What does a credit score tell you?

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I'm not a big fan of FICO scores. I believe the system to be very flawed. Someone with excellent credit might be on the edge of bankruptcy, while someone will bad credit might be honest, lost their job or was injured, and got behind.

While I'm sure credit scores can give a hint as to the character of a person, it may be totally off. Someone like my Dad that pays cash for everything had a zero credit score. The only way he was able to get the one credit card he has is that the local bank could see his large accounts. He never uses the card except for airline tickets or a rental car, but pays off the balance right away.

I think it's a sin that insurance companies quote rates based on a credit score, and an even bigger sin that some employers will not hire someone with bad credit.

If everyone were like millionaire Dave Ramsey their FICO score would be zilch, ie: Bad Credit or No Credit. He doesn't use credit cards at all, only debit cards.
  • Profile picture of the author KimW
    Dave Ramsey wasn't always a millionare, if what he says is true.
    But like him or not, he does give mostly good advice and preaches good values.
    We took his Financial Peace University course a few years back and if it wasn't for my illness we would have been debt free by now. As it is my medical bills make that an impossibility.
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  • Profile picture of the author seasoned
    Everything you said was RIGHT! HEY, one bank(WAMU) made a mistake, shipped me a document OVERNIGHT, and charged me $10 WITHOUT telling me! They kept calling to ask me to payup, DURING BUSY WORKING HOURS, and they told me they would clear it up. They DIDN'T! My credit was DESTROYED for $.05! YEP, a NICKLE! It was only $10, and only about 8% a YEAR! ANOTHER company (bank of america) failed to remove a FRAUDULANT charge, so ever year, in october, as I recall, I got a late charge! I rented two cars, one from thrifty and one from dollar, and it turns out they are the SAME! They ALWAYS ran a credit inquiry CLAIMING it was because I used a debit card, though it was NOT a debit card. SO, NOW I go to EVERY bank TWICE a month, and check my credit report!

    And if I have $300,000 of credit cards, each with $30,000, and $30,000 income, it is OK! I can even have 3 cards with $10,000 each on them, but I CAN'T have one with $30,000? WHO thinks these rules up?

    Anyway, I am an EXCELLENT risk! EVEN when I had over $330K in debt, part due to universal default, I paid it all like a champ. Yet my credit, from about 2005(WAMU)-2009(When I realigned all my debt) didn't look good. I don't know how low it went, but one agency had me close to 620! Last time I saw my fico, it was as high as 777. NOW, they apparently have a new scoring system, but it looks even better.

    and I haven't even gotten into "ID THEFT" yet!

    Steve
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    • Profile picture of the author Earnestine
      Credit scores do not take into consideration your income or how much savings you have.Instead, your credit score is primarily influenced by your current debt level, your credit history and how many times your credit report is pulled up by various agencies.
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      • Profile picture of the author seasoned
        Originally Posted by Earnestine View Post

        Credit scores do not take into consideration your income or how much savings you have.Instead, your credit score is primarily influenced by your current debt level, your credit history and how many times your credit report is pulled up by various agencies.
        ACTUALLY, one metric they use is that ALL monthly payments should not exceed 30% of your annual income! Outside of that, your debt level overall has NOTHING to do with your score!

        A credit line is considered BAD unless you owe no more than a certain percentage of it, REGARDLESS of income!

        As for the idea of people bringing up credit reports? *******FOUR******* pulled it up because of my ONE mortgage!

        1. Chase to quote rates, but THEY don't give mortgages.
        2. By JPMORGAN, chases parent, for the mortgage.
        3. AGAIN like 2, because they slipped up on the SSN!
        4. They gave me a credit card as part of the deal, but THEY don't deal with credit cards, so FIRST USA, a subsidiary of JPM, inquired.

        And a couple days ago, I bought a SPRINT phone, and TMOBILE ALSO inquired on my credit. I NEVER looked at TMOBILE. NEVER!!!!!!!

        Steve
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  • Profile picture of the author KimW
    I believe credit reform was promised but in the end it was all just smoke and mirrors.
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    • Profile picture of the author seasoned
      Originally Posted by KimW View Post

      I believe credit reform was promised but in the end it was all just smoke and mirrors.
      There WERE a COUPLE of nice things, but you are right! It didn't go far enough, there was some bad stuff, and it happened like 3-4 years too late.(A couple years prior, with mergers and the economy, MANY(including me), had their credit lowered, etc...) In fact, it was said that BofA bought MBNA, one of the WORST, albeit most successful for THEM, credit card agencies. BofA DID take on MBNA policies though, as if MBNA bough BofA.

      Steve
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  • Profile picture of the author DannyTX
    Originally Posted by Scott Ames View Post

    If everyone were like millionaire Dave Ramsey their FICO score would be zilch, ie: Bad Credit or No Credit. He doesn't use credit cards at all, only debit cards.
    Ditto---When I heard that one of the first things Dave Ramsey advocates is getting rid of credit cards my first thought was, "what an idiot." Then after second thought I guess if your main credit problems are credit cards then maybe so be it. Actually just learn how to use them and they can help your credit score. Our church is starting his Financial Peace University in a couple of weeks and I won't be there. I could probably teach it better that Dave Ramsey.

    I also don't like FICO simply because we have enough challenges in financial / business life already. In the last ten or so years we now have to look out for identity theft.

    Anyway, I guess I read every article I stumble onto in regard to improving FICO scores simply because of insurance costs. My auto insurance is just too high with a perfect driving record, low risk vehicles, (except for Z-71 pickup), middle aged, (55). Our home insurance is kind of high as well, which is a six-year old brick home within a few miles of the fire department. That is as low on the scale of homeowner's coverage as you can get. If it were an older frame home in the country it would much higher.

    I am 100% debt free. We use two credit cards for almost everything and pay the total balance every month. One time I actually left a balance of about $10.00 from one month to the next because I thought that would do something to improve the FICO score, but later found out that may have been wrong. However, I think that having credit cards and using them helps FICO scores. What gripes me is that if I understand FICO correctly I could improve my FICO if I had a mortgage, simply because of making payments on time for a mortgage improves FICO scores. I try to do everything I can to improve my FICO, but I'm sure not going to mortgage the house to do it.

    I recently checked my credit score with one of the three credit agencies simply because it was free. It was 805. I really thought it would have been a little higher. I guess I could pay FICO to see what their number really is, but 805 will work for me for now. I shred several credit card offers per week.

    Here is a tip for you if you are in business for yourself and start a relationship with a new supplier that wants to run a credit check. Tell them to let you order your own credit report and submit it to them. I did that about a month ago. When I explained to them that I was debt free, had a high credit score, and wanted to keep it that way, they just accepted that free credit report that I mentioned above. If they had run the credit check it would have lowered my score.
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    • Profile picture of the author Kay King
      There is a problem with FICO that is growing now and may be a much bigger problem in the next few years IF the economy improves.

      There was a 14 month "window" between the passage of a new credit regulations bill and activation of those laws. During those months, lenders arbitrarily raised interest rates on credit cards across the country.

      Credit limits were lowered even for good credit customers - and APR was often doubled with little warning. This caused thousands of people to default on credit debt when they could not meet the new high payments. It also damaged their FICO because lower limits immediately changed the person's debt-to-income ratio.

      The laws disallowed these practices - but the months lenders were given to "reposition accounts" have really messed up FICO for many people. This did not just apply to people with shaky credit but also to those with excellent FICO scores.

      FICO scores respond quickly to bad credit - but react slowly when you are replacing bad credit with good credit. This results in consumers who had great credit for years but lost jobs/income during the economic crisis to now have bad credit.

      It's surprising how few financial experts are questioning the accuracy of FICO scores which are now being used as a "predictor" rather than a "history". I think this may get some regulators attention at some point.

      In fact, one inquiry by an employer or such will not hurt your credit score. If you apply for several loans, credit cards, etc over a short period of time it appears you are in trouble and looking for cash - FICO has become as much about "appearances" as about "history". Insurance companies (life/car/property) often check your credit a couple times a year.

      kay
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    • Profile picture of the author seasoned
      Originally Posted by DannyTX View Post

      Anyway, I guess I read every article I stumble onto in regard to improving FICO scores simply because of insurance costs.
      I heard an expert on fico scores once. I thought most of my life that there was ONE formula, aand the top score was 825(IIRC), etc.... That expert said there are SEVERAL formulas, and if you like EVER make a late payment, EVER in your life, you are BARRED from the best formula, the one that goes uup to 825.

      FURTHER, in looking at transunions suggestions for transunion, experian, and the other, EACH uses different criteria. The best you can really do is think like they do, and try to standardize the criteria. They generally say, apparently....

      1. You should have credit cards, an installment loan, and a mortgage.
      2. The balance for each type of loan should not exceed x% of your credit line. Good luck figuring x.
      3. The total of any credit lines should have an x amount that does not exceed y% of your income.
      4. The total of all credit lines together should not exceed 30% of your income.
      5. You should have as few inquiries as possible. over 4 IS considered excessive.
      6. You can't have over x credit cards or less than y credit cards.

      BTW when I got an installment loan, my score went up! NOTHING else changed.
      Though the mortgage apparently helps my score, the latest mortgage I have has the suggestions saying my balance is too much of the loan value. I am paid FOUR MONTHS in advance!

      My auto insurance is just too high with a perfect driving record, low risk vehicles, (except for Z-71 pickup), middle aged, (55). Our home insurance is kind of high as well, which is a six-year old brick home within a few miles of the fire department. That is as low on the scale of homeowner's coverage as you can get. If it were an older frame home in the country it would much higher.
      I once moved from woodland hills to sherman oaks, and my vehicle insurance went up $1000/year! It happened the MOMENT I informed me, and they said it was because I lived there. Someone below 25yo will automatically pay more. Males pay more. Of course, your driving record, and past claims affect it also.

      One time I actually left a balance of about $10.00 from one month to the next because I thought that would do something to improve the FICO score, but later found out that may have been wrong.
      Yeah, if they noticed that, it could be a mark against you.

      However, I think that having credit cards and using them helps FICO scores. What gripes me is that if I understand FICO correctly I could improve my FICO if I had a mortgage, simply because of making payments on time for a mortgage improves FICO scores. I try to do everything I can to improve my FICO, but I'm sure not going to mortgage the house to do it.

      I recently checked my credit score with one of the three credit agencies simply because it was free. It was 805. I really thought it would have been a little higher. I guess I could pay FICO to see what their number really is, but 805 will work for me for now. I shred several credit card offers per week.
      CAREFUL. They came out with new scores! Called VANTAGE scores! When my reporting company switched over, all my scores went up, but their relative values didn't change. The 825 FICO limit is the ULTIMATE near unreachable goal! IMPECABLE CREDIT! BUT, with vantage, my transunion score, after lies from creditors, excess invalid inquiries, etc... Is 818!!!! That rates as a B! The top vantage score is apparently 990! BTW I DOUBT your FICO is 805. From what I have heard that is HARD to get. Decent credit can get you into the 800+ range on vantage though.

      Here is a tip for you if you are in business for yourself and start a relationship with a new supplier that wants to run a credit check. Tell them to let you order your own credit report and submit it to them. I did that about a month ago. When I explained to them that I was debt free, had a high credit score, and wanted to keep it that way, they just accepted that free credit report that I mentioned above. If they had run the credit check it would have lowered my score.
      Well, I went to radioshack and didn't figure they would do a credit check. Some IDIOT ran my credit through TMOBILE. And it was also run through sprint. At least I did buy sprint. I would never, and HAVE NEVER, looked at Tmobile!!!!!

      Steve
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  • Profile picture of the author Lou Diamond
    Hello,
    I was in car sales for many years and I left the business because customers were not able to get a loan on the car that I spent three hours trying to sell to them.
    Even with a good credit score if you do not have a high paying job to show that you can pay off a loan you will not get the item that you wanted.
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    • Profile picture of the author Kay King
      Lou - I was in sales, too...that's so right.

      I don't think many consumers realize just how screwed up the FICO system is today.

      Just one example (and this happened to several people I know)...

      My son was told by Chase his credit card APR was being changed from 9.9% to 26.9%. Reason given? "Adjusting customer base for new laws".

      Excuse me? My son has a FICO well over 800. How many people like that does a lender get as as customer? It was sheer stupidity on the lender's part. The FICO score would reflect that increase in APR and IMMEDIATELY decrease his FICO score as it would identify an "increased risk". That's screwed up.

      In my son's case, he sent a check for the balance and closed the account before the new rate could take affect. Several of his friends and co-workers did the same. Most people don't have the ability to do that and can have credit damaged through no action or fault of their own.

      I wouldn't want to be selling houses or cars today - credit is so tight it has to hurt sales.

      kay
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      • Profile picture of the author seasoned
        Originally Posted by Kay King View Post

        Lou - I was in sales, too...that's so right.

        I don't think many consumers realize just how screwed up the FICO system is today.
        *****MANY***** like US, DO realize it! We are supposed to have a way to appeal, *****BY FEDERAL LAW*****, but apparently it is WORTHLESS, and trying to appeal THAT could cost MILLIONS of dollars because it must be done through the courts.

        Just one example (and this happened to several people I know)...

        My son was told by Chase his credit card APR was being changed from 9.9% to 26.9%. Reason given? "Adjusting customer base for new laws".

        Excuse me? My son has a FICO well over 800. How many people like that does a lender get as as customer? It was sheer stupidity on the lender's part. The FICO score would reflect that increase in APR and IMMEDIATELY decrease his FICO score as it would identify an "increased risk". That's screwed up.
        The SAME thing happened to ME, but I wasn't given any such reason. It USED to be that I could ASK for a rate reduction, and GET ONE!

        In my son's case, he sent a check for the balance and closed the account before the new rate could take affect. Several of his friends and co-workers did the same. Most people don't have the ability to do that and can have credit damaged through no action or fault of their own.

        I wouldn't want to be selling houses or cars today - credit is so tight it has to hurt sales.

        kay
        THREE problems!:

        1. It could have an effect ANYWAY!
        2. The FICO system is apparently NOT standard and kind of messed up. ONE agreed on standard, however, is that dropping an older credit card can have a NEGATIVE effect on your credit. Older cards carry more weight because it is assumed that you have used them longer.

        With the FICO, you have to walk a tightrope. The more credit you have, the better, but after some point, it starts to hurt your credit. The total you owe, over all cards, should not exceed 30% of your income, and no card should have more than about 70% used.

        I don't know how interest figures DIRECTLY into the score, but it DOES raise the monthly payments, and amount used, and affects the scores THERE.

        Of course, all three credit agencies calculate these things in a different way, which is one reason why all three scores are generally different.

        Steve
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  • Profile picture of the author Thomas Wilkinson
    Recently I noticed that two credit card accounts that I no longer use were still listed as open. The cards were zeroed out and in my safe. I closed the accounts and it lowered my credit score.
    Most people don't seem to realize that by LAW you are entitled to one free credit report per year from each of the three major agencies. Transunion will fight you and I've usually had to use their 800 number to get one but the other two are accessed fairly quickly online. They will sell you hard on signing you up for a paid service but it isn't necessary. Go here, its free. www.annualcreditreport.com

    Thomas
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    When you hear someone telling you what YOU can't do, they are usually talking about what THEY can't do.
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  • Profile picture of the author emmancharlie
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    • Profile picture of the author KimW
      Originally Posted by emmancharlie View Post

      Credit Score simply tell the lenders , How good you are in your past paying you debts.
      BS, Credit scores are artificial information that needs to have the reform that was promised Americans actually implimented.
      Any BS corporation can add lies to your report yet for an individual to get something wrong removed borders on the impossible.
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  • Profile picture of the author seasoned
    Kim is right! I have had BOTH happen to me! There is a FEDERAL law that MANDATES an appeal process, but they do NOT comply!

    And does ******ANYONE****** know how fico is figured? ****NOPE****! At one point, I heard it is proprietary.

    I have seen my score go DOWN when it should have gone UP, and UP when it should have been stable.

    If you make $100K/year, and have 20 cards with NO debt, it will lower your score, REGARDLESS of credit!

    If you make $100K/year, and have 2 cards with credit of $25, and have 15K used on each, it may have NO effect on your credit. In fact, it may IMPROVE your credit! Under the SAME conditions, if you only have $20K of credit, and it is on ONE card, it will probably HURT your credit!

    If you have two credit cards, and the older one (10years old) is one you don't like as much as a new one that is 2years old, and you get rid of it, you could HURT your credit! If you get rid of the newer one, it could HELP your credit.

    Doesn't this sound like it's NUTS!?!??

    And what about people like ME? I COULD charge $10,000 in a month, and pay it off in the next month.

    There HAS to be a balance! The factual information on my credit reports is different! so CLEARLY it is WRONG! That is FACT! Transunion says the others are wrong. Equifax says the others are wrong. Any proof that one is right proves the others are WRONG! THEREFORE, if fico were PERFECT, it would STILL be imperfect because the base data is WRONG!

    MORE than that, based on the errors, I know how it is wrong, so it CAN'T be FIXED in even a year!

    Anyway, there HAS to be a balance! Can they take my word that they are wrong? NOPE! Things would fall apart! But to have just ANYONE say that I have problems I don't should be easier to challenge, and malicious info should have repercussions!

    Steve
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