My credit card company (Discover) has recently congratulated me on having a FICO score of 817. Does this score really mean anything? Is this what banks use to lend money or is this some sort of enticement by Discover?
Yes, it means a metric shit-ton for most kinds of large loans, credit card offers and sometimes even employment. 817 is extremely good by any measure (the top score is 850 but that is un-achievable for most people and doesn’t matter anyway). Anything over about a 750 is considered to be in the top range of scores. 720 is considered “good”.
What that means is that when you buy a car, a house or refinance a mortgage, you will qualify for the advertised best rate if everything else is in order. Most people don’t. That can save you thousands or even much, much more over the life of the loan. For instance, I am refinancing my house right now and I qualified for the best interest rate because I make sure my credit score is in your range religiously.
It also matters for credit card offers. I am a master of getting free travel from exclusive credit card introductory offers but many of them require a very high credit score. I never have to worry about that because mine is very high as is yours. In other words, having a credit score in the 800’s means that you will never be denied credit for that reason alone and you will qualify for the preferred rates that add up to serious money for large loans.
OTOH, having a credit score in the 600’s or lower can disqualify you from conventional financial resources or make them much more expensive because you are deemed a high risk in that range. That is one way of many that poor and financially irresponsible people fall into a credit trap.
There are lots of other credit scoring models for various purposes but FICO is the main one and it is highly correlated with the others.
A FICO score of 817 is pretty much a pristine credit rating, so, yes, that’s good. And from when we bought a house a year ago, I do believe Discover’s FICO score did correspondent accurately to the scores from the three credit agencies. (The scores from the three agencies varied a bit, but all were within the same ballpark as the FICO score. With 817, you’re golden.)
I did poorly in asking my question. You hit on the actual question I meant to ask. What I was trying to ask is if the score Discover is saying I have would correspond with what a bank or lending institution will come up with if I were to apply for a loan?
Probably. Discover is, y’know, a bank/lending institution itself. That’s how you have a credit card with them. I can’t see any nefarious reason why they would want to inflate your apparent credit score. You may range 10-30 points from their score if doing something creditty elsewhere, but there’s pretty much no way you don’t have good credit if Discover is telling you that you do.
P.S. Just for the viewers at home, you do have a loan with Discover; it’s a revolving account, but it’s basically a loan. That’s why if you apply for a loan elsewhere, they will take into account your max credit with Discover, even if you never float a high balance.
There are a ton of different FICO scores used for different purposes (mortgages, car loans, credit cards, general inquiries, etc.) and they all have slightly different models and all rely on slightly different data depending on which credit agency is doing the calculation. The scores offered for free by credit card companies are not necessarily using exactly the same model (or all the same data) as those used by the credit bureaus, even if the scoring service is actually provided by one of the big credit bureaus.
That said, all these scores are very highly correlated with one another, and if Discover says they’re giving you an 817, that’s very good and your other scores from other providers will also be very good.
FICO stands for Fair, Isaac Company, which developed, and continues to develop and support the algorithms.
The way I understand it is that there are only 3 credit bureaus- Equifax, Transunion and Experian. When you do various lending/credit related things, it gets reported to these credit unions, and their info is sent to FICO (Fair Isaac Corporation) to calculate the scores using their statistical model.
Thing is, the three bureaus don’t quite have the same exact information- not everything gets reported to all three. So even though they’re all being run through the same model (FICO) to determine the score, the initial data is slightly different, giving slightly different scores.
Discover probably gets their score from one bureau, and your bank could get theirs from another. But it’s likely that your scores won’t be different enough to matter; there’s no practical difference between a 750 and a 817 in terms of what they’re willing to lend you. They’re probably going to be more interested in your job, salary and tenure for that- they know you pay stuff back, now they want to see how much you can pay back.
Quick follow-up- my bank (Wells Fargo) offers free FICO scores and explictly says they use Experian data.
My credit card company complementary credit score is the FICO® Bankcard Score 8, which might be what the OP was provided. It has a range up to 900, but anything over 800 is still very good.
I’ve notice that too on my Discover Card statement. It changes each month from as low as 817 to 850 for a few months and then to something like 835. It is only useful if you are applying for loans. I think Discover Card is doing this for a couple of reasons. The first is that it is providing a service without any charge or hassle to show your credit score. I don’t know if the other credit card companies do this, but it is useful that Discover Card does that without me having to order a report just to find out the score. I guess it is nice to know, but I it doesn’t change my financial habits.
But I also think it encourages you to contact them to increase your credit limit, which they like. People who get higher credit card spending limits tend to carry a balance. I never carry a credit card balance and don’t get anywhere near the credit limit. I’ve had the card for a long time, but without me asking they increased the credit limit. I’m sure this was to encourage me to start putting a bunch of things on it, so it would encourage me to carry a balance.
One benefit of them putting the credit score on the statement is if it drops dramatically and you’ve not changed anything in your personal finances, it might mean something is using your credit fraudulently and you should investigated. Because I read someplace that it says the credit score is determined by the ratio of balance to debt you have, so a sudden dramatic drop could mean something fishy is going on.
Looking back on previous statements I notice my FICO score rises and falls from month to month as well, which I do not really understand why that is. I always pay off my balance monthly and on time. I have no other debt. I haven’t applied for any type loan in about 15 years. I have had no credit checks ran (that I know of). I can understand my score ticking upward slightly as time passes without any hiccups, but why should it rise and fall?
I agree it is nice to have it on the monthly statement. I will start paying more attention since it appears to be a real thing and not just some sort subliminal advertising gimmick.
Your score rises and falls because your credit utilization ratio changes from moment to moment. That is, a large factor in scoring is how much credit you have available versus how much you actually use. If you have $300,000.00 in total credit available (say, $100K on three separate credit cards) and your balance is only $5, your score will be great. If, on the other hand, your balance is $298,000.00, your score will not be so great.
If you don’t generally carry balances and want to see what your score should be, pay off all your cards on the same day and look at your score two business days later.
I was at 850 for quite a few years. Then I paid off my house and it dropped down to 838. I was paying double on the mortgage for a few years, and I guess that really helped my CR. Now I just have 2 credit cards that I pay off every month. No car loan or anything else.
Paying double on a mortgage doesn’t affect your credit score. All that is reported is that you made each installment on time. It doesn’t matter if you make the exact payment due or a hundred times the payment due.
Your score went down after your paid off your mortgage because a mortgage is a long-term account. When the payoff was reported and the account closed, you lost a ~20-year-old account from your overall portfolio. The average age of your accounts is one of the (less substantial) FICO factors. Credit mix is too, and having a mortgage is beneficial because it tells lenders that some other financial institution thought you were worth lending $200K or whatever.
Despite all of the marketing that implies you have “a” credit score, you actually have several dozen credit scores, all calculated in a slightly different manner in order to focus on whatever aspect of your finances they want to focus on. Because they are all using basically the same information, the numbers are all going to be relatively close together, maybe a 10-15-20 point swing in either direction, and if Discover is showing you an 817 you don’t need really to worry about that, but to people with scores in the high 600s or low 700s it could mean quite a lot.
A while back I found out a credit score isn’t only important when applying for loans, it is also used for determining auto insurance premiums. Surprised me a bit as I didn’t quite see the connection between paying my bills on time and crashing my car.
A FICO of 817 is very good … that goes back seven years and seven years ago the World Economy™ was in the septic tank …
Beyond getting credit just about anywhere … you also might get an insurance policy whereas someone with a lower score would be refused … a rental unit even though yours is the 57th application turned in … extra employment opportunities … the FICO score is an objective documented fact about your financial responsibility, and almost always this leads to the belief you’re responsible in the general sense …
Not that all these applications of a credit report are exactly lawful, a good score still opens many doors that would otherwise be closed …
There are a few more but those are the big three.
In general, when you get a mortgage, your lender is going to pull all three and calculate based off the middle score. If you have multiple borrowers, they’re going to go off the lowest of the middle scores.
Wells reports a number from Experian with a range of 250-900. My score has risen a 100 points over the last year.
Credit Karma reports Trans Union and Equifax with a range of 300-850. Score is unchanged over the last year.