I’ve found myself randomly tied into knots over the three digits that dictate everything from my interest rate to my loan acceptance, and even my auto insurance rates. My credit score has caused me more stress and sleepless nights than most anything else in the world. And today, I decided I don’t care what it is – and here’s why:
My credit score is not an accurate representation of my financial situation or credit worthiness.
Now, try telling that to the credit card company that recently denied my application, or the one that claims my score is so low that I only qualify for its highest interest rate (about 17 percentage points above prime). To them, my credit score is pretty much *all* that determines my credit worthiness. And to a certain extent and for certain people, it does.
But for me — and, I believe, the majority of consumers with some occasional spots on an otherwise clean history — it does not.
Allow me to give you a brief tour of my finances of the past 12 years:
- Applied for and received a student card in 2000
- Promptly ran up my balance and couldn’t pay it off
- Ran to my parents for help after finally receiving one too many collections calls
- Paid off that balance
- Applied for and received a second card around 2003
- Promptly ran up my balance and couldn’t pay it off
- Applied for and received three additional lines of credit between 2005 and 2009
- Promptly ran up those balances and couldn’t pay them off
- Found myself almost $20,000 in consumer debt with four lines of credit, each carrying 30%+ interest rates, in a recessionary economy
- Called my bank (which held three of the four credit lines) begging for help and was referred to Take Charge America, a credit counseling agency
- Got my credit card interest rates negotiated down to about 7%
- Paid off almost $20,000 in consumer debt over three years, with payments of nearly $600 each month
And that takes us up to last month. In these three years, I’ve learned how important it is to have savings in the bank, because I wasn’t allowed to use any of my existing cards or apply for additional revolving lines of credit. I couldn’t fall back on a piece of plastic, so I had to put money in the bank for car emergencies, health emergencies, home emergencies, and potential job loss – not to mention regular stuff I just wanted to buy (still haven’t kicked that habit, but I’ve become more conscious of what I’m buying and why – a topic for a future post).
Meanwhile, I was still allowed and able to open an auto loan, a mortgage, and student loans. The only time my participation in a credit counseling agency ever came up was when the manager of a car dealership accused me of being a bad credit risk on the floor of his dealership, in front of other customers, simply because he wanted to sell me a new rather than a used car. Cut to later that night and I obtained instant approval from Capital One to purchase a used car – elsewhere.
In short, I learned how to be a responsible credit consumer.
Which was why, upon paying off my balances in full in August, I applied for a rewards card. In three years, I hadn’t been able to use revolving credit, which had affected my credit score tremendously. Turns out, if you don’t use your credit cards, your credit score suffers. Which makes sense, as horrid as it sounds. It’s a “credit” score – scoring your credit. And without credit, your score is hard to determine.
I also wanted to enroll in a rewards program because, being a much more responsible user of credit, I knew that using my credit for everyday purchases and immediately paying those purchases off would not only re-establish a pattern of responsible credit usage, but also provide a nice little kickback to our growing family for travel, baby purchases, and more.
Imagine my rage when I was denied credit on my first application to Chase. Despite a stated score of 710 in the denial letter, I was told that my balances in proportion to my available credit were too high – absurd, since all my revolving credit balances are currently $0. I was told that I had too many delinquencies on my account – one 30-day late payment in July of 2009 being “too many.” And I was told that I had a lack of revolving account information.
Yes, because I had spent the past three years being a responsible consumer and paying off my debt rather than hiding from it.
Since, as a condition of my payback program, my previous cards had been cancelled, the only way for me to prove that I could use credit and pay for my purchases in a timely manner is to obtain credit. So I tried applying for one more before resorting to my bank or a secured card – and I was accepted.
And then I received the notice in the mail yesterday, sent ahead of my American Express card, letting me know that my APR had been determined by my credit score, and what that score was, according to Experian: 687.
(I’m not shy, I’ll tell you my credit scores.)
Eight months ago, when my husband and I applied for our mortgage – which we closed in April – my Experian score was a 729. That’s a 42-point drop.
When I was denied my first card, I was told my TransUnion score was a 710. In January, it was 740 — but even 710 is higher than what Experian calculated on my behalf.
After a brief moment of gloom, my husband reminded me exactly why I was getting this card – to build my history back up and start demonstrating how responsible I had become.
And that’s when I decided that I don’t care what my credit score is.
After reviewing my credit reports for accuracy (do this – you get a free one from each agency each year), and finding everything to be not only accurate but looking pretty damn awesome, I made a quick call to Experian to discuss my 42-point score drop over the past eight months. According to the helpful man on the phone, credit scores fluctuate all the time for a number of reasons, and all companies have different scoring models that they use to determine my credit worthiness. And by “companies,” he meant my mortgage company and my credit card company – that they had both simply determined a credit score based on how they were deciding to view my information. Which I believe to be an error on his part – my mortgage company can’t just make up a score for me, can it? – but leads to the point of this post.
One agency might tell me my score is a 715 (Equifax, it turns out), while another might tell me it’s 687.
One month it might be 729, and a few months later – after paying off every penny of every credit card and obtaining a mortgage while staying clean everywhere else – it might be 687.
I pay off a card, and my score might drop.
I carry a balance, and credit card companies might like me better and decrease my interest rate. They call people who pay promptly “deadbeats.” You know why? Because they’re not making any money on us.
Oh, and not to mention that the score I pay for on FICO or from any of the other reporting agencies, is not the score my lenders see. Which makes paying for my score a big fat waste of time and money (but not obtaining my free report on an annual basis – that’s essential).
My credit score doesn’t matter. It will change based on any number of whims. Why we need three reporting agencies generating three different pictures of our financial worthiness, is beyond me. But what does matter is that my husband and I are almost debt-free, we have a healthy emergency savings account, we own a home that we paid a fair market value for and can absolutely afford (and can afford to maintain), and we can afford to sock savings away every month.
I don’t care what my credit score is – responsibility is not a three digit number.