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At the risk of oversharing …

Posted by joeabbott on November 12, 2016

I’ve always been interested in my credit rating: the evaluation of my risk profile based on held accounts, payment histories, etc. I don’t really need the information, nor do I plan on leveraging it, so it’s always been a question of interest over anything of substance. But, when I’ve looked in on offers to show me my credit rating score, I’m always stopped by having to register a credit card; ostensibly to verify my identity.

But, I’ve never been happy giving out credit card information if I’m not buying something; just seems unnecessary. And, a good thing I’ve walked away from those offers, as a quick web-search tells me that, as often as not, those cards are being used to charge people after small print “trial periods” have expired. Typically within the month.

But, I stumbled upon Credit Karma while perusing my favorite time-wasting site (Reddit). Credit Karma is a “free” service that never asks for money; the “free” being in quotes because you do have to create an account with the company to get your score. While that was almost a deal breaker for me, the more I read about Credit Karma from the company itself and from other people posting online, the more I felt comfortable that this was an ethical company with nothing to hide. And. to that point, they very clearly state (and I’m summarizing here) that “we have to make money somehow and getting your contact information when you create an account that we share with select partners provides that income”. So, essentially, they’re doing what Amazon or anyone else does with your personal information: they leverage it among other companies who want to buy that info. And, hopefully, with discretion.

Anyhow, as I looked more into credit rating information, I found a lot of information. The below is from the Credit Karma founder as posted on Reddit:

    • There is no such thing as an actual credit score. There are dozens per individual. As one person pointed out, even FICO has dozens of variants source. Now consider Vantage. Many banks use multiple scores. None of them disclose because it would be like Coke telling you a secret ingredient.
    • Comparing different scores and different bureaus is comparing apples and oranges. Most times, the scores will be pulled on different dates which is another reason for change. When my balances are high (mid payment cycle), my score is lower since I am using more of my credit. Scores are real time and point in time. They constantly change. A variance of 10-40 points is normal.
    • Fun fact. A difference of 50 points at 600 is very different than a difference of 50 points at 800. I point this out because people banks care about your probablity of default. Not some 3 digit number. FICO Odds Ratio Page 11 shows that a score of 600 has a default rate of 27%, 650 has a default rate of 10%. Whereas a score of 700 has a default rate of 3.6% and 750 has a default rate of 1%.

So, a lot more complex than I thought it would be. But, I’m happy to say that, other than my mortgage, I paid off my last loan in 1993 (“debt free in ‘93!”) and don’t really need to worry about this all that much. But, as anyone else who has spent too much time in a classroom or being rated in some way or another, I was happy to see my credit scores being in the “excellent” category:

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I have other questions that are mildly curious to me … can I intentionally move the score by non-loan activity? what’s the average fluctuation? why is it on an 850 point scale? … but I’m not so inclined to go out and research them. I’m just happy to know that, if I need a loan, I can likely get it.

Thanks for dropping by and I hope your credit scores are excellent, too!

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2 Responses to “At the risk of oversharing …”

  1. A very fun read Joe! Thanks

    Chantal

  2. fran abbott said

    I was surprised and very happy to see that my bank rates me excellent too. I do pay Trans Union $12/month to report any activities on my accounts, and its interesting to see the actions reported. I’ve tracked down a few things, which involved institutions other than the ones “listed” that actually “own” my familiar stores, etc. They definitely don’t like having accounts cancelled and drag their feet in doing so, so I’ve had to nudge a few into compliance with my request. But it’s such relief to be totally debt-free at this point of my life, and I’m very grateful for that. Mom

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