Improving your credit score: The facts

Visa credit cards.


TESS VIGELAND: Now, of course, Chris is just one guy. What he does to boost his credit score isn't necessarily going to work for you, or is it?

Liz Pulliam Weston is a good judge of that. She literally wrote the book on credit scores called, "Your Credit Score." And, of course, you hear her often as a guest on our call-in segment. Liz, initial thoughts about Mr. Peplinski's quest? Is this a golden fleece moment?

LIZ PULLIAM WESTON: Well, you know, what it reminds me of is that scene in "Our Town," where Emily is bugging her mom about, "Am I pretty enough?" And her mother says, "You're pretty enough for all normal purposes." And you know what, if you have a 760 score, you are pretty enough for lenders. You're going to get the best rates in terms. There's really no big advantage to getting a score above that.

VIGELAND: So is Chris, even though he's well-intentioned, missing the point?

PULLIAM WESTON: Well, I understand the desire to be the best, to top out on that scale, but one of the things that he's concerned about is having a big buffer. And the problem is the higher your score, the more it drops if you mess up.


PULLIAM WESTON: Yeah. If you have, say, a 780 score, and you miss a payment -- you're 30 days late -- your score can drop up to 110 points. If your score is lower, like the 680 range, they kind of build in the fact that you've messed up in the past. Your score falls less.

VIGELAND: Wow. So that's exactly the opposite of what he thinks it is?

PULLIAM WESTON: Yeah, kind of. He does have a point that having a buffer is nice, so if some small things go wrong you're not really paying for it and you can still get the best rates and terms. But a major thing, like missing a payment, is really going to hurt your score.

VIGELAND: What about all of the other steps that he's taking. You have dealt with the issue of credit scores for many, many years. Would all that apply to just about everybody else?

PULLIAM WESTON: Pretty much. What the score likes to see is a mix of different kinds of credit. It likes to see that you're not rushing out and getting a bunch of credit at once. It likes to see that you're using only a small portion of your available lines and that you're paying your bills on time. Now you don't have to have an auto loan, student loans, a mortgage and credit cards. You actually can get a very good score just with credit cards or just with installment loans. IT'S just easier if you have that mix.

VIGELAND: So is it, as I put it to him, a code to crack?

PULLIAM WESTON: We know a lot more about it than we did even 10 years ago. We know a lot of the different things that can help you improve your score, like paying down your credit card debt, not applying for a bunch of credit. But there are still things that we don't know for sure, like people ask me all that time, "If I do this how many points will I gain?" And we just don't know that. That's just not something that Fair Isaac has wanted to reveal to the public.

VIGELAND: Why is this number not something that we can help ourselves with to whatever extent we choose?

PULLIAM WESTON: Because it's a proprietary formula. This was created for lenders and it's become something that everybody knows about now, fortunately. But there's still this idea that it's a proprietary product. They don't want everybody to know. Another thing we probably should mention is that you just don't have one credit score. You know, we talk about, "My credit score is X." Actually, you have three FICOS -- one from each credit bureau. You could also have an auto score FICO. You could have one for mortgages, you can have one for credit cards -- all these formulas can be tweaked a little bit.

VIGELAND: Do you ever foresee a time when the credit score will not be something that we have to obsess over? Not that we perhaps have to obsesses anyway, but it's become just this huge yoke around our necks.

PULLIAM WESTON: Well, it's become incredibly important in so many aspects of our financial lives -- not just whether you get a loan, but what interest rate you pay. A lot states, it determines what you pay for insurance premiums, it could affect that. So yes, it's really infiltrated our lives. I don't see anything near-term replacing the credit score, because the thing about it is it tends to work. It's not always fair, it doesn't always seem logical, but it does a pretty good job of what it was designed to do.

VIGELAND: All right, Liz Pulliam Weston, our credit score expert. Thanks so much.

PULLIAM WESTON: Anytime, Tess.

About the author

Tess Vigeland is the host of Marketplace Money, where she takes a deep dive into why we do what we do with our money.
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As long as the Fair Isaac algorithm for the credit scoring agencies remains proprietary information, t consumer will never have any real sway in improving their credit score(s). Most people do not even know who owns the credit score. Hint: not the consumer. Since the big three credit scoring agencies sell the scores, which they create and own, to lenders, the big three are working against the consumer. The lenders want scores to be lower so that they can charge higher interest
rates. It is high time to have a PUBLIC credit score issued by the real big guy: the US government. Maybe with Elizabeth Warren at the helm of the new Consumer Finance Protection Agency a fair Fair Isaac score, whose algorithm is known and understood, will be available. If consumers do not know what truly affects their scores and they do not even own the scores issued in their names then the current system is hardly a Fair Issac. Consumers urgently need a public score which they own and whose algorithm is known so that consumers can truly know how to improve their scores.

learned nothing knew here. when will the public know the formula and details and the facts of how to better their scores?

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