Credit Scores | A Brief Intro

...and a slight rant on why they make no sense.

If you know nothing about credit scores, know that it’s simply a number that shows how good of a borrower you are to anyone that might want to lend you money.

Here are a few ways of understanding why a score is generally helpful as it helps us decide whether to:

• watch a Netflix show (Google Reviews, IMDB, Rotten Tomates)
• decide whether to buy a product (Amazon ratings, Steam scores)
• feel comfortable with our driver (Uber, Lyft)

In this case, our credit scores are a little more important as it concerns our financial lives and it’s how lenders rate us, which is far more controversial.

Most sites will generally tell you that the scores range between 300 and 850.

Let’s just pause there and think about how dumb that is.

Why would someone ever pick 300 to 850 as the range? Why not just use something our brains can easily compare against like 0 to 100 or 0 to 1000?

Unless it's meant to be intentionally confusing and gatekeep the system. Hmm.

Regardless, that’s what is used and so the whole system is built around it.

We do not just have a single credit score. We have multiple depending on what bureau is providing the data, what company is analyzing the data, and the model the lender is using.

None of the specifics of this matter to us, unless you’re just curious.

I will say though, there are three main credit bureaus: Experian, Equifax, and TransUnion that provide the data on top of which our credit scores are built.

And once again, let’s think about how dumb it is that private companies are selling our own data to others and us for profit even though we never opted in. It’s just the price we pay for entry into the financial system (are they the original Google and Facebook?).

Don’t even get me started on them getting hacked back in 2017 and losing the data of over 100 million Americans and then having the gall to sell us credit “protection” as a service.

Once again, the specifics of how our data gets passed around to create the score don’t matter, what does matter is that the components that make up our score are all the same.

As long as we understand what goes in, we’ll know how our credit looks when a score comes out. We can then take steps in our lives to both improve our scores and ensure that our scores are elevated.

This post was ported over from my Substack series