I have been thinking and reading about credit because it is so important these days. I have learned a lot and have also learned how little I actually know about it. Such as, how is my credit score figured out, how do i improve my credit score, can I trust these companies that have so much control over my life?
Credit – how to figure it. When i first started reading about credit I though that I would find a few sites that gave me a some formulas. I thought figuring out my credit score would be as easily as figuring out my BMI. Well it is not. You can get a credit history report for free (best site is this one: https://www.annualcreditreport.com/cra/index.jsp) , but you have to pay money for your credit score. Hear that!! You have to pay money for something that is supposedly already yours. Truth in advertising would make them say, “You have to pay money for their ranking of your credit”. Also, the formula the three different credit companies use to figure out your credit score is apparently classified. The best the FTC can do is this (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.htm):
“Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical formula, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor. A total number of points — a credit score — helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments on time. Generally, consumers with good credit risks have higher credit scores.”
You do not have exact details on how your credit score is calculated. All you have are general details on being a good indebted serf, and making all your payments on time like a good boy. Remember to eat your veggies, too. Keep in mind these credit companies sale YOUR information to other companies. Is it possible that they are telling those companies information that they want to hear. For example, a credit card company would want a person who would never default on their payments, but who also carries a balance. Best of both words. You do not pay these companies, anything you really have no say in what they are telling their clients, the banks and profiteers of the world.
How do we solve the problem of these private companies having so much control over your information. For most people, dropping off of the credit map would be impossible. I think all they would have to do is post their formulas to the web. Once we know how they are computing our scores, we can determine for ourselves if they are fair and honest and which companies to trust.