The truth behind the credit score

April 28, 2011 · 16 comments

I’m on my way to the airport to go visit Girl Ninja in San Diego, which means I’ve got a guest post for ya today. I’ll be back and in action next week. Enjoy your weekend suckers. I know I will :)

Hi, I’m Ed and I’d like to punch TWO people in the face with one swing. Just line them up (if they were still alive), and beat some sense into them. I’m referring to the two gentlemen behind the idea of the credit score, Bill Fair and Earl Isaac, collectively known as the Fair Isaac Corporation (FICO), where your credit score originates. These guys purposely sold Americans to the mercy of financial institutions and unless you’re a multi-millionaire that can pay cash for everything, you’re going to have to participate in their insidious game.

FICO was founded in 1956 by a couple of mafia godfather wannabes that were unwilling to be fully transparent in their methodology. It’s not that I necessarily disagree with the ideas of checking a person’s credit history before loaning to them, but more that these scores are based on a fairly secretive formula.

Your credit score is a three digit number ranging from 300-850 that serves as a numerical representation of your credit risk and trustworthiness. If you’ve ever been late on a credit card payment by more than 30 days or applied for “too many” credit cards at once (how many is too many? Your guess is as good as mine!), your score most likely took a hit. Luckily, there are aggressive and passive strategies one can implement to work their score back to a preferable number.

These days, you can’t secure a loan, let alone an apartment without a good credit score. And what’s worse, is the standards of what’s considered “good” are constantly changing. For instance, before the Financial Crisis of 2008, a score of 680 was good enough to get you great rates on credit cards, installment loans and mortgages. These days, lenders are looking for 730 or better to give out the best interest rates. They keep pushing it higher and higher and soon enough, I’m sure you won’t be able to purchase a home without a 95% down payment.

So in short, we are all subjected to this game of cat and mouse because two guys who thought it would be cute to enslave the Western world to a seemingly ambiguous system. We’re all tools getting screwed and abused. So if you’re ever turned down for a credit card, a rental lease or an auto loan, just know that there’s someone in your corner yearning for an after-fight suckerpunch.
Bill Fair and Earl Isaac: I’m calling you out from your graves — Bring it on, ladies.

Ed O’Brien is a writer on personal finance, specializing in credit repair. You can find more of his articles located at CreditRepair.org.