FICO Score Advice

A FICO score is a three-digit number that informs lenders of the risk associated with giving credit to a specific individual. The three consumer reporting bureaus -- Equifax, Experian and TransUnion -- use the Fair Isaac Company's credit scoring software to calculate FICO scores, which they call BEACON Scores, Experian Risk Models or EMPIRICA Scores. These scores run on a scale from 300 to 850, with 300 representing terrible credit and 850 representing perfect credit. You can maintain a good FICO score by following a few guidelines.

Never Miss a Payment

Missed credit card, mortgage or loan payments will cause your FICO score to plummet, sometimes by as much as 100 points, according to an article from Dayana Yochim, a columnist for The Motley Fool, a consumer finance website. In addition to the short-term impact, late or missed payment information will stay on your credit report -- the file from which Fair Isaac's software calculates FICO scores -- for seven years. However, if you're a few days late, don't worry: a lender will not usually report late payment information to the consumer reporting bureaus until your bill is at least 30 days past due.

Keep Your Credit Cards Open

Quit using your credit cards to stay out of debt and reduce the temptation to spend more than you can afford. However, canceling your credit cards lowers your FICO score, says a 2008 article from Leslie McFadden, a columnist for the personal money management website Bankrate. This is because Fair Isaac's algorithm takes into account the total amount of credit you have on file. Closing your cards lowers this amount. Also, closing one of your oldest cards will shorten your credit history, causing your FICO score to drop.

Don't Max Out Your Cards

Fair Isaac's algorithm considers a factor called "amounts owed," which compares the debt you owe to how much available credit you have. Amounts owed accounts for 30 percent of your FICO score, according to Fair Isaac. Maxing out -- or spending more than 35 percent of your card's credit limit -- will cause your FICO score to drop. If you must carry a balance, spread it out to several of your credit cards, which will keep your FICO score from dropping.

Avoid Foreclosure and Bankruptcy

Fair Isaac's FICO-scoring algorithm also takes financial crises such as foreclosure and bankruptcy into account. Declaring bankruptcy will drop your FICO score by 160 to 220 points, while allowing your home to go into foreclosure can lower your score by a comparably large amount. In addition to foreclosure and bankruptcy, short-selling your home or completing a deed-in-lieu transaction with your bank will have an equally deleterious effect on your FICO score.