We were married in 1986 and paid off all mortgages and credit cards. Since 1986 all significant purchases like houses and cars have been made with cash. Utilities and costs such as insurance has been auto-paid. Groceries, gas, medicine etc, etc. and the like have been put on Discover cards and the balance paid in full monthly.
Today I have a credit score of 790. Why? How does this happen?
My young wife who is gainfully employed by with the government has a credit score of 770. Why? How?
What is this credit score? Where does it come from? Why do either of us have any credit score?
You answered your question right there. You use credit every month. You might pay it off, but you are still using it. Now the answer of what determines what score you have is left for smarter people.
You have Discover cards with regularly paid-off balances. Those are credit cards. Therefore, you have a credit history (probably including the pre-1986 stuff too) and therefore a credit rating.
Everybody has a credit rating. If you don’t, you can’t get credit.
Your credit score is computed from all the information available to the credit scoring companies. You might be amazed at what they know about you, and some of the info might be wrong. It will never be corrected unless you vociferously complain, as no attempt is made to verify data.
And what they don’t know counts as a negative, so my advice is to play the game. Eventually, you’ll be glad you did.
A credit rating assists potential lenders of your financial trustworthiness to pay back a loan. A higher credit score means you are more trustworthy, and often entitles you to special discounts, interest rate reductions and easier lending criteria if you do decide to borrow.
FWIW, our outstanding debt is just a mortgage. The vehicles are paid off and we pay off the credit cards monthly as well. Our credit rating is 825. That rating allows us to buy practically anything on credit with no problems from any lender, at a reduced interest rate.
A credit score is a numerical measure of how good a credit risk you are. The traditional one is the FICO score, which was created by the Fair Isaac Company (hence the name) using proprietary methods based on your credit history. Fair Isaac sells access to your score to companies that might want to extend you credit so they can figure out how much and at what rate to offer it.
Also keep in mind that there are different formulas used to compute credit scores, but they use a similar (but not identical) scale, which is confusing. A 700 for one may be good, but substandard for another. Rarely are you told which formula was used to compute one unless you ask, and you can’t compare oranges to apples.
So, any guesses as to why my young (Age 55.) wife who is comfortably employed has a lower score than I do while I am old and I am literally near death?
The formulas are secret. They have weightings that may not be fathomable, and may have had a raison d’être at one time, but are not in your favor at the moment.
And, to repeat what I said earlier, “Many web sites offer generic credit scores that are not ones that lenders use.”
I have used zendough.com to monitor my credit history. While there may be other, similar services, you might find this one useful. They will send you a notice if anyone is accessing your credit data, giving you a head start on refuting bogus info.
OK, here goes. My credit score is…super-high, but not perfect. Here’s why. I am copying from my Zendough account.
2 late payments (>30 days) in the last 30 years are a negative. God knows what 3 late payments in 40 years would have caused.
Of 3 revolving accounts, including one that I have had for 45 years, the total amount of available credit is $10,000. Since I pay cash for most everything, including computers and automobiles, I never need more. I have never asked for more. Big mistake.
Oddly, I often pay more than the balance on a credit card bill, and typically have a positive credit balance. Doesn’t count.
I looked into some refinancing a year ago, and inquired to 5 banks. This is considered a big, big, big, black mark, even though I never accepted the many loans I was offered. Don’t ever ask for credit you don’t expect to use.
Right. What do I need with a real estate account with a credit balance? My mortgage is paid. I have cash. I have no long-term debts. Bad, bad, Musicat.
The moral of the story? Hide everything you can. Lie a lot, but do it smartly. Honesty doesn’t pay. If you pay cash, don’t let anyone know about it. Good credit risks never use cash. If you have credit, inflate it to the max. If you have one card, apply for 3, no more. Use them, don’t let them sit dormant (non-use is a bad mark). Buy something with them, no matter what (that’s the price you pay for good credit). Set up automatic payments for the exact amounts due, no more, no less. If you own property, get a mortgage (again, the price you pay).
Note that under this dysfunctional system, good credit ain’t free, and it ain’t cheap. You pay for it. Not directly, but by knowing how to use the system. Keeping your nose clean ain’t enough. No matter how rich or honest you may be, they will find something that is suspect and downgrade your score.
Don’t those drop off in 7 years? My score now is in the low 800s across the three major agencies, but about 10 years ago I had more late payments than that, with at least three of them at >90 days, accounts overlimit, a debt-to-credit percentage over 100%, etc. (And my score at that time was somewhere around 580, I think.) Ever source I’ve seen seems to say all that info drops off your credit history after 7 years.
I’m not sure the rules, but my point is that 30 years of spotless payments is apparently insignificant compared to 2 late (very minor late) payments in the last few. The weighting here is wonky, IMHO.
Also note that you have no recourse if a CC company records a payment late due to *their *fault. It still goes down as a customer’s fault. If customers knew that a 3 year old late payment, late because of the creditor’s error, was going to be so critical, wouldn’t the customer make a big deal of it? But who does that? Am I going to make a major stink because someone didn’t enter the payment to the account for 10 days? Even “instant” payments take 5 days (or used to), and the customer gets the shaft.
Age, employment, and salary are not part of your FICO or FICO-imitation (informally known as “Fako”) scores. The scores are calculated based on information in your file at the credit reporting agencies and they realize that they typically do not have reliable employment data. Age discrimination has legal problems with it.
(This is not to say that some credit grantor can’t make up its own non-FICO score that would include these factors for its internal use.)
To know why you have a better score, you’ll need to get copies of both of your credit histories from the same bureau and compare them. Having older accounts (in good standing) helps. If there are more or different accounts listed on your history than on your wife’s history, that would be the explanation.
Get more credit cards. Keep your eyes open for remarkable sign up bonuses, take the bonuses, do the minimum necessary to get the bonus, and then do just enough to keep the account active. If you ever fly anywhere, the airline-points credit cards keep offering at least 50,000 free miles for signing up. There are also good cash bonuses from time to time: A couple of years ago, Capital One was offering $1100 to sign up for its Venture card.
Getting a new credit card will at first lower your score a bit. But as it ages, it will improve your score assuming you don’t make late payments and don’t max out the credit limit.
Once you get into the near-perfect range with your credit score, the reasons they give for not having a higher score are meaningless. If you don’t have the absolute maximum score, the law requires them to give you a reason. Nobody has the maximum score, so they have to spit out a list of reasons for everyone. For the people who have near-maximum scores, they sort of grasp at straws and just pull out a few “reasons” that could apply to anybody.
And to illustrate that (sorry about this rant, but it could be useful info to anyone wondering why their score wasn’t perfect), I just scanned through my credit stuff and noticed an adverse entry “public record or judgement” from about a year ago. Sounds really bad, doesn’t it? But it’s because of a 1998 (!) lien placed in error. I have an official document from the state saying that the lien “was placed in error” (their exact wording) and has been removed. But it went into the credit report as a bad thing, and not in 1998, but 2012, when it was discovered and disputed. It’s unlikely that I will be able to get this changed, and not worthwhile to try.
(Which is why I now use Zendough to keep track of these things. Things I didn’t know about for 10 years because I wasn’t watching.)
Is this really the way credit should work? The customer is assumed to be a deadbeat unless challenged? But it is.
This, sort of. I had a 800-something score last time I checked, several years ago. I get my credit reports (without the actual score) three times a year. It always looks good. Yet I get a whole list of reasons, just like Musicat, why my score might not be so good, and how to improve it. It seems reasonably likely to me that this “advice” is nothing more than standard boilerplate one-size-fits-all advice that is not in any way tailored to my specific data. Most of the reasons given clearly have no bearing on my personal case.
Here’s a tidbit: I rarely rack up more than a couple-hundred in credit card debt in a month, which I always pay off in full. Maybe three times in the past 10 years I’ve racked up $1000 or so, which I paid off in approximately $300 monthly increments. But some years ago (before those annual credit reports were available to the consumer), one customer service rep told me that they never report any data to the credit bureaus as long as I pay up in full before the next monthly bill. (Apparently, one could even be late, as long as you paid up within the next 30 days.) Once I began getting my three-times-a-year “annual” credit report, it became apparent that this was bullshit, as my credit usage and pristine payment history was all there, going back for quite a few years.
One factor is how much credit you have vs. how much is in use. I have 3 credit cards, Visa, Am Ex and Discover. Use them all and pay them all off every month. The banks don’t kill me because they don’t get a dime of interest out of me. But the credit bureaus do because paying your bills on time is an indicator of your positive history of credit use. Pretty much anything over 750 will get you the best rates for a car loan, etc.
But they are a mystery. All of our credit is joint, as are all of our assets but my wife has always had a score that is slightly higher (10 pts) than mine.
There are plenty of web sites that will tell you how to repair bad credit, but when your score is over 800 and you can pay cash for anything you want, who gives a _____ .
Now, where in the world are you getting this idea? Disputing credit reports is easy as pie. Often, it’s no harder than a one-time email. All the credit bureaus have whole sections for submitting a dispute online.
I’ve had three things removed from my credit report without even needing to submit any proof other than my bald assertion. Don’t give up so easily. Try it out.
I agree with Chessic sense. Every year I dispute every negative thing on my credit reports, whether I was actually at fault at it or not. Sometimes the bank or whoever doesn’t have proof any more of the delinquent payment, or whatever it was, and it just falls off my credit report.
Is it unethical to dispute late payments that I know really were late and my fault? Possibly. But it’s part of the game you play.
I say, just dispute dispute dispute every single thing. You might be surprised what ends up disappearing.