Dear Debt Adviser,
I have two questions, both with regard to credit scores. First, I’m 72 and retired. My wife is a few years younger. We just paid off our mortgage, pay our credit cards in full monthly and have no car debt. Our income is fine.

Everything I read about credit scores, especially FICO, says essentially that having no long-term/permanent debt lowers one’s score. Is this true and if so, will our score be damaged? If yes, what can we do to prevent that?

My second question is as follows: Is there another score other than FICO? If so, which do most creditors use? How do we get our scores?
— Arnold

Dear Arnold,
I have good news. I checked with the good folks at Fair Isaac (the organization that established the FICO scoring model) and they assured me that your paid mortgage will still be considered (and get you valuable scoring points for positive long-term debt) in your credit score for as long it remains on your credit report.

Sounds great, right? I thought so too until I started wondering, “How long will it stay on his credit report?”

So, I made another inquiry to a friend at one of the major credit reporting bureaus and was told that any positive information on a paid loan will remain on your credit report for 10 years from the “paid” date. Good news for you and your credit score.

In answer to your question regarding other credit scores, yes a new credit score has hit the market. VantageScore was developed by the three major credit bureaus (Equifax, Experian and TransUnion) and was launched in March 2006. The score is based on information from all three bureaus’ databases. Scores range from 501 to 990, with the higher score representing the lowest risk to a potential lender.

The advantage of the VantageScore for consumers is that the methodology for calculating the scores is based on the most recent economic trends and consumer credit behavior. Another feature of VantageScore is how it handles consumers with thin credit files, such as immigrants and those new to the credit reporting system, including kids recently graduating from high school or college, the newly divorced or widowed without a prior history, and guys like you who may have less to report as your big-ticket items are paid off.

VantageScore requires less of a credit history to produce an accurate score. However, your thinner file will produce a score just as accurate as the number assigned to your friends who have fat credit histories.

The factors that make up the VantageScore are similar to FICO.

Factors included in VantageScore:
  • Payment history – Do you pay on time and as agreed?
  • Available credit – Total amount of credit currently available to you.
  • Credit utilization – Proportion of your total credit being used.
  • Credit balances – Total owed on all accounts.
  • Depth of credit – Length of time you have had credit and the types of credit.
  • Recent credit – Information about new accounts and credit inquiries.

The credit reporting bureaus say that VantageScore was developed due to market demand from lenders. At this time, it isn’t nearly as widely used as the FICO score. To be safe, I’d check with any potential lenders and ask which credit score they are using to make lending decisions. Make sure you have the same information that the lender does.

The scores are sold individually by each of the three bureaus. Scores may be accessed at the Web sites of Equifax, Experian and TransUnion. One last thing: Neither VantageScore nor the FICO score consider authorized user accounts in their calculations, although the bureaus still report them.

To keep your credit robust, I’d suggest a small program of keeping a few cards open and occasionally taking them out to the store for some exercise. Just be sure to keep them on a leash, keep them lean and keep them away from your kids!