re: What's your credit score?

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These numbers everybody throws out really have no meaning. I read somewhere that there are like 49 different credit scores. Numbers can vary widely.

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The lack of knowledge about how credit works in this thread is extremely high. Their are 3 major credit reporting agencies, TransUnion, Experian, and Equifax each of them with their own scoring system. Depending on which area of the country you live in one might be more prevelant than the others.

If you go to a bank or credit union for a consumer loan (auto, recreational vehicle, personal loan) they will more than likely pull your credit & score from only one of the agencies as the cost of a full trimerge credit report is much higher (depending on the agreement with the credit agency the bank can get a single bureau report for $7-10 whereas a tri-merge report will cost $50+).

When applying for a real estate mortgage a full tri-merge credit report is pulled. The information from all three major agencies is compiled and merged into one report and each of the scores from those agencies are listed on the report. There is also information on the report relating to your identity, alias names, and prior addresses, basically the report contains a fraud alert. When the lender is "scoring" your report for mortgage lending purchases the middle score is used. Sometimes there may not be enough information available to the agency to generate a credit score. In those cases if only 2 scores are generated the lowest one is used, if one or zero scores are generated then non-traditional credit sources are used, or, more than likely, you aren't getting a conventional mortgage but you may still be eligible for VA, FHA, or Rural Development financing.

Your credit score is based on many different factors and each agency has devised a complex algorithm they use to generate a score. Factors include the amount of debt you have, the type of debt you have (a good mortgage payment history carries more weight than regular installment loans or credit cards), age of the accounts, amount of revolving credit, the ratio of outstanding credit to max limit (are your cards maxed or do you keep low balances?). This is why it is foolish to ever cancel a credit card that does not charge you an annual fee. By keeping an open account with a high limit and zero balance you are adding an aged account to your credit history with a ratio of 0% credit used thereby lowering your overall debt load ratio. Depending on the day of the month your credit is pulled your score will fluctuate due to payments being applied to your various accounts and the ever changing information compiled of your credit history. The report is just a snapshot in time and will change within the next 30 days.

Finally, a good credit history is not an indicator of a good financial well being. It is only a tool to be used to determine if you have a history of repaying your debts in a timely fashion. A truly rich person has no use for credit as they are able to pay cash for everything. They more than likely will have no credit score since they have no history or very little history.

End lesson.