Understanding your Credit Score

When we were first starting out in school and in life, we were all on an even playing field and then when we left high school or college, it was just assumed that we, as Americans, understand the responsibilities of living in the United States and how to build a strong financial legacy. We don’t teach our children in schools about building credit and mom and dad were never taught anything so they have nothing to pass on. They had nothing twenty years ago when I was in school and there is still nothing being implemented today, when the impact of ignorance is far greater.

Credit Karma and a variety of other free credit score sites provide Vantage Scores (the competitor to FICO that the three credit bureaus created in 2006) however less than 10% of all creditors use Vantage scores to determine how much you will pay for your car or home. It has a completely different range and algorithm (formula) than FICO for determining your credit score but the score range is exactly the same. Credit card statements coming in the mail with scores that “look like FICO scores but in the small print are labeled PLUS Scores can further confuse us. Twenty-seven million FICO scores are purchased a day from the three credit bureaus from consumers curious about their credit rating who want to improve it or to make sure they have not been a victim of identity theft. The recent Equifax breach has certainly sparked and grabbed all of our attention causing us to want start paying more attention to this financial report card tied to building wealth.

Since the housing crisis in 08, there is no longer a certain “group” of people who have bad credit. EVERYONE has something on their credit that they would like to get off the report and everyone would love to know the inside tips and tricks to raise their score…. especially with the impact a low credit score can have on your finances. Today, having a low credit score could have you paying three times as much insurance as the guy who just got a DUI. We are on information overload from the internet but who can anyone believe or trust? Wouldn’t it be great to hand your child a manual as they graduated college to give them their best introduction to finances and making good choices in such a way that would draw them and create excitement around the subject of money?

There is no better time for this:

  • Did you know that adult coloring books are 4 of the NY Times top 10 bestsellers right now? (Coloring books marketed as adult activity for reducing stress, etc.)
  • Did you know your credit is being run by employers, auto insurance company, solar companies, home insurance companies, mortgages, autos, rental car companies, landlords and the list is growing?
  • DO you know every person in America who has any credit reported within the last 6 months could have 70+ credit scores depending on the model, the agency, and the credit score type?
  • Did you know simply by changing the date you pay your credit card each month, it could change your credit score by 100 points or more?

This country needs a mood lifter.

Like Dorothy spinning around in her home in that tornado, we as a country felt the same in the housing crisis of 2008. The house has stopped and her black and white world opens up to a colorful new world. People want to be SMARTER this time. They don’t want to pay a bunch of money to someone making promises. They don’t want to be scammed. They have a desire to learn it themselves (as long as it doesn’t take too much time) and they know it is TOO important not to understand in the world today.

We don’t have to fear the flying monkeys though. By remembering what Glinda the Good Witch said to Dorothy, we can be empowered with the same wisdom and take back our own power in improving our finances!