So yesterday I was reading about the new “Ultra FICO” and just generally feeling negative about America’s financial industry. If you haven’t heard, now people with really low/ no credit can link all their financial accounts (checking, savings, etc) to try to boost their credit score and borrow money they wouldn’t otherwise be able to access.
This got me thinking – I have no idea what my credit score is! I haven’t checked it for a handful of years. So why not? For what it’s worth, I used the free website Credit Sesame.
I’m not being paid by them or anything, I just wanted to tell you where I got it for free if you were curious. You have to give them a lot of information, and permission to check your TransUnion credit report. And then each month they will calculate an approximate credit score for you. As far as I can see, it’s the same as a whole host of other websites, like Credit Karma and even a few credit cards with a monthly credit score as a benefit.
So I checked my credit score. And it’s terrible.
Okay, well it’s not the worst it could be, but it’s the lowest it’s ever been for me.
656
My credit score used to be VERY close to 850. And I was PROUD. I thought that meant I was adulting really well. I had always been told to be responsible, to “build my credit”, that it would open doors for me into amazing jobs, low insurance rates, and the best deals on future purchases.
Turns out, that wasn’t the truth.
The only thing a high credit score ever did for me was allow me to borrow more money than I responsibly should. The deeper in debt I was, the higher my credit score soared. So when I was at my most irresponsible with money, when I was literally drowning, when we were living paycheck to paycheck with no savings… the credit companies were LOVING IT.
And then, I woke up. I stopped focusing on what other people thought, and stopping pining for the next big shiny purchase. We decided to stop borrowing money for things we hadn’t saved for, and start paying off the things we had already bought but still owed money on. (which was… ummm… everything.)
And as we gained steam, and began really getting a handle on our finances…. Our credit scores began dropping. Mine’s dropped steadily over the last ten years or so. I assume my credit score will continue to drop until there’s basically nothing to report on, because even the old paid-off debts will eventually fall off the report after seven years or so.
Right now, Credit Sesame tells me that there are a few factors contributing to my low credit score. They are giving me an “F” in the areas of Credit Usage (haha, I’m not using credit), Credit Age (umm because zero accounts means no age), and Credit Mix (because it’s hard to diversify zero things). I’ve got a C in Payment History, because I’d always made my payments on time, but currently I’m not making payments (living the dream!). The only area I’m doing well in is Credit Inquiries, because my credit reports are locked and no one can make any inquiries on them. Apparently the fewer the inquiries the better.
I also want to point out that the marketing here is genius. It’s not debt – its CREDIT. Doesn’t that sound better? Much more desirable. Who doesn’t want to “build credit”? I mean, if they called it a Debt Score, and rated my debts, it would be a bit more obvious that it’s not something I really want. But instead, they are gifting you with all this positive CREDIT, that you have to apply for. It’s really brilliant. And they give you a grade and a score, not based on how much you are drowning in debt, but based on your Credit Usage. Doesn’t that sound like you are really being responsible? As if you are using your credit, and your payments are not completely in control of your money.
And the best part? They give you recommendations! So they recommend, to improve my credit score, the number one thing I need to do is….. Get a credit card. Somehow digging myself back into debt will prove that I am a good risk. Because lenders don’t want someone who is debt free! They want someone who borrows lots and lots of money and doesn’t pay it back right away. They want someone who will pay their outrageous interest rate, each month, for the rest of their consumer driven life.
And that’s not me anymore.
Do you agree with me about credit scores, or are you still working to keep yours high?
January 22, 2019
It’s the system. Or rather, it is the current system. No saying when it might change though. So, if this is the current system, why not make the best use of it? Do you know for a fact that you won’t ever require a good credit score for something?
Having just one credit card open, even if you don’t use it, gives your Credit Utilization maximum points. (If your credit limit is, say, $1k, and you don’t use the credit card and your balance is always zero, you get the most benefit).
Similarly, don’t close out your oldest credit account. Don’t use it, but close it out as it hurts your Credit Age.
Knowing the system, and then taking maximum advantage of the system, isn’t that what being financially prudent all about?
Cheers!
March 1, 2019
Hi NWA – thanks for your comment! You make a good point – this is the only system we’ve got and we’re definitely constrained to working within it. While I can’t know absolutely that I will never wish I had a credit score, I am doing everything I can to make sure of it! ie saving up cash so I don’t have to borrow money, working on multiple income streams so I won’t be dependent on others to give me a job (perhaps based on credit score?).
I’m just trying to control the things I can, and opt out of the system as much as possible.