I hope you're all staying safe and covering each others backs. - Manuel
I hope you're all staying safe and covering each others backs. - Manuel
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The Financial Omnipotence of Credit Scores

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Hello, there! Credit bureaus calculate credit scores using fixed, scientific formulas. In other words, there is no alchemy behind these figures, but the more known about them, the more they can be controlled to gain financial advantage.

Then again, everybody knows that good credit scores are essential to maintaining good credit. In 2019, commonly used FICO scores range from 300 to 850, and a minimum score of 700 is considered acceptable by creditors.

It is also common knowledge that there are three major credit bureaus - Equifax, Experian, and TransUnion - compiling their independent credit reports. Since creditors report separately to each of these bureaus, one person can have varying credit scores despite standard calculation guidelines. Variances only arise because of differences in information that each of the bureaus receives.

Most importantly, the factors affecting credit scores couldn't be more specific and well-defined. These factors include payment history, credit utilization ratio, credit mix, negative entries (foreclosures, late or skipped payments, etc.), and hard inquiries. Also, there are certain types of credit, such as installment loans and revolving credit, that weigh more substantial on a person's credit scores than others.

Beyond the technical details, however, there is so much more to know about credit scores and the omnipotence they have gained in America's credit vacuum. While it's easy to take the nitty-gritty for granted, ignoring the more extensive, longer-term picture can be disastrous.

For starters, any information on a credit report can impact its owner's credit scores profoundly - not for a day, a week, or a month, but for years. For example, if a person has been making late payments in the last seven months since going jobless, his credit reports will carry such information for the next seven years. Even if he pays off an entire collection account, it will still appear on his records in the same way that bankruptcies do. If the person files Chapter 7, this bankruptcy will remain on the credit reports for up to a full decade. 

The good news is every bad detail on a credit report will eventually fade, and the owner can immediately begin to correct issues by taking concrete steps, such as consistently paying on time and clearing balances in full. It is also crucial to remember that partial payments aren't as harmless as they seem. Any amount that even slightly deviates from the agreed terms can cause credit damage.

Another misconception about credit scores is the purported need to maintain a monthly credit card balance to build credit. In reality, depleting balances at the end of each payment cycle is the only guaranteed way of keeping reports on the positive.

Considering the influence of credit scores on personal finances, it is, therefore, wise to ensure that these numbers are always in check. Should there be errors or inaccuracies in billing statements or credit reports, disputes must be filed as soon as possible. Creditors are not known to wait, and they will act how and when they think they should.

Everyone appreciates the benefits of maintaining good credit scores. It helps people get the best credit interest rates and the best life insurance premiums. It can even affect whether or not a landlord accepts an application to rent. However, these numbers cannot take care of themselves.

Using credit recklessly can cause critical damage to a debtor's financial future. Hence, people should be responsible and proactive in protecting their credit scores. After all, there is no room for complacency in a credit-centric world, where the real benefits are reserved for those who are proven worthy.


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