Is your credit score bullshit?

52 thoughts on “Is your credit score bullshit?”

  1. I did a little cc hacking this past month, so I figured I’d get ding’d with an inquiry and a lower score. To my surprise, I went up to 830 on both Transunion and Equifax. I guess this extra account helped my score more than the inquiry did to harm it… go figure. 🙂

    Ironically, as an early retiree with no traditional income, this solid credit score won’t help me one bit to refi any properties…bs.

  2. In January, I checked it when I got 2 more credit cards (Target and Amazon). I’d been hovering around 720 and now I’m up to around 750. Hopefully I can keep going up this year! 🙂

    800 would be awesome since I could get lower interest rates on future properties.

    Thanks for sharing Steve – I enjoy your commentary in between the stories you include in your posts.

  3. The credit reporting services are so inaccurate and broken that it’s a fallacy to believe them to be reliable. They are just dangerous and should be ignored.

    As a victim of identity theft multiple times (I even file taxes with a PIN), I have given up. I wish you the best of luck if you choose to sort it out!

    Great analysis!

  4. The last time I checked my credit score was last week. I usually check pretty frequently to see if anything fishy is going on. Credit Karma is very useful in the fact that it gives me an estimate of where my credit should be, but not where it actually is because different financial institutions have different scoring methods.

  5. I had a friend get a summons from the state of California to appear in court for a paternity suit. He had no idea what was going on and called up California to say I’ve never visited California let alone know a woman that would want to sue me for a paternity suit. Turns out the state found the wrong person and had taken a flyer trying to grasp that he was the right person. Mistakes happen all the time and with the explosion of data I have a feeling we are going to be seeing a ton more mistakes.

    1. Oh geez, that sounds horrible. I remember a letter I got from the IRS about supposed income from the state of Utah. Never lived there, hadn’t really been there at that point, either.

  6. Have never heard of background checks going wrong before. That really is scary. And I do agree that we rely on credit report checks way too much. I never really understood why companies use it for employment decisions. If you don’t carry a balance on your credit card and pay your debt on time then you’re going to be a better employee?

    1. Yeah, background checks go wrong more than people realize. Sometimes, the errors/omissions are pretty trivial. Other times, though, they can be downright devastating.

  7. Sadly this stuff happens all to frequently. I am a Jr. At my last Refinance I had to spend significant time convincing the bank I have no stake in my father’s home. (He’s delinquent on a few bills, a story for another time). Mind you we have different social security numbers and don’t even live in the same state. The whole identity theft insurance thing seems like the ultimate con. We screw up and give your credit to someone hen we try to charge you to help fix it.

    1. Wow, interesting! Yeah, I always thought that SSNs were important pieces of information that personally identify an individual. But with how often people with different SSNs get mixed up…I gotta wonder how useful they really are.

  8. I check our score every month or so and have alerts setup for new credit requests – I think the large swings in the numbers are BS. It’s like watching the stock market.

    I remember having my credit pulled for my current job years ago, doesn’t really make sense to me – maybe they thing it is a responsibility marker?

    The accountability factor, if you can make a material impact on someone’s life – you are responsible for the outcome. Especially if someone is paying you!!!

    1. Amen to that, Apathy. Yeah, I’ve had my credit score checked at every place that I’ve ever worked at. It was a part of the hiring process. Hell, even to get a freaking cell phone plan. Ugh…

  9. I love and hate watching John Oliver. On the one hand, his show is entertaining and informative at the same time. On the other hand, the systemic problems that he calls out can be infuriating, just like this one. I keep tabs on my credit report and check pretty regularly to make sure there are no errors, but I am also more attuned to my finances than the average person. And the average person is far more likely to rely on their credit report for loans. We need to find a way to address this on the system level rather than putting the burden on every individual to figure it out for themselves, but I have no solutions to offer right now.

    1. Sometimes, John Oliver can be a little much. I’m no Trump fan, but his incessant bashing of Trump got real old, real quick – and it ended up possibly giving him enough publicity to help him win! 🙂

      But yeah, calling out this issue was a good call. It gets the conversation going, even though nothing will come of it. It’s still interesting enough to talk about.

  10. I’ll take a slightly different tack here as I have some experience with industries that require pristine credit and spotless background checks. Yes, there are errors and it sucks when it happens, there’s identity theft and all the rest. But most of the time, a person can fairly easily sort it out with a little effort. Would we rather have people hired for sensitive positions without trying to verify their backgrounds at all (with money, crime, etc)? Businesses have a hard time explaining a lack of due diligence. It’s easy to poke holes in the system but much harder to fix the system.

    Bad credit can be a legitimate indicator of a person’s reliability or their ability to get their life in order (especially when it comes to money). Maybe there’s no correlation between bad credit and being able to do a certain job, but there is a correlation between bad credit and the ability to meet obligations. It’s not iron clad, but it’s a factor. Show me a person with terrible credit, and I’ll show you a person who could be a risk to your business. Put it this way, if you’re a landlord, would you rather have a renter with an 800 score or a 600 score?

    Just an opinion and I know I won’t offend you because your blogging voice doesn’t give a shit what I think anyway 🙂

    Great post! –R

    1. Hey Rich – I think background checks can have their place. The larger problem I believe is with the systemic inaccuracies that these reports very often contain and the sheer hell that most people go through to clear their names. As a society, we place a HUGE reliance on these reports, so the least we can do is ensure their accuracy, and/or put in place an easy-as-possible process for us to clear our names.

      Appreciate the comment!

  11. When my credit was pulled for the first time when I was applying for a mortgage in 2001 (at the age of 24), there was a HUGE mistake on my credit report — it showed me living in another state and married to someone many years older than me. My lender helped to get this removed but, to this day, I receive pieces of mail for my “spouse.” It’s incredibly frustrating that the mistake doesn’t go away, even after the bureaus supposedly fix it.

    Luckily that was the only mistake I’ve even seen on my credit reports. Years ago I decided to place a credit freeze at all three bureaus to help ensure that credit isn’t taken out in my name/SSN. But I really have no faith in these reports and bureaus and it freaks me out that they are tied to so many aspects of our lives.

    I wish it was just as easy to pull public records so that we could review them prior to potential employers pulling them. With those, we don’t even get a chance to fix any errors until the damage is done.

    1. That’s very true, Kate – until the damage is done, most of us don’t even know about problems or omissions on our reports. We find out at the worst possible times, too…jobs, mortgage refinancing, loans, etc.

  12. I heard about some mistakes too, but the percentage must be pretty low. Hopefully, in the very low single digit. As a landlord, I depend on the credit report to screen our tenant. I’d avoid someone with a bad credit/background like a plague. They need to correct any mistakes if they want to get a good place to live. I know it sucks, but that’s how it works.

    1. I definitely hear you. As a landlord, you certainly don’t want an irresponsible person in your properties. And for the people who actually deserve their low credit scores – I have no sympathy for them. But for those who are victims of an identity crime, yeah…that sucks.

  13. When I moved here at the age of 30 I had no credit history. Nobody wanted to give me a credit card because I had no credit history, but I needed one to build credit history. Because of my history, or lack thereof, I was offered the most amazing car loan rates. 15.8% comes to mind. Credit scores made my life a tad difficult for a while. All is A-OK in BITA credit land now, but I haven’t forgotten just how difficult life can be with a bad score.

    1. I understand that having no credit can be just as damaging as having NO credit. Our society depends a heck of a lot on them, unfortunately.

  14. Oh yeah, none of this surprised me. Credit scores are just arbitrary numbers that lenders assign to us because they can’t think of a better way to see if we’ll rob them blind. Like anything in this world, they aren’t perfect at all. That’s why it’s important to monitor your credit report and challenge ANY false information at all.

    1. Well said, Mrs. Picky Pincher. You’re right, staying on top of your credit report is definitely wise. Being proactive about anything that might be a mistake is even wiser!

  15. Couldn’t agree more Steve. Credit reports are way overused, and background checks are frequently wrong.

    Hell, even the federal government screws this stuff up really badly — On a weekend trip to Canada my wife was once denied entry into the United States because someone else with the same name had committed a felony. It was completely ridiculous….and the Feds said it could take months to resolve.

    Meanwhile we had jobs and lives back in the States to return to….

  16. I hate the whole credit thing. I’ve never had bad credit, but once when applying for a mortgage, the broker suggested that I carry more credit cards. I’m the kind of person who doesn’t like to ‘play the game’…. I’d rather just keep my life simple with my one personal credit card and my one business credit card.

    As a landlord, I don’t look at the number as much as the activity. If someone defaulted on a small electric bill, that’s a pretty big deal. Unfortunately though, after reading this article, renters may be turned away for false information.

    “Oh, and I don’t really care about sending a man to the moon, but we can do that too… But yet, we can’t perfect identity protection.” – I’ve said this so many times: “We can put a man on the moon, but we can’t figure out xyz…” – Usually the systems that don’t get worked out, like identity protection, don’t have a lot of money to be made. Unfortunately, that is how our country runs these days.

    1. Unfortunately, you’re right. There isn’t a lot of money to be made in perfecting the system. In fact, there’s quite a bit of money in “protecting people” from the system – in the form of insurance and other identity protection services. With a [near] perfect system, there would be no need for those things!

  17. I spot check my report. I’m not so concerned about the number/score, but reviewing to make sure what’s on it is accurate. I have had some creditors take their sweet ass time to update information on my report.

  18. We check our credit reports once a year and check Credit Karma every couple of months. We actually froze our credit about a year ago so that we don’t have to worry that people can open up new accounts. It was easy to do and we “thawed” them last month to apply for new Chase Reserve cards (and 100,000 UR point bonuses!). We don’t churn cards enough now to keep it thawed and we don’t need a mortgage or credit for anything else. I’ve had cards shut down for fraudulent activity a few times – and it freaked me out. Trying to get things that are just plain wrong off your credit report is a hassle I hope I never have to deal with.

    1. You and me both, Vicki. And freezing credit might not be a bad idea for us either, especially because we certainly have no intention of buying a house or car any time soon. Something to think about!

      1. It gave us a lot of piece of mind. We know people can still mess with our current credit cards, but no one can go and open credit at an electronics or furniture store. Those are the ones you might not find out about for a LONG time!

  19. My bank (BoA) now offers a free credit score monitor embedded in my account dashboard, so it’s easy to keep track of it. I’ve always felt the credit scoring system was a bit of a scam, and there’s now a whole industry that thrives on that incompetence (lifelock is a good example). The nice thing about decoupling from debt is not having to worry about credit scores anymore (or at least not as much).

  20. Funny, but true. Anyway, I was a victim of identity theft and so I put a fraud alert on my credit. So any time when anyone want to open a credit card/get a loan they got to call me on my cell phone to confirm. But the funny thing was I change my phone number, and now I cant even get a credit card/loan anymore because the credit company cant get a hold of me on my obsolete number. All these agency use automated service so it a pain to get anything done/change/update with them (Recently I found a loop hole to update my phone number but that story for another day).

    1. I feel your pain regarding all these systems…and then you have a slew of usernames and passwords, each system with different requirements for complexity. It’s a mess, I tell you! Easy when it works, but a pain when it doesn’t.

  21. As an identity theft victim, I check my credit report regularly. I have a freeze on my credit so no one, not even me, can take out credit in my name unless I unfreeze it. I’ve also heard many, many stories of inaccurate information and identity theft ruining loans and job opportunities. It’s ridiculous just how much stock companies put in these inaccurate reports. Also the fact that credit scores don’t take your income/debt situation into account is a con in my mind. How silly is it that someone with a high income and no debt has no score? And you have to keep around a credit card just to somehow “prove” you can manage debt?

    1. That’s been a sticking point with me, too – you gotta have debt to prove that you can manage debt? I’ve heard that it’s wise to at least keep a balance on your card for a couple months, then pay it off, to establish a credit history.

      Gosh…

  22. I credit my FICO score with allowing me to get into 500k of mortgage debt. 🙂 Good score, no problem! On one of my loans we did a no income verification which basically meant that based on my credit history and never paying a bill late, I was able to buy my home without them taking my income into account…I didn’t have a w2 at the time. Seriously? Ugh. Now my score is almost back to normal 800 area. I think about what Dave Ramsey says that we don’t really need a credit score but I would be terrified this day in age not to have one. It just seems that is what our country has built its financial platform on and to be without seems more complicated. Damned if you do, damned if you dont!

    1. True that, Miss Mazuma. I’ve heard the same thing from Dave Ramsey. Basically, if you don’t buy anything expensive, then you don’t need a credit score. Employment might be the exception to that rule…housing, too, if a landlord wants to see it. Maybe it is a necessary evil…just unfortunate that it’s so fraught with mistakes!

  23. I have totally used credit scores to screen our rental tenants. But it is kind of crazy to think about. I’m not looking for perfect credit, in fact I would prefer they don’t have perfect credit (because they will just go out and buy a house!) But I always ask if there is anything they might want to clarify and I send them a copy of the report (they are paying for it after all). That way if something is messed up, at least they know why they keep getting rejected by landlords.

    1. It’s nice that you give them the option of clarifying anything! I am sure it is nice to know why you might keep getting denied for rental properties. 😉

  24. Hey Steve,
    I’ve been following for awhile and greatly appreciate your writing style and advice. Thank you for your honesty. I have a question outside form this thread if you are willing to let me take you off topic — or perhaps you can direct me to a previous post I haven’t found yet. How are you and your wife approaching a permanent address now that you have transitioned to the Windstream and plan to travel so much? My husband and I are hoping to do something similar in a year or two via a sailboat so I would appreciate any advice or insight you might have. My frame of reference here is more than just mailing address but thinking towards the realm of taxes.
    Cheers and huge congratulations on the transition at Christmas! I can’t wait for that day for me (hopefully) later this year.

    1. Hi Elizabeth – there are services out there (like Escapees, for example) that provide permanent addresses for a fee. You sign up for the service and they create a permanent address for you (like a street address and apartment number). They collect all your mail. Every once in a while, you call and have your mail forwarded to where ever you happen to be.

      That said, we aren’t using one of those services yet…my in-laws are serving that duty at the moment and collect our mail and scan the things that we actually *need* to have, so it makes it a little easier and cheaper for us.

  25. Hi Steve,

    Reader from 2nd world here (Poland) 🙂
    I am actually very surprised by this article. And even more about the reaction in the comments, because no one from the land of freedom (the image of US here) pointed that this is kind of slavery. Three private companies acutally have the power to say ‘No, this person score is not big enough TO GET A JOB’.
    I did not know that you have such practices in the US. In my country they check you when you apply for the government position, but no one checks your credit score (only when you apply for a loan). What they can check is your criminal record.
    I mean – why should anyone check my credit score if all I want is to earn some money while moving paperwork from desk a to desk b? Why could I not wipe corporate floor if I am bankrupt?
    I think that someone has given too much power to some entities here.

    1. I hear ya, Michal. Technically, the three big credit agencies can’t CONTROL your ability to get a job, but yes, the score that they provide has an influence over our employment culture unfortunately. Some businesses don’t check your credit, but a lot of them do.

  26. Life is becoming more complicated. I have maxed out my credit card s for medical bills. It was vision related and not an option, unless being blind counts. I gambled and lost. I cannot return to work. Bankruptcy? I managed to start over a few years back after losing all my savings and investments after the construction trade fell. Car and house are paid for. Selling house is not an option. It is held in trust for my handicapped daughter. I cannot believe this is where I have landed at age 53. After taking care of special child, AS will be minimal. Maybe 500.00. Any thoughts? Anyone?

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