In 1958 engineer Bill Fair and mathematician Earl Isaac sent a letter to the 50 largest American credit grantors. In it, they explained their mathematical model for determining credit scores. Only one replied. But Isaac was a dogged man and today every major lender dotes on the FICO (Fair Isaac Company) credit scoring system. The FICO system is also employed by the three biggest credit reporting agencies also known as credit bureaus — Experian, Equifax, and Trans Union.

Like it or not, these big three are keeping intimate tabs on you behind your back. They are quietly collecting data that affects your ability to get a home or car, to qualify for insurance, and even to obtain a job. To help individuals avoid, and to free themselves from the clutches of a low score, Mercer County Community College is offering “Improving and Fixing Your Credit,” on Tuesday, May 20 and 27, at 6:30 p.m. on the West Windsor campus. Cost: $40. Visit or call 609-570-3311.

Course instructor Valerie Williams has been watching other people’s bills for the last 11 years. Calling herself a “totally Jersey girl,” Williams was born and raised in Ewing, where her mother taught banking. Williams attended Old Dominion University, graduating in 1993 with a bachelor’s in computer science. Returning to the Garden State, she began working for Mobil Corporation, as a computer trainer. Since 1997 Williams has performed electronic data capture for Pharmanet in Carnegie Center. In addition to the more standard jobs of formulating clinical research results, Williams also deals with hospital billing systems. She found herself continually advising individuals about their bills and credit situations. Finally, at a friend’s suggestion, she formalized her advice, and packaged it into an easily understandable course.

First, a little honesty: America is not drowning in credit card debt. Despite the many skewed statistics bandied about, the Federal Reserve states that 23.8 percent of American households don’t even own any credit or retail cards. Another 31.2 percent have paid off all their cards each month in full. Of the remaining 45 percent, one third carry balances of under $1000. But as Williams points out, it’s less the amount owed than that hidden demolition of one’s credit that can begin plummeting with only a few late payments.

Scoring your credit. Using the FICO model, each of the big three credit reporting agencies works out its own credit number for each individual. 850 is tops, 300 is the bottom. 750 is considered excellent. 720 means you are in good credit shape for the next loan. Below 660 means you might have trouble obtaining a loan and will probably pay a higher rate. The credit reporting agencies can do that to you.

To formulate an individual credit score, the FICO model weighs five major considerations: 35 percent of the score is based on past payment history; 30 percent involves outstanding debt; length of credit history takes 15 percent; and with recent credit applications and types of credit and loans you have account for 10 percent each. There are other models, but most are similar to this formula.

Avoiding the brink. Obviously the best way to avoid bad credit is to pay in full, on time. This is most easily achieved with a little tracking regimen “I never use the term budget,” says Williams. “It scares people. All I do is look at what comes in each month, then subtract the ‘must-pay’ bills, then realize the exact dollar amount of what you have left to spend.”

After considering such must-pays as utilities, mortgage, car payments, and a rough grocery estimate, take note of that exact amount you have left. If that figure is $500 a month, and you see yourself spending $200 by the first weekend, it may be time to brown bag lunches and cut back.

“ATMs do not provide free money,” notes Williams wryly. “Make a little note on your calendar each time you make an ATM withdrawal and the amount. It may frighten you into frugality.” Also a little fiscal organization keeps you from being blindsided by massive bills. First, keep your checkbook balanced. End stub checks provide the easiest way to keep a running tally.

Second, create some sort of bill repository, such as an accordion folder, so all the debts remain in one place. Then whether it’s a notebook or computerized spread sheet, develop a simple, convenient money tracking system. It should note not only how much you paid PSE&G, and when, but which month the bill was covering. This last note prevents double billing and double paying.

“The most important thing to schedule, however, is time,” says Williams. “Setting an hour or so to pay bills and marking it on your calendar will keep things from slipping by and resting for months unheeded on the kitchen table.” While not a great fan, Williams feels that online payment is all right only if the user prints out a payment copy for his records. And never allow automatic payment, which provides others access to your funds.

Pulling yourself out. Independent surveys have indicated that at least 79 percent of credit reports involve at least one error. The best defense against this false reporting by the big three credit agencies is to obtain a free annual credit report and check it over. Visit the government-monitored, truly free site With that report, comes the telephone numbers and online sites for disputing bills.

A little hint here. According to the Fair Credit Reporting Act of l997, credit agencies are required to notify you when they lower your score But they never do this. Thus if you want a bad remark removed, you can always dispute that you were never legally notified. They typically cave in.

On a more personal note, Williams recommends contacting each creditor and warning them that you are about to fall behind in payments. Explaining the situation and your intent to make full payment makes creditors much more willing to work out feasible payment schedules.

Most households forfeiting credit card payments earn less than $50,000 annually. There are many working poor barely squeaking by who must use extended credit as their only hope. For the rest, much of the credit fix can be handled with some fiscal discipline, and a willingness to take on credit agencies with their own rules.

— Bart Jackson

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