Play on your finances to get the perfect credit score


Preparing to make a major purchase or take out a loan often means doing everything you can to improve your credit score. As noted, multiple consumer credit scores can help determine interest rates on loans and mortgages, and whether someone has access to credit.

People try many strategies to get the perfect score, paying off old debt if they can, working to increase credit card limits, or spreading debt across multiple cards. These efforts are essentially attempts to manipulate the algorithms that generate credit scores to a person’s advantage.

Amber Miller, a certified financial planner in Minneapolis, already has a high credit score, but wishes it was even higher.

“At this point, if it’s less than 800…I wonder what’s going on?” she says. “Because now I feel like I tried to figure out the system, worked the system to be perfect.”

Miller had a general idea of ​​what makes for a good credit rating, and yet, despite using far less than their maximum credit allowed on cards and paying bills in full each month, she and her husband noticed that their ratings kept falling, sometimes by 10 or 20 points at a time.

Miller decided to experiment with new strategies to increase her score, including changing how often she paid her credit card bills. She went from paying monthly to bi-weekly and finally weekly.

“It absolutely blew our credit [scores]”, Miller said. “I mean, like every week, it would go up 10 points for each of us.”

His strategy was essentially guesswork. Credit reporting companies outline their calculations, but the nuances are exclusive.

“So at a high level we kind of know,” said David Silberman, senior fellow at the Center for Responsible Lending, “but precisely what, what does ‘credit history‘ mean and how is it scored? Or What do “credit types” mean and how are they scored?It’s all black box.

Nevertheless, there is a whole industry out there promising easy solutions to improving credit scores, some that work and some that don’t. Credit reporting companies are familiar with most of these strategies and regularly update their models to account for new types of data and changing consumer behaviors.

Ethan Dornhelm, vice president of scores and predictive analytics at FICO, exemplifies a popular trend a decade ago of “authorized user piggybacking.”

“People would basically rent their sparkling credit card account,” he said, referring to accounts with high credit limits, low balances and long histories. “And, for a fee, they would add people as an authorized user on their account. And in doing so, that account would then be flagged in authorized users’ credit reports and potentially factor into their FICO score.

This was often used to improve the authorized user’s score. Some parents have also added children as authorized users on their cards to help them build credit history. But after noticing the trend, FICO looked at the algorithm and the data.

“And what we ultimately concluded was actually that the information about authorized users was not as directly related to whether someone was going to pay future bills as agreed, as the information contained about the accounts whose they were legally responsible,” Dornhelm said. FICO therefore modified the algorithm in a later version to weight this information differently.

Not all changes are so clear cut. Credit reporting companies keep the finer details of their algorithms at their fingertips for competitive advantage. But that leaves a lot of people guessing or listening to the people giving bad credit advice.

“I think some people who try it may actually misunderstand what’s good and what’s bad,” said Silberman of the Center for Responsible Lending. “And they can actually do things that have the exact opposite effect of what they intend.”

And the consequences of guessing wrong can be serious. UCLA professor Safiya Noble has written extensively about the role of algorithms in our lives and gave the example of someone with bad credit and no dental insurance.

“If you don’t have dental care and need to fund a dental visit with some type of dental credit card or credit system,” she said. (Access to these lines of credit and the interest someone pays can potentially depend on someone’s credit rating.)

“Having good credit or bad credit shouldn’t determine how your health, well-being, and ability to see a dentist and other types of specialists are,” Noble said.

It’s one of the many reasons why some consumers pay monthly subscriptions to stay on top of their credit scores or, like Amber Miller in Minnesota, use free online services or apps to track their score.

Miller said after he ended his experiment with weekly credit card payments, his scores started to drop again.

“I guess in some way I was trying to game the system, but I was just trying to see what would work,” she said.

But now that she think she knows how it works, Miller said she was a little frustrated. Because without her experience of paying her cards every week, she would score lower.

“It’s unfair. It’s not real life,” she said. as you pay [your credit card] every month, versus four times a month… It’s the same ending so there’s no difference.

At the same time, Miller said she was lucky. She still has a high score and does not need new credit at this time.

“Day in and day out, I’m not sure the score itself matters, other than maybe my ego,” she said. “But when I want to use it, I want to make sure that number is high.”

Understand the general features of credit scoring algorithms do not require the kind of intense experiments that Miller did.

VantageScore offers consumer resources on its website, including a “credit score quiz” to test your knowledge.

The FICO website has detailed explanations of all the different components of the score and guides on how to improve your credit score.

And the Consumer Financial Protection Bureau has an entire section of its site dedicated to credit scores and credit reports…including the differences between the two.

To learn more about consumer rights related to credit scores, see this summary of the Fair Credit Reporting Act, which outlines what you can legally do if you have a problem with your score.

Thank you to all the listeners who shared with us their credit score stories for this series.

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