Credit Repair

You don’t need to carry a balance on your credit cards and pay interest to have a good score. As you’ve read several times already, your credit reports-and thus the FICO formula-make no distinction between balances you carry month to month and balances that you payoff. Smart consumers don’t carry credit card balances for any reason, and certainly not to improve their scores.

Now, it is true that to get the highest FICO scores, you need to have both revolving accounts, such as credit cards, and installment loans, such as a mortgage or car loan. And with the exception of those 0 percent rates used to push auto sales after September 11, most installment loans require paying interest.

But here’s a news flash: You don’t need to have the very highest score to get good credit. Any score over 720 or so is going to get you the best rates and terms with many lenders. Some, particularly auto and home equity lenders, reserve their best deals for those with scores over 760. You don’t have to have an 850, or even 800 score, to get great deals.

If you’re trying to improve a mediocre score, a small, affordable installment loan can help-provided that you can get approved for it and pay it off on time. But otherwise there’s no reason to get yourself into debt and pay interest.