10 Credit Score Myths Annihilated In 60 Seconds
Ex-FICO exec Andy Jolls destroys 10 credit score myths in 60 seconds in this nice lil video. For credit score newbies, it's a nice introduction and for experts it's decent, and short, refresher.
[via Lifehacker]
Post a comment
Comments:
@xthexlanternx: Hmm I was wondering why there was so much whitespace...
The video is apparently blocked from work.
I would have stuck around for 120 seconds if that meant some of it got explained a little bit better.
I can't stand video only articles either. In the time it takes for the video to load, ads to play (if applicable) and watch the video, I could have read the same content several times.
CNN.com is one of the worst offenders. If I see that little camera next to an article link, I'll just find a text only version via Google News.
@xthexlanternx:
I am glad that I am not the only person who feels that way. Videos are blocked at work and school which means I can only watch them at home and by the time I get there, Ive usually forgotten about it.
@realserendipity: nothing new here if you've even read consumerist before. synopsis:
1. you have 3 credit scores - be aware of all 3
2. FICO is the most important
3. credit scores are used in non-lending situations like employment screening
4. your credit score will vary from bureau to bureau
5. you can get your credit report free but you'll have to pay for your credit score
6. closing credit cards hurts your score
7. don't need to carry a balance on credit cards to build your score
8. checking your credit score won't ding you
9. online home loan shopping doesn't hurt your score
10. repair your credit yourself, don't pay someone else to do it
@Jesse: I'm currently stoked that there are other people in the world who don't want to watch CNN video!
All these news sites believe we just want to watch video, that we are incapable of reading the news for ourselves, that we want to see a talking head and a couple images.
My lord, what did people do in days of newspapers without many pictures? IDK, maybe people used their imaginations!@?
Can I debunk one of his myths?
1. You have 3 credit scores
While there are 3 repositories (bureaus) and each will have a score there are vastly more than just 3 of them. Within each repository there are several different score models and even different versions of FICO. For instance, with Transunion there is TU98, TU04 and TU08. In addition to the variations of FICO scores there are also 'fake credit scores' as I call them. These include Experian Vantage Score and the PLUS score among others. So you can see there are actually many different scores.
What ticks me off is that I believe FICO/credit scores should be available for free. After the score has a major effect on my life.
Not only that, they make it very difficult to get your credit report, unless you pay for it.
Yes, there is free credit report now offered annually. However good luck actually getting it to work. I had 2 out of the 3 credit report websites crash on me.
Someone give me this guys address so I can slit his throat.
@balls187: I've been getting a free credit report every four months for years now, with no problems whatsoever. Not sure why you find it difficult...you might want to look on your end.
Plus, there's really no reason for FICO to do anything free for you, since you're not their customer in the first place.
@balls187:
I'm with Superceral. I pull one report every 4 months with no problems whatsoever. Just have to make sure you click past their attempts to get you to spend money with them.
Personally, I'd like to see FICO sued for an invasion of privacy. Yes, they are a private company and so you aren't entitled to shit from them for free. However, they are tracking all of your information and providing that to corporations. So if they aren't going to give me the score, they should stop tracking my information.
@rhys1882: That seems like a good rule - if you want to track personal information, make that information available to the person you're tracking.
@rhys1882: FICO doesn't track your personal information, the credit bureaus do. FICO just has the algorithm (or whatever) that your information gets run through to get your FICO score (although the score is calculated slightly differently for each credit bureau). Fun stuff.
Andy didn't mention numbers 11 and 12:
- Don't borrow money. Then you won't have to pay it back.
- Don't buy things you don't need.
You technically give them permission when you sign for credit or a service. Also if they didn't track you you would never get a loan or maybe even a job. Also, technically they only give it to people you permit them to or they have a legal purpose.
The score is just your credit report run through a computer statistical model they spent millions developing. If they gave it away it would cheapen the value. As long as your report is correct you can figure your score kind of close online.
One problem I have seen is errors on the report cause people to delay house closings or refinancing. This can cause stress and thousands of dollars if there is a rate increase. Often these mistakes are due to negligence or less than honest actions. I think certain types of should be harder to post on a report and easier to get off. Then there should be some type of real civil remedy. Right now the process looks good on paper, but ends up screwing the individual with no real world recourse. I would like to see changes on this.
@rhys1882: Nobody forced you to give corporations information. Pay cash for everything. You agreed to disclosure of the information so you really can't sue them for using it.
Quick question. My wife had a Salute & Tribute Mastercard and recently they terminated the programs and closed the accounts out of nowhere. Does that effect the score the same as if she stopped paying and they closed down and went to collections?
@supercereal: If your logic were sound, then it also ought to apply to the credit reports too. Why aren't the 3 CRA's allowed to deny you access to your credit report? After all, you're not Experian's customer either, right?
Why?
Because it might be inaccurate (based on fraudulent/erroneous data) and you have a right to f***ing know it so you can at least TRY to rectify it. Because bad credit can have a serious effect on your life.
In 1980 it was understandable that there was some cost to providing you with your credit report. But in 2009, when it costs virtually nothing to just show you the damn information they have compiled on you, your credit reports and scores should actually be available for free ANYTIME, not just once a year.
The CRAs and FICO are bastards. Don't forget that it's Experian who runs the SCAM website freecreditreport.com.
@PlasmaMachine:
A closed revolving line which is paid as agreed and not 30 days or more late not be treated the same as a charge off revolving line. The charge off line would be a serious deliquency and have a large impact. The closed card will have a smaller impact.
Definitely not.
Credit cards are rated in R ratings (which are part of what is calculated into fico scores). Here's a site with info on the R scores. A higher number is worse, although no score is also worse than a good score.
No credit means R0, which is what a paid in full and closed account should be rated, assuming you didn't miss payments.
An account in good standing will be rated R1 to R4, depending on just how diligent you are at paying it up. R1 is perfect, R4 means getting money from you is like pulling teeth. Possible but not fun. If you just stop paying, you will drop 1 "R" each month until 5 months have gone by (you'll be an R5 then).
If you still don't pay after that, the creditors will decide what to do with you. If the debt is secured, they repossess the secured item and rate the account an R8. If the account is then paid in full, it stay at R8. If there's money owing (or there's nothing to repo) they dump the account to collections and rate it R9.
If collections gets the money from you, they should rate the account R7 and close it. If they don't, it stays at R9.
Bankruptcy is automatic R7 for all accounts involved because it too is consolidating the debts.
So, if you refuse to pay, and you refuse to go bankrupt, and the creditor doesn't force bankruptcy on you, and they don't use collections, the account ends up closed out as an R9. If you go bankrupt or you pay a credit agency, the account is rated an R7. If you pay before it goes to a credit agency but after you piss them off, R5. As far as a judgment goes, I assume that's an R7, maybe an R8 if they have to repo something through the courts.
If you just need time, remember, you will drop 1 "R" point on this account per month until it is paid or you get to R5. If you don't have the money, you're better off to shuttle this debt to another account, even if it means opening up another card and just transferring it to it.
@twophrasebark: god forbid anyone would ever buy a house, a car, or an education. god forbid anyone would ever start a business. and god forbid anyone would ever accrue unexpected medical or other expenses.
thanks for filling the infuriating smug bastard quota required for every credit-related consumerist post.
@twophrasebark: Even a responsible person can sometimes encounter a situation where it is appropriate to borrow money. Vehicles can commonly make it happen for people, and homes are almost a guaranteed requirement for borrowing.
There are plenty of good reasons to have stable credit.
I agree that people shouldn't borrow money to buy items they don't need, though. That's just a recipe for disaster.
@xthexlanternx: I'm with you. And the worst are those sites that won't allow you to pause the video until it all downloads to your computer, so you can watch it without all the stop-start jerkiness. 99% of the time, when I see that a story is video only, I just close the tab and move on.
You listening, CNN?
@xthexlanternx: You're not alone. I hate video only articles at work and at home. At work our walls are paper thin and at home there are usually other people in the room. Never seen a video so important that I was willing to pickup and move to a more secluded spot. The worst is being at work and the video starts automatically and you've forgot your sound is turned up. Hear me cnn??
Credit Score Myth #11
Your credit score matters.
If you have a good job, pay your bills in full every month, then your credit score will take care of itself. If you have already f(*&ed up your credit score, then forget about it. Few employers are going to not hire you because of your credit score, and again, if you have a good job and can make a 20% down payment, you won't have trouble getting a lone of any kind. If you can't put 20% down, then you shouldn't get a loan until you can.
American Express will give you a credit report AND a credit score from Experian through the American Express website for FREE. I did it earlier this week and I did a year before.
The CRAs provide free reports because the underlying information might be wrong - what Fair Isaac chooses to DO with that information is between them and their customers (i.e. lenders).
After all, lenders could say "we're not going to loan to anyone with a credit card with more than three 8s in the card number" - it would be dumb, but they could do it.
@zacox: The amount of time it takes me to scan an article and learn the key information is about 1/nth the time it takes to load a video, ignore the ad, listen to some inane introduction of the talking head, and then get to the damn point.
@wickedpixel: Hearted! Thanks to you, it took me ten seconds to find out that this 60-second video is 100% information-free for active Consumerist readers.
@TheWillow: if you want to skip CNN video ads, just click to a new video and then immediately click the video that you wanted to watch.
@mcs328: I haven't looked into that offer, but the score they give you probably won't be your FICO score, it will probably be a BS score that doesn't really mean anything
@mcs328:
As probablykate thought... AMEX gives you an Experian PLUS score which is worthless. You can still monitor the report for incorrect info though.
@West Coast Secessionist: Well, for one, FICO doesn't store or maintain your information. All they do is feed data from the CRAs into an equation and spit out a number. That's it. The number is based on information you already know, have, and can access. It's completely illogical for FICO to hand out free information.
You have free access to that information, but not the score. They're two completely different scenarios.
Sounds like I hit a nerve?
I stand by what I wrote. It is far better to not borrow money. And it is far better to not buy things you don't need.
Except for buying a house or your education, there is really no need to borrow money.
That would be a pretty weak Bingo. I'm not blaming or attacking the writer of the article or anyone else.
I am mentioning two sound pieces of advice that any financial counselor will tell you. Sorry if it came off smug - I meant it tongue-in-cheek.
@feckingmorons: Yeah, actually you ARE forced to give them information. You fill out your taxes every year because the law requires it, and that starts your score. If you're an adult, you have to live somewhere. You either pay rent or have a mortgage, and you need electricity and water. Unless Daddy Warbucks is covering your living expenses, all of that activity is part of your credit score.
Sure, if you're an illegal immigrant, live in a tent and can avoid getting arrested for vagrancy, you can live without having a record with the credit bureaus. They track a lot more information than just loans and unsecured credit cards.
I really really hate when I click on a news article only to find out it is a video.