Buddhist Catholic Contemplative Evangelical General Christian Hindu Jewish Latter-day Saint Muslim New Visions Progressive Christian

Beliefs

Topics

Columnists

Resource Library

Research Tools

Video

Podcasts

Thought Readers

Faith In Media Tracker

Newsletters

Ad-Free & Subscriber Log-In Subscription Support

Follow Patheos

Home
Progressive Christian
Tips on improving your HW score

Tips on improving your HW score

Last updated on: July 27, 2010 at 3:25 pm by Fred Clark

Tips on improving your HW score 2010-07-27T15:25:54-04:00 Fred Clark

LOGO Patheos Explore the world's faith through different perspectives on religion and spirituality! Patheos has the views of the prevalent religions and spiritualities of the world.

The Today Show this morning presented its latest variation on the now-routine story "Five Ways to Improve Your Credit Score."

"It affects all portions of your life," Matt Lauer says in the introduction, "how much you pay for insurance, even whether or not you might get a job."

The report never challenges this "all portions of your life" expansion of credit scoring or questions why what was purportedly designed as a measure of credit-worthiness should be or should be allowed to be used for so many other reasons and decisions so far removed from that purpose. It's just a given.

Finance reporter Jean Chatzky bemoans the fate of the fourth of Americans who are forced to pay higher rates for everything from mortgages to insurance premiums due to their sub-600 credit scores, but it never occurs to her that this game shouldn't be played in the first place. Transunion, Equifax and Experian set the rules, even if they haven't bothered to tell us what those rules are. Ours but to follow those cryptic rules as best we can, paying all due penalties when we violate them.

Chatzky claims to have access to the secret formulas used for credit scoring — at least in the broadest outlines, so along with her five recommendations, she offers an estimate of what percentage of your credit score each factor constitutes.

1. Pay your bills on time: 35%

OK, sure. That makes sense. That's the sort of thing this measurement was meant to measure.

2. Limit your credit use/"credit utilization": 30%

"You only want to be using 10 percent to 30 percent on those credit cards of your total credit lines," Chatzky says. More than that — and perhaps also less than that — could harm your score. She suggests you keep all your credit lines in that 10- to 30-percent sweet spot.

Note already the capacity for a cascade effect. Miss a payment and your consequently lower credit score will lead creditors to reduce the amount of credit available to you. The $250 balance you were carrying on that $1,000 limit is now $250 on a $500 limit, so your credit utilization has magically shot up from the sweet spot of 25 percent to the flashing red warning sign of 50 percent — further reducing your credit score.

3. Keep old credit cards open and avoid credit you don't need: 15%

See, by closing those older cards, you reduce the overall size of your available credit, thereby increasing your credit utilization and lowering your score. Chatzky says it's the "length of your relationship with creditors" that accounts for 15 percent of your score. "Longer is better," she says.

Now we've moved into a realm where responsible, rational decisions can harm your credit score. It makes sense to close an older account with higher rates or fees, but doing so can harm your score and then saving money on those rates and fees will end up costing you money because of the rules of the game. This not only prevents consumers from reaping the possible benefits of competition, but it begins to show that this "score" doesn't really measure what it purports to measure.

4. Diversify your types of credit.

Having accounted for or guessed at 80 percent of the scoring formula in the first three items, Chatzky doesn't even guess at how this particular bit of advice is weighted. "They like to see … a mix," she says. "That you have the skills and the wherewithal to pay off a mortgage, to pay off a car loan, to pay your credit cards on time, to pay your student loans."

This doesn't quite make sense. If you pay off your mortgage or pay off your car loan, then you're reucing the "diversity" of your "credit" (she means "debt," actually, but it's common practice in these reports to use the terms interchangeably).

The unintentional slip here is Chatzky's belated acknowledgment that the main thing the credit scorers are looking for is "the wherewithal." She doesn't hazard a guess at what percentage of your score sheer brute "wherewithal" constitutes, but I'm guessing it's more than the 80 percent she thinks she's accounted for so far.

5. Avoid credit you don't need.

Lauer and Chatzky ran out of time, so we're not told what this means or what alleged percentage of our credit scores it makes up. That also leaves us guessing as to what "you don't need" means in the context of the previous three recommendations. Getting a new credit card would seem to increase your total available credit — thus reducing your credit utilization and improving your score, which Chatzky insists you "need" to do. And it might add to the "diversity" of your types of credit — also an apparent "necessity" in this game.

Don't get me wrong here. I don't think anyone should add more credit/debt just for the sake of adding more credit/debt. That strikes me as irresponsible and foolish. But if Chatzky is correct, it's just the sort of irresponsibility and foolishness that is likely to improve your credit score. That's how the game is played. (Or, at least, how NBC's financial reporter is guessing the game is played, since none of us has access to the actual secret proprietary formulas.)

Consider how the credit score as described by Chatzky creates powerful incentives to acquire, maintain and constantly use open lines of credit. Ponder the mutually beneficial coziness displayed here between the credit-rating agencies and the credit-card lenders and mortgage companies they work with.

A kick-back by any other name would smell as rank.

In any case, let me add a few of my own suggestions to the tips provided by the Today Show:

1. Make a lot of money.

Really, just a stinking boatload of money. The more the better. You don't necessarily need the "wherewithal" of a Bill Gates or a Carlos Slim, or even quite the wherewithal of a LeBron James. But you're going to want high-six-figure income, at least. Note that being stinking filthy rich is no guarantee of a high credit score. It's necessary, but it's not sufficient. The bottom line, though, is that if you're not at least second-home rich, then your credit score will never be as good as Bernie Madoff's was.

2. Pay your bills on time, all the time.

The easiest way to ensure this happens is to make a stinking boatload of money (see tip No. 1 above) and then to have all your bills automatically deducted from your account. If you're not filthy rich, be very careful with automatic bill payments. The usual suspects — Verizon, AT&T, Comcast, etc. — have a history of "accidental" overcharges or double-charges or inexplicable delays in crediting even automated, speed-of-light electronic payments, and if you're not at least flush enough to have plenty of margin for error in your bank account, then such "accidents" can lead to missed payments, late fees and the cascading collapse of your credit score. It's probably wisest then to have your accountant or one of the household servants monitor these automated payments to ensure they go according to schedule.

3. Establish credit by having wealthy relatives co-sign large loans.

A dismaying number of Americans have been woefully irresponsible in choosing their parents or grandparents. That foolishness is reflected, as it should be, in their credit scores.

4. Don't be a victim of identity theft.

You may recognize the picture to the right as the bank robbers from the film Point Break. But that's not quite accurate. Sure they went into a bank and extracted lots of money at gunpoint, but according to the new rules of the credit-scoring game, they didn't steal from the bank — they stole from Richard Nixon, Jimmy Carter, Ronald Reagan and Lyndon B. Johnson.

This is what "identity theft" means. When someone steals from the bank while pretending to be you, the credit scoring agencies say they actually stole from you and not from the bank. After all, if I walk into a bank claiming to be you and empty out all of your accounts, whose job should it be to double-check that I really am who I claim to be? Not the bank's, certainly. So it must be your job and your responsibility, at all times, to make sure that no one, anywhere, is pretending to be you.

This is quite complicated and time-consuming, but for a price you can pay the credit agencies to help you do it. The most responsible step would be to pay each of the three credit rating agencies a monthly fee for this ID theft protection, as well of monthly fees to each of your diverse sources of credit, all of whom also offer this protection service. That can amount to more than $100 a month, but if that additional expense worries you, remember tip No. 1 above.

class warfare

Previous Post

July 27, 2010

TF: Another world

Next Post

July 29, 2010 Why every AG in the country should be suing the credit-rating agencies

Browse Our Archives

Select a Category class warfare evangelicals Iraq Left Behind Mammon music Uncategorized

Select a Month October 2026 September 2026 August 2026 July 2026 June 2026 May 2026 April 2026 March 2026 January 2026 December 2025 November 2025 October 2025 September 2025 August 2025 July 2025 June 2025 May 2025 April 2025 March 2025 February 2025 January 2025 December 2024 November 2024 October 2024 September 2024 August 2024 July 2024 June 2024 May 2024 April 2024 March 2024 February 2024 January 2024 December 2023 November 2023 October 2023 September 2023 August 2023 July 2023 June 2023 May 2023 April 2023 March 2023 February 2023 January 2023 December 2022 November 2022 October 2022 September 2022 August 2022 July 2022 June 2022 May 2022 April 2022 March 2022 February 2022 January 2022 December 2021 November 2021 October 2021 September 2021 August 2021 July 2021 June 2021 May 2021 April 2021 March 2021 February 2021 January 2021 December 2020 November 2020 October 2020 September 2020 August 2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 January 2020 December 2019 November 2019 October 2019 September 2019 August 2019 July 2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019 December 2018 November 2018 October 2018 September 2018 August 2018 July 2018 June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 October 2016 September 2016 August 2016 July 2016 June 2016 May 2016 April 2016 March 2016 February 2016 January 2016 December 2015 November 2015 October 2015 September 2015 August 2015 July 2015 June 2015 May 2015 April 2015 March 2015 February 2015 January 2015 December 2014 November 2014 October 2014 September 2014 August 2014 July 2014 June 2014 May 2014 April 2014 March 2014 February 2014 January 2014 December 2013 November 2013 October 2013 September 2013 August 2013 July 2013 June 2013 May 2013 April 2013 March 2013 February 2013 January 2013 December 2012 November 2012 October 2012 September 2012 August 2012 July 2012 June 2012 May 2012 April 2012 March 2012 February 2012 January 2012 December 2011 November 2011 October 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April 2011 March 2011 February 2011 January 2011 December 2010 November 2010 October 2010 September 2010 August 2010 July 2010 June 2010 May 2010 April 2010 March 2010 February 2010 January 2010 December 2009 November 2009 October 2009 September 2009 August 2009 July 2009 June 2009 May 2009 April 2009 March 2009 February 2009 January 2009 December 2008 November 2008 October 2008 September 2008 August 2008 July 2008 June 2008 May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 September 2007 August 2007 July 2007 June 2007 May 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 June 2006 May 2006 April 2006 March 2006 February 2006 January 2006 December 2005 November 2005 October 2005 September 2005 August 2005 July 2005 June 2005 May 2005 April 2005 March 2005 February 2005 January 2005 December 2004 November 2004 October 2004 September 2004 August 2004 July 2004 June 2004 May 2004 April 2004 March 2004 February 2004 January 2004 December 2003 November 2003 October 2003 September 2003

TAKE THE

Religious Wisdom Quiz

Who built the Ark of the Covenant?

Select your answer to see how you score.

Aaron Joshua Bezalel Moses