MortgageReadyCreditRepair

The credit score is perhaps the most misunderstood tool of finance lending. Like the crash landing at Roswell and why women are smarter than men, no one really knows the truth of it, but thankfully everyone has an opinion (note the sarcasm and let's move on). Scores are mathematical equations which take certain facts into its determination. Payment history, age of credit history (given as an average), utilization (how much you use) and the absence of derogatory items (can be anything from late history to charge offs and collections) determine where your score lands, how it moves around and what type of interest you are charged.

High risk consumers, those who have either poor credit due to little history, number of accounts, re-payment history or mishaps that happen more often than not like missing multiple payments, are hit with the algorithm full blast. The score will be a poor one. Not all poor scores are the result of charge offs and collections, this is just one facet of it. Most people have a very marginal understanding of scores and scoring, some think its too hard like say, Chinese algebra or painting by numbers. And some, afraid of learning because it looks too hard, ignore it and play Xbox all night while they hit the bong and eat Fritos. We don't judge, but we are Dorito fan's personally.

Scoring looks difficult and that's because the wonderful minds that put the score into motion DESIGNED it that way. No one knows much about them, and while we can predict how they will act some of the time, no one can predict what they will actually do most of the time. This is the point of it. If you are the intrepid soul who likes to put their mind to it, feel free to waste a decade of your life trying. We won't tell you not to. But the way a score is designed to work is for the bank and not necessarily you, the consumer.

Scores are not static and they aren't one size fits all. Each score is different for each person because each person's situation is different.

One person can get approved to buy a house with a 620 score and 20 open revolving accounts from credit cards to Bob's World of Funny Hats and Argyle Socks and another who has 2 revolving accounts and a perfect history of on time payments can be denied outright. Other aspects fall into the equation. Age of credit, or how long a person has had credit, is really important to a bank. One could have an 800 score with 1 year age of credit history and the likelihood of a bank approving that person to buy a pencil are about as on par that Fred Astaire's ghost will show up in your bedroom and show you how to do tap dance the Charleston. Could happen, just not very likely. Banks like people with a history. And that history doesn't have to be all good.

Scores are designed to be difficult to maintain indefinitely in the higher brackets, that is the point, and the constant hoop jumping is enough to make you sick of the industry, but it isn't likely to change anytime soon. Because of this, no one will have a perfect 850 score, 10 high balance credit cards, a mortgage, a decent car, a decent wife and two charmingly ungrateful kids and a somewhat passable mistress and expect their credit standing to be stiff as a sailors third leg in a Bangkok whorehouse. Nonsense.

The failure is built into it, because banks make money from people with low scores not high ones. And the high score is only good for a big purchase at a lower interest rate. That's it.

Understanding the score is only important when you want to make a big purchase, like a home or an RV with a big kitchen. It isn't meant to be sustained over the long run, but with the proper usage, timely payments and careful use, a credit score can always be available as a means to use money which you do not have, and pay it back at an interest rate that won't give you premature gray hair. So when you want to learn how a score works kindly visit the score people (FICO) and take some notes. In the real world, a score is put in place by a risk management company to assist a lending and finance institution determine a persons worth as it pertains to lending and interest. Which is fine if what you want is a credit card or a car loan that isn't going to scalp you alive, beat you unconscious and then ride your carcass down the hill like a toboggan.