mo money mo problems

May 28, 2008 1:55 PM

Why is my credit score so @#!%$ing low? I am in a better financial position than anyone I know in my age / earnings category.

I've never had any long-term debt whatsoever. No loans, mortages, nothing.

I always pay my credit card balances in full. The only payment I missed in recent years was one for less than $50.

I make $75,000 annually, and save at least a third of it.

I have over $100,000 in cash or short-term deposits, and a lot more in other assets.

So why the !@#!%!% is TransUnion giving me a credit score of 665, in the bottom quartile for Canadians? Of course they were completely unhelpful on the phone when I asked them.

This is affecting my success at applying to rent a new apartment.

posted by randomstriker to work & money (26 comments total)

I'd order/pay for a copy of your report. You might well have negative items being reported that you don't know about. My husband's score was tanking over a $9.11 charge from the utility company after we moved to a new place. They sent it to collections, but it wasn't worth any collection agent's time to call for $9 - so it just sat there, taking his score down. Getting that cleared up was less than an hour of time, and his score is up about 50 points since then.
posted by handful of rain at 1:59 PM on May 28, 2008

I've never had any long-term debt whatsoever. No loans, mortages, nothing.

i'm not an expert, but that may be your problem. unfortunately, some debt is good debt--it shows your ability to make regular payments. so student loans and mortgages (assuming you pay on time) are helpful in that regard. at least, this is what people who know more about this stuff tell me.

also, i assume you have checked to make sure nobody has opened a credit card in your name or anything like that.

also, check all three reporting agencies. transunion may just be off for some reason.
posted by thinkingwoman at 2:02 PM on May 28, 2008

I've never had any long-term debt whatsoever. No loans, mortages, nothing.

I could be absolutely wrong, but I think this is part of the reason.

Might be different for Canada, but according to this page:

"Your payment history – about 35% of a FICO score
Have you paid your credit accounts on time? Late payments, bankruptcies, and other negative items can hurt your credit score. But a solid record of on-time payments helps your score."
posted by o0dano0o at 2:02 PM on May 28, 2008

Or, what thinkingwoman said ;)
posted by o0dano0o at 2:02 PM on May 28, 2008

Definitely subscribe to a credit inform service. I use mycreditkeeper.com which is pretty much identical to other services that cost $10/month. You'll see anything that could be considered a negative factor and why it is so. You can also see if there are misspellings or gaps in your personal info. Also, you'll get email reminders anytime there are changes or inquiries to your credit information.
posted by Burhanistan at 2:04 PM on May 28, 2008

I always pay my credit card balances in full.

Believe it or not, that can actually hurt your credit. I know. It's aboslutely ridiculous. Take a look at myfico.com. It's got a credit score calculator. Also, second get a copy of your credit report. When I was looking at buying last year, I got a copy of mine and found an error.

And honestly, the whole credit scoring system is a mystery to quite a few people. Good luck.
posted by notjustfoxybrown at 2:04 PM on May 28, 2008

Definitely see about your detailed credit report; a friend of mine didn't know why her credit was so low, until she did so and realized that her identity had been thefted.
posted by Greg Nog at 2:11 PM on May 28, 2008

I've never had any long-term debt whatsoever

FICO scores try to estimate how good a "customer" you will be for credit providers, not how good a credit risk you are in the absolute.

Credit providers value people who pay a lot of interest and make their payments on time, in that order.
posted by tachikaze at 2:14 PM on May 28, 2008

Neither your income nor your savings have anything whatsoever to do with your credit score.
posted by peep at 2:16 PM on May 28, 2008

I don't think you need a monthly "credit inform service" or whatever they're called. You can order a detailed credit report from Transunion every 6 months or so and save a bunch of money. Honestly, daily or weekly updates aren't really necessary, as I don't think there's a statute of limitations on filing a dispute.
posted by muddgirl at 2:16 PM on May 28, 2008

You want to have open and available credit that you use regularly and responsibly. When somebody is evaluating your credit history, they want to see how you cope with debt and that you are reliable to dutifully pay it down. So, you weren't terribly specific in your question about what type of accounts you have, but you want to have a reasonable number of open lines of credit, often in the form of credit cards. I'd say you should now start to charge absolutely everything you can so that you build up a regular payment history. Credit cards that you hardly ever use demonstrate nothing to Fair Issacs, Experian, TransUnion, etc. You might even want to, occasionally, hold a balance on a card that you gradually pay down even if you could pay it off all at once. Say you purchase a new television for 1800 CAD -- pay 600 each month for three months if your interest rate is low.

Really, all you need to do is use credit more actively. You sound very responsible, but the cash flow isn't involved with credit lines enough. It's kind of odd, isn't it?
posted by cgomez at 2:17 PM on May 28, 2008

I second the identity theft thing, it doesn't make sense otherwise, any bank should be creaming their pants for a client like you
posted by matteo at 2:26 PM on May 28, 2008

It's impossible to give a good "why" without seeing your exact credit score and even then it's not completely possible. FICO is a trade secret and the best any of us can do it guess. There's some pretty good guesses to be had but it's largely beside the point - Fair Isaac acknowledges in general what components work in.

The big ones for you are going to be credit history, as others have mentioned, age of credit, and utilization.

Utilization probably isn't a big one if you have credit and are carrying nothing on it, though you really should ditch things you don't use (subject to the next point). You can also ask your creditors to lower your available credit. They won't want to do it but if the alternative is that you close your account the chances are they'll agree.

You might also be getting hurt by the age of your accounts. Compare two individuals: One gets a Blatsazz card in 2000 with a $1000 limit and keeps it open and makes on-time payments through today. Another gets a card in 2000, closes it on December 31st 2000 and gets a new card from someone else on Jan 1 2001, then repeats that behavior all the way through now. The person with a single account going back will have a better credit score.

Consequently it's in your interest to keep the older accounts you have. People who have jumped around a lot get penalized, even if they've been every bit as diligent as people who didn't. There's several flaws in the model and this is one of them.

This kind of thing used to get discussed into the ground on The Art of Credit and I am sure continues to be so over on DebtorBoards.com. If you really care you can go look it up there.

The long and short of it (more long than short, it seems... sorry) is that your best short-term move is likely to close some of your unused newer accounts if you have a lot of unused credit available.
posted by phearlez at 2:39 PM on May 28, 2008

Here's the FICO breakdown, though you need to click the "About FICO® scores" tab to see it.

Note that "amounts owed"(utilization) at 30% is way larger than "types of accounts" (your lack of a past mortgage or car loan would be reflected in there) at 10%, and even length of history at 15% is larger.
posted by phearlez at 2:43 PM on May 28, 2008

I've never had any long-term debt whatsoever. No loans, mortages, nothing.

nthing that this is why.
posted by fixedgear at 2:50 PM on May 28, 2008

Age can also affect it - if you don't have a full 7 year history, you'll have a lower score than if you do, even if on that shorter report you have no black marks.
posted by restless_nomad at 3:05 PM on May 28, 2008

Each individual actually has three different credit scores per credit agency: creditworthiness for home loan, auto loan, and consumer credit. Your score could very well be higher in any one category or be lower at a different credit agency. Not all creditors report to all agencies. If you have problems with renting, I suggest negotiating paying multiple months of rent upfront (since you have weak credit but high cash reserves).
posted by mattbucher at 3:20 PM on May 28, 2008

I had the same frustration years ago - "I have no debts, how can I have a low credit score?!" - and had it explained to me that (within reason) the more debt, and types of debt, you maintain and regularly pay down (but not totally clear), the better "credit customer" you are considered and the higher score you have. If they're never going to make any money off you charging interest, then no one's very interested in lending you money.

So you have to owe some more money and make regular payments on it. I went out and got several department store credit cards at places I used to spend cash at, spent as usual, then paid off the bill over several months instead of all at once. A year later my score was 120 points higher. YMMV.

P.S. most landlords/rental companies understand this, especially when you're younger. A little note saying "my score is low because I do not maintain any debts and always pay balances in full; income and full credit reports are available on request" went a long way when this was a problem for me.
posted by bartleby at 4:33 PM on May 28, 2008

This is affecting my success at applying to rent a new apartment.

Hmm, are you applying to super-exclusive places or something? I can't really imagine most apartments turning you down if you're willing to show them proof of your net worth. Remember, you're entering into a negotiation with them; you don't have to just go by whatever blanks are available on the application form. If they try to turn you down based solely on credit score, I'd just call them and say, more or less, "Don't you realize I'm rich?" (Also, as previously mentioned, if even that doesn't work, you could offer to pay a few months in advance, which wouldn't seem to be a hardship for you.)

As for the score itself, the $50 thing may hurt you more than you'd think, because that line of credit will be marked as delinquent for 7 years, and that will affect your ratio of positive vs. negative accounts, which is a big part of the score. I'd try to dispute that and get it removed if possible.
posted by dixie flatline at 5:01 PM on May 28, 2008

Each individual actually has three different credit scores per credit agency: creditworthiness for home loan, auto loan, and consumer credit.

Citation, please? People may apply different standard requirements for FICO scoring but I have never heard anything about multiple scoring models.
posted by phearlez at 6:45 PM on May 28, 2008

I didn't have time to read all of the answers, but I was previously in your situation (no credit cards, no debt ever, making >$70k, etc.) and was not able to get a car loan last year. Also, the credit card I got started me with a $500 credit limit.

After I co-signed the car loan with my mom and got the credit card (and paid it on time for a year), I've had the credit card company send me a letter saying they have increased my credit line on the card once every month for the past 10 months or so, so I'm assuming my credit score is going up. I haven't checked my score, though.
posted by yellowbkpk at 8:23 PM on May 28, 2008

The lack of long term loan/mortgage is the problem. In essence your credit score is the likelihood of you taking a loan and paying it back. If you can't demonstrate a habit of doing so in the past, how else the score company can judge your credibility?
posted by bargainhunter at 9:47 PM on May 28, 2008

From my experience landlords who run credit checks are not looking at your credit score, they are looking to see if you have a foreclosure, bankruptcy, or MAJOR red flag on your report that might indicate to them that you will be a bad tenant / stop paying your bills.

If they ARE looking at your credit score ask them to look for all of your debts, of which you have none on your report, then show them a paycheck to prove you are making 75000 a year. I dont know why they wouldnt give you the apartment on the spot.
posted by outsider at 11:16 PM on May 28, 2008

Each individual actually has three different credit scores per credit agency: creditworthiness for home loan, auto loan, and consumer credit.

Citation, please? People may apply different standard requirements for FICO scoring but I have never heard anything about multiple scoring models.

Wiki: FICO scores are intended to show the likelihood that a borrower will default on a loan; a separate score, the BNI, is used to determine the likelihood of a borrower's declaring bankruptcy. Although the Fair Isaac Corporation's web site offers to sell borrowers "their FICO score," as if it were a single number, the company uses different scoring methods to rate a borrower's suitability for three types of credit—mortgages, automobile loans, and consumer credit— reflecting the loan default risks inherent to these different types of lending. It is not unusual for these scores to differ—by 50 points or more—for the same borrower. The score also depends on what credit reporting agency the data is obtained on, since not all creditors report to all three. The score Fair Isaac sells to borrowers is their consumer credit score, and the borrower can choose which agency the data is obtained from.
posted by mattbucher at 7:30 AM on May 29, 2008

For the record, FreeCreditReport dot com is not free. They require that you sign up for a program before receiving your full report. Go to AnnualCreditReport dot com to get free reports.
posted by SoftSummerBreeze at 9:19 AM on May 29, 2008

Aha. The BNI - the Bankruptcy Navigator - is an Equifax-owned and Equifax-only offering, unlike FICO which Fair Isaac will compute based on any of the big three's credit reports. If you're going to worry about that - which most people would say you shouldn't, I think you'll find - there's other credit scoring models besides FICO too, some of which are mentioned in that wikipedia article.

As far as the multiple ways of computing FICO numbers, the wikipedia article provides no citations to back that up nor have I ever seen any. That particular article is filled with unsourced assertions, in fact.
posted by phearlez at 12:05 PM on May 29, 2008