5 Little-Known Credit Score Facts

Oct. 4, 2011— -- In today's financial world, handling your credit and credit score wisely is absolutely crucial. So it helps to know some secrets of the credit world that can give you a leg up -- or come back to bite you. Here are five of my favorite little-known credit facts.

1. Late payments are not usually reported until 30 days overdue.Make no mistake, paying your bills late is a terrible idea. But there's a smidge of wiggle room: that three-day slip-up when you couldn't find a stamp shouldn't be a problem. 30 days is the be-all-end-all benchmark. If your payment is late, but not more than 30 days late, you should be okay. But don't make it a habit. You don't want to rely on your creditors' good will. They could change their practices at any time -- and might, in order to make more money.

2. You must report thefts immediately.

If you're defrauded via an electronic transaction, your bank may not pay you back. The Federal Reserve's "Regulation E" says you must report thefts involving online banking, ATM cards and debit cards within two days to limit your liability to $50. Your liability jumps up to $500 on the third day. And if you don't report the loss for more than 60 days, you are responsible for the entire loss. Another reason to keep an eagle eye on bank statements.

3. Big secret: Advance-fee loans are illegal.

If somebody says they can guarantee you a loan in exchange for a flat fee, it's a scam. No bank can guarantee you a loan up front. A real lender might charge a small fee for a credit check, but large fees -- especially if they're called "processing fees" -- are a telltale sign of a rip-off. If you pay the fee you will get nothing in return.

4. Don't close existing accounts.If you have gradually opened up a lot of credit card accounts over the years, and you pay them in full or don't even use many of them, let it be. Don't close those accounts. It could hurt that all-important credit utilization ratio by reducing the total amount of credit you are approved for compared to your total amount of debt. It's especially bad to close longstanding accounts, since "length of credit history" makes up 15 percent of your score, the third biggest chunk.

5. Paying off an older collection account may not be a good idea.

By law, the credit bureaus are supposed to assign the original delinquency date to every debt. But sometimes when debt collectors make a fresh report about the status of that same debt, it gets "re-aged" so it looks like a recent problem. This isn't supposed to happen, but it can. As you know, recent activity is weighted more heavily than older activity. So, if an unpaid debt is close to the seven year mark when it will fall off your report, you may want to let it be.