Credit Scores

Your credit score is a complicated and mysterious thing. What does 779 mean?  I think the banks, insurance companies etc like it that way.  My parents always told me that your credit rating is one of the most important items for you to pay attention to and stays with you forever.   I always interpreted that as - pay your bills on time.  But there are funny things you discover about credit:

(1) Not being in debt can be bad - you have no history of credit performance
(2) Having too many credit cards or cards that are open that you don't use is not real favorable (banks see those credit cards as potential liabilities - so having open and unused credit available is not a good thing)
(3) Closed cards is not a good thing - even if you requested it to be closed and there were no issues
(4) New Credit Card applications -  see point (2)
(5) Credit inquiries on your account (e.g. Insurance change etc.) - called "Hard Inquiries"
(6) Public Records on File
(7) Collections on File

Here is an example where automation has created challenges.  Because each of these events are considered independent events by the computer, your credit score goes down. Humans are not looking at these reports.
 
Let me explain -  Recently I decided to open a Fidelity American Express Card (and quit using the Gold American Express card I received from being on Susan's account - that's another long story of dissatisfaction with Amex). I was changing and adding brokerage accounts with proper titles. At the same time I was doing this, I was considering changing Auto, Home, and Umbrella Insurance.  And about that time I missed a Discover Card payment  4/09 (see my previous blog).   All these events caused Allstate to kick out my application with a form letter.  Unbelievable. 

It's a good idea to annually get your free credit report and keep a file of these.  I don't practice what I preach but my file has a 2006, 2008 and 2009 reports.  Some reports have combined scores - some just detail.  I personally like the Privacy Guard report that Susan ordered the best.

There are some things that are a "permanent record" and your credit report is one of those.  No erasing, no going back TransUnion says I have been on their files since 1985 and it shows a credit card (still active) opened in 1983.  Even a pack rat like me doesn't have that data.

So be deliberate on all your credit decisions - it's like blogging in permanent ink.