Whether you think we’re out of the recession or not (I would bet “no” based on the responses last week), it’s always important to play a little personal finance defense. Today, the topic is on credit scores and how to improve your score by taking a few small steps.

These aren’t steps you can use to boost your score 100 points overnight… those don’t exist. These are simply smart moves you can make, over and over again, that will ensure your score will be as accurate and as high as possible. And if anyone says they can boost your score 100 overnight, chances are it’s a scam (unless you have some egregious errors on your report!).

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With the passing of the CARD Act, credit card companies have been responding by instituting purchase-based annual fees. Before the CARD Act, many issuers were trimming their books of inactive, low-activity, and risky credit card accounts. You may remember American Express offering cardholders a financial incentive to close accounts.

In this environment, there may come a time when you will want to cancel a credit card. A few years ago, canceling a credit card was easy. You called them and told them you wanted to cancel, they try to keep you around, you did that dance, and then diced up your card. Nowadays, you go through the same charade, but now you have to be worried about how the cancellation would impact your credit score! Boo!

So here are some tips on minimizing the impact of canceling any one credit card.

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Whether it’s driving on the highway or surfing on the information superhighway, I’ve been seeing a lot of ads for credit reports and credit scores. With the economy weak, people are looking to play defense and advertising are looking to capitalize. Like I’ve said in the past, checking your credit report annually is one of the best financial things you can do for yourself.

I have one word of warning for you: Don’t ever go to a company that isn’t Experian, Equifax, TransUnion, or Fair Isaac. Never ever.

Here’s why:

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Have you ever been curious what the average credit score is?

We know that the FICO credit score range goes from 300 to 850 with a good credit score being up above 750, but what is the average credit score? Fair Isaac shares a chart that indicates the average FICO credit score is around 700, but we don’t know when chart the was updated (see the chart here).

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I can’t believe I’ve been using Credit Karma all these months and never wrote up a quick review of the service! I’ve written reviews about their credit score report card, but never about the entire service. Tsk tsk, what a bad blogger I am.

Credit Karma offers a lot of nice juicy information but the only thing I’m really pumped about is the fact that you get your TransUnion credit score absolutely free. When you sign up, you have to provide a lot of sensitive personal information because it’s needed to pull your credit score from TransUnion. Since the service is free, the only barrier to using it is your comfort level with providing this information to a third party.

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In the past I’ve joked about how your FICO credit score has become the new report card for your life. Instead of letter grades, we now get a three digit grade in the form of a credit score. As much as you may hate it, that’s how life works and your credit score has become just that, a grade.

I don’t know if Credit Karma heard me or it’s just a strange coincidence, but they put out a credit report card tool that takes your TransUnion data (all of Credit Karma’s information is based on TransUnion data) and gives you grades on a litany of factors (seven to be exact):

• Credit Card Utilization
• Percent of On-Time Payments
• Average Age of Open Credit Lines
• Total Accounts
• Credit Inquiries
• Total Debt
• Debt to Income Ratio

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Quick answer? Close enough.

A while back I wrote about two free credit score estimates tools: myFICO’s Credit Estimator and CreditKarma. In the course of reviewing myFICO’s ScoreWatch, I learned my actual credit score. So the natural question was, how did my real score compare to my actual score?

The answer is that they were close, but not within the same “tier” of credit quality. The difference isn’t surprising though because they used data from different bureaus and each used their own equation for calculating the score. I think the scores were “close enough” to validate the use of credit score estimators. Here’s how they stacked up.

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Reader David recently commented about how an error on his report had him pay more than he was supposed to on a recent mortgage loan. The gist of the story is that before a credit card company wrongly reported a late payment or some other adverse note on his credit report, his FICO was 830. (he says bankruptcy, but credit card companies can’t put that) Afterwards, his score fell to 750. He called the credit card company in June of this year to fix it, which they said they would, and then he forgot about it. This week, at the closing, he learned that his score was still in the 750 range because the credit card company didn’t do what they said they would and he failed to follow through. The end result is that for the next 30 years, or however long the loan is, he will be paying for the mistake and him not following through. It’s a terrible situation but there’s little left to do.

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Your FICO score has become one of the most important indicators of your credit worthiness and so many people are very interested in their score. Credit bureaus know this and so they often sell services that let you see what score they’ve given you. Your credit score is important but for many it’s far more important to pue $30-50 a month away into an savings, so enter in FICO credit score estimators.

Below I’ll talk about two FICO score estimators that I feel are trusthworthy enough to work with. There are a lot of websites out there offering a free FICO credit score or a free FICO credit score estimate that are really just front pages for scams getting you to sign up for monitoring services or other pay services (or they’re out to steal your identity!). Don’t use those. I feel the two services below are the only ones you should trust.

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