For Peace of Mind, Focus on Whole Report and Not Just Credit Scores

Credit monitoring has become a daily activity for some people.  We are able to instantly look at our current credit scores from just opening an app on our phones.  Many banks offer free monitoring as part of their promotions.  We can see what our credit score is by the minute.  Is that a good thing though?  Should we really want to or do we really need to know our credit score every time it makes a move?  I suggest we are putting too much stock in the up-to-the-minute credit score and the stress it seems to cause almost suggests its an unhealthy idea.

First, one must understand what credit scoring actually is before giving it all the focus we do.  A credit score is what results when you take all the information on your credit report and put it through a complicated, yet specific, math equation.  Much like calculating a high school or college grade point average, where each grade is a score, and can be worth more or less depending upon the amount of credit hours or difficulty of the class.  A credit score takes a credit report, as it appears at that very moment in time, and certain parts are given a certain value, and a score is calculated.  Thus, that score can change slightly or even greatly depending on the information that is going into the calculation.

Additionally, there is no such thing as one single credit score.  There are numerous different score possibilities because there are numerous different ways it can be calculated.  The most popular credit score, commonly known as FICO, was created by the Fair Isaac Corporation.   Essentially, two mathematicians that came up with the equation that so many creditors have come to rely upon.  But even FICO has not created just one score.  FICO itself has made modifications to how its score is calculated. In addition, each credit bureau (Trans Union, Equifax, and Experian) have created their own versions of scores that they give to consumers who wish to view a score.  Thus, your Trans Union score as calculated by Trans Union’s score model can be a bit different than your Trans Union score using a FICO model.  It just all depends on what kind of score is being used, and again, what is in your report at the very moment the score is being calculated.

Many of the score models do have similar basic concepts.  That is, payment history/responsibility for debts is usually the highest factor.  The amount of balances you carry usually is a major factor too, followed by overall history of credit as well as how you vary between types of credit you have.  But given all this, what is it one should do when we are concerned about keeping a good score?  The answer is, don’t.  Don’t keep looking at your score every other day or week expecting it to move as a barometer of your credit life.  The tiny ebbs and flows of your score can have you stressing about something that may not be worth even paying attention to.

Always start with just reviewing your credit report for the information that appears on it.  Check the accounts and payment histories.  Check the balances.  Make sure everything is true and accurate.  If everything on your report is correct and accurate, then don’t sweat your score.  As the saying goes, it is what it is.  When you go apply for credit, the potential creditor will either review the report or obtain a score or both.  If your report is accurate, then the score that comes out will be the one you deserve.  And naturally, if the information is not accurate on your credit report, you can call us at SmithMarco, P.C. for a completely free case review.

Larry Smith
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