You Do Not Need Credit Scores

(image via Kruse & Crawford)

“A man who pays his bills on time is soon forgotten

 Oscar Wilde, writer, poet

Hang on, didn’t I write in my newsletter a few weeks ago, in Credit is Queen, that credit scores are a decisive factor in the mortgage game? We can compare a credit score to weight loss. Generally, people don’t hop on the scale constantly to check changes in weight loss, nor do they pay to do so. Other than a scale, there are simple factors to assess whether one has gained weight (clothes not fitting for instance)…And the solutions are relatively simple, like eating less carbs and cutting down on sugar. But no one in his right mind would write to the scale manufacturer, to complain that the scale is showing the wrong number, or expect that the federal government provide assistance to reach those scale manufacturers.

What prompted me to write this nonsense were two articles written by Kathleen Pender: Consumers Get New Help on Issues with Credit Reports and Credit Scores May be Free–But Aren’t Fico, which both appear in the San Francisco Chronicle.

In my book, I write in detail about credit scores and their effect on one’s mortgage. But it seems that credit scoring has become a big business, peddled by the banks and the credit bureaus.

Credit Bureaus
The only time borrowers require a credit score is when they apply for a mortgage or any other credit related needs. There are three credit agencies: Trans UnionEquifax, and Experian. Though they all use a variation of the FICO scoring system, their numbers vary. Mortgage lenders use the average number, regardless which agency reported it.

If there are two people applying for a mortgage, the lenders will use the lowest out of the two scores which is by itself an arbitrary rule.

There are many factors that can affect the score and in addition to this there are variations of scoring models. The score which is sold through some websites is called “educational” and is useless for mortgage qualification, and in my view, is a waste money.

Each industry has their own criteria like auto insurance or rent, and the scores will vary from one to the other. Besides, there are other scoring models like Vantage Score. Therefore, Wells Fargo offering a “free” credit score is a marketing gimmick to draw people into their branches and in my mind is very misleading.

But the Consumer Financial Protection Bureau (CFPB), which was set to monitor banking and mortgage activity by the government and is paid by your and my money, is not going to protect borrowers from the banks misleading tricks to get customers.

One of the CFPB’s functions is set to handle complaints and there are thousands of consumers who have reasons to complain. As far as credit reports and scores are concerned, I do not think complaints can really make a difference, but advice from an experienced mortgage professional can. Through many years of experience, we know what can affect the score and what actions consumers can take to improve it.

If you know someone who needs a mortgage and might have problems with their credit score, please do not hesitate and contact me. But first read my book. The credit is only one of the 5 C’s one needs to get a mortgage.


There are a few simple rules on how to have an excellent credit score.

  • First, something your grandmother may have told you, if you cannot pay your credit card bill at the end of the month, do not use plastic, or at least create a budget.
  • ALWAYS pay your bills on time. If you are travelling or have an emergency, ask someone reputable to do it for you. Paying online might help, if you have enough money in your account, but mistakes do happen.
  • Do not allow medical bills, or any other disputes go into collection. Pay first, then dispute. This alone will save you a lot of aggravation and can make a difference in getting or not getting a mortgage.
  • You can check your credit report (not scores) for free( once a year for possible errors.
  • If planning to apply for a mortgage and suspect that your credit scores might be affected negatively, start the process three months in advance.



Best Wishes,

Manny<br />