides consumer counseling, agreed.

"It's a huge problem," Stephenson said. "You go to AZB Car Center. The company will run your credit to 20 different banks trying to get the best rate. Each banker will pull your credit report, which lowers your FICO score . . . It looks like you've made 20 attempts to get a car and you didn't get one."

In January, the California company that calculates the credit scores, Fair, Isaac and Co. (FICO), said it would change its method of computing the scores so that consumers would not be penalized for rate-shopping.

The company calculates the scores based on statistics from each of the nation's three major credit "repositories" _ Equifax, Trans Union and Experian.

However, Stephenson said the problem persists.

His advice:

Shop around but avoid giving out personal information, such as a Social Security number, that might trigger an unnecessary credit check.

Pay off bad debts immediately. Bad debt can be bounced around through several collection agencies, generating multiple hits on your FICO score.

While credit scores aren't publicly available, consumers can obtain a free copy of their credit report and check for errors.

Narrow the field of choices by selecting only the most reputable, recognized companies. Consult the Better Business Bureau to get a history on the company.

Be especially wary of unsolicited credit card applications.

"Credit cards should only be used for emergencies, not for daily convenience," Stephenson said. "There's no reason for an individual to have five to 10 different credit cards."

_ Staff writer Richard Verrier can be reached at 869-6245 or by e-mail at