The Truth About Credit Scores
Here's a subject that will get some comments / questions
I may not reply to all of them because this is NOT technical analysis this is conceptual stuff
Firstly and most important: Credit Scores are NOT built for consumers
NOT AT ALL
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Here's a subject that will get some comments / questions
I may not reply to all of them because this is NOT technical analysis this is conceptual stuff
Firstly and most important: Credit Scores are NOT built for consumers
NOT AT ALL
2/
The single most important thing to understand about Credit Scores and Credit Reports is that they are solely designed for Lenders
Sure, Landlords and Insurance companies use them but they're for credit granters
Another shocker: Good and Bad score; not how we look at it
3/
Sure, Landlords and Insurance companies use them but they're for credit granters
Another shocker: Good and Bad score; not how we look at it
3/
We think: In or Out
Either the score qualifies for lending or not
A 900 score is meaningless, once the score passes 780 who cares
Because Score isn't subjective, its just 680 is pass for normal lending 600 is not
Below 450 will disqualifies for anything but private
4/
Either the score qualifies for lending or not
A 900 score is meaningless, once the score passes 780 who cares
Because Score isn't subjective, its just 680 is pass for normal lending 600 is not
Below 450 will disqualifies for anything but private
4/
Because here's the key
Credit Scores are NOT about good or bad people
They are ONLY designed to estimate chance of default within 90 days
Statistically and historically scores over 780 don't ever default on mortgages, now in Canada maybe 1K will default but that's nothing
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Credit Scores are NOT about good or bad people
They are ONLY designed to estimate chance of default within 90 days
Statistically and historically scores over 780 don't ever default on mortgages, now in Canada maybe 1K will default but that's nothing
5/
Lenders only care about default potential: having to use Collection on the loan
That's it
And the system works WELL at that precise job, good for the public too, it makes lending cheaper by being efficient
Its NOT perfect
Its starts to go south when credit goes bad
6/
That's it
And the system works WELL at that precise job, good for the public too, it makes lending cheaper by being efficient
Its NOT perfect
Its starts to go south when credit goes bad
6/
As @ScottTerrioHMA and @doughoyes will tell you, once missed payments and collections mount the information in Bureaus can get crappy, sometimes inaccurate because Collecters play games
Again, remember the Score is only about In or Out to us so 90 day missed payments = Out
7/
Again, remember the Score is only about In or Out to us so 90 day missed payments = Out
7/
Couple other things
Credit Reports consumers order for themselves or as part of financial services offerings: mainly useless, its a novel to go into the reasons
Seeking advice to fix Credit? Meh, could be helpful but NEVER pay for it
You're told to avoid Credit pulls?
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Credit Reports consumers order for themselves or as part of financial services offerings: mainly useless, its a novel to go into the reasons
Seeking advice to fix Credit? Meh, could be helpful but NEVER pay for it
You're told to avoid Credit pulls?
8/
Its BS, a trick from a high rate lender to discourage you from shopping for a better rate
Example: 860 score, 4 pulls in 2 weeks = 846 score, who cares!!
Sum up credit scores: a statistical tool for lenders
What drives scores up: use credit and pay to zero every month
8/
Example: 860 score, 4 pulls in 2 weeks = 846 score, who cares!!
Sum up credit scores: a statistical tool for lenders
What drives scores up: use credit and pay to zero every month
8/
Don't miss any payments!
You will have a great score
Easier said than done
There are a ton of little details: New Canadians, people who pay cash alot, people trying to recover from credit problems, that's for another day
Bottom line: a tool for Lenders
Thats ALL
You will have a great score
Easier said than done
There are a ton of little details: New Canadians, people who pay cash alot, people trying to recover from credit problems, that's for another day
Bottom line: a tool for Lenders
Thats ALL
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