A Suze Orman exclusive

So let's get honest: when is the last time that you checked one of your credit reports, let alone checked all three? I’m betting a lot of you have never done this. Big mistake. Since your FICO scores are made up of the information that is on your credit reports, bad information can be very bad news.Hey, maybe you have a bad FICO score because you have done a lousy job managing your credit. But if your score is lousy because of some mistakes, then that's crazy; you're needlessly throwing away money by paying a higher interest rate.

Be on the Lookout For...
First, you want to make sure there is no "unpaid" bill being held against you that you know you have paid. Make sure that every item on that credit report belongs to you and that you have not been a victim of Identity Theft. Identity Theft is when someone gains access to one of your accounts - or uses some basic info about you to open an account that you don't even know about and runs up a ton of charges. It is a huge problem across America, so don't naively think you can't be a victim. And when those charges go unpaid, it's your credit that is going to get dinged. And that in turn leads to a lower FICO score. How good you are about paying your bills, what's called your Payment History, makes up 35 percent of your FICO score. So if your history is a mess because of Identity Theft you are going to be in a big financial mess.

So the first thing I want you to do is to head on over to www.myfico.com where for $12.95 you can check your credit report and score. You will choose which credit reporting bureau to get your score from, or for $38.85 you can get at all three of your FICO scores as well as all three of your credit reports.

Avoid the Biggest FICO Blunder
Do not close down your credit cards. So many of you call into my TV show and tell me how proud you are that as you are paying off the balances on your credit cards you are also closing down some accounts so you will have just one credit card. I know your intention is fabulous; you think that by getting rid of some cards your FICO score is going to improve. But then you go to check your score and instead of going up it is now LOWER! That's no mistake, it's just one of the odd ways that lenders look at your credit. Let me explain.

Fifteen percent of your FICO score is made up of your credit history. Your credit history is how long you have had credit. That makes sense; while it's easy to be on good behavior for a short period of time, what's really telling is how we behave over many years. ( Hmm... maybe we should all get a personal relationship FICO score before we get romantically involved...) So when you cancel some credit cards you may be canceling a big part of your history.

Here's a common scenario: You have five credit cards. Four of those cards are old friends; you got them between five and 10 years ago. Your fifth card is your new fabulous friend you just got two months ago; she's a beaut, with a low interest rate and a great mileage plan. So you think you're doing the smart and responsible thing by canceling the four old cards you don't use anymore. Really bad move. When FICO goes to compute your score it is now looking at just a two-month credit history, rather than a 10-year history. Moral of the story: don't cancel the cards. Just stick 'em in a drawer (or better yet, a safe deposit box) where you won't use them.

Till Debt Do We Part
Another thirty percent of your FICO score is made up of your debt-to-credit-limit ratio. Simply put, this is how much money you actually owe on those cards (your debt) compared to the available credit on those cards; what's called your credit limit. So let's take a look at those five credit cards that you have again. Each one has a credit limit of $2,000. So when we combine all five cards we're looking at a combined credit limit of $10,000. Now let's say that you really only use that one card you got two months ago and have charged that card up to its max of $2,000. Okay, that's not too bad, because when FICO looks at how much you owe ($2,000) in comparison to your credit limit ($10,000) that see you have used up only 20 percent of your available credit. So you have a debt to credit limit ratio of 20 percent.

But here's where so many of you go wrong: if you close those four cards you aren't using, your total credit limit is now $2,000; so if you charge $2,000 a month - even if you pay it off - your ratio is now 100 percent. That is going to be a major credit score bummer. So as I said, just keep the unused card someplace safe; by not canceling it you will be helping your credit score.