Do you fully understand how your credit score it calculated and reported? You probably know that you should always pay your bills on time, not max out credit cards, and keep up to date on your mortgage, but if you’re still a little shaky on how the rest of it works, you’re not alone. However, there’s a whole lot beyond the basics of credit score and sound financial practices that the vast majority of Americans have no clue about!
Here are 20 surprising facts about credit. We’ll cover the first 10 in this blog and then the rest in part 2.
1. Tall, dark, and 700 FICO?
Credit scores are actually factoring into whom we date these days. Believe it or not, many people are inquiring about a potential romantic partner’s credit score not only before marriage but when a couple starts dating. There are even dating sites – like CreditScoreDating.com and others– that match you with someone that meets your credit score requirements!
2. Back in my day, we walked 10 miles to school in the snow and had good credit.
Despite the bevy of information about credit score and finances at their fingertips, the younger generation REALLY isn’t getting the message these days. In fact, a recent study found that Gen Yers have the lowest credit scores of four different generations. Interestingly, the stud revealed that credit scores increased progressively the older the generation they examined.
3. A bad credit score can lose you that dream job.
Not only is credit score a crucial factor when you want to apply for a new loan or a mortgage, but employers are screening their potential employees for credit score like never before. It’s estimated that 1 in 4 unemployed Americans have been subjected to a credit score check when they applied for a job, and 1 in 10 has actually been denied a job because of a bad score or something on their credit report!
4. Certain employers and jobs factor in credit more than others.
Any occupation in financial services, that calls for an employee to handle large amounts of client funds, or calls for high security is likely to look at a candidate’s credit score. In fact, occupations and industries that often look at an applicant’s credit score include: 1) parking booth operator, 2) the military, 3) accounting, 4) mortgage loan originator, 5) Transportation Security Administrator (TSA), 6) law enforcement, and 7) temporary service positions.
5. Credit score wasn’t designed to help you!
The entire credit reporting model and scoring system was never designed with helping the consumer in mind, but was all about measuring risk and giving objective data to lenders so they could make better, safer – and more profitable – lending decisions! Still to this day, credit score is a valuable tool that helps companies – not consumers! So if it seems a little confusing at times (it is!) then realize all of the information is in a usable format for banks, lenders, and corporations – not the public!
6. The Great Recession…of credit scores?
From 2008 to 2012, as our country was in the midst of the worst financial and market collapse in our history since the Great Depression (called the “Great Recession”), our credit scores too a huge hit, too. With record numbers of home foreclosures, mortgage defaults, and bankruptcies, the percentage of people who had scores lower than 600 skyrocket from only 15% in 2006 to over 25% in 2010!
7. Ignorance is NOT bliss when it comes to credit score.
Admittedly, it’s not always fun to go through your credit report and identify what needs fixing or attention and make those changes, but the payoff of a better financial future is well worth it. But many MOST people don’t even get to that point! In fact, 2/3 of American adults – more than 144 million people – never looked at their credit report in the last year! An additional 1/3 of Americans also have no idea what their credit score is. Scary!
8. Lenders used to operate with no transparency.
Until recently, you might apply for a credit card, mortgage, or other new loan only to be rejected – but have no idea why. That’s because lenders weren’t required to disclose what credit scores and information they were looking at and basing their decisions on. But with the Dodd-Frank financial reform bill in 2011, lenders were mandated to disclose credit scores to all applicants.
9. A lot more people are pulling your credit than you realize.
There are a whole host of companies and services that are legally authorized to check your credit score when you apply or sign up with them, including some cable TV, Internet, cell phone, furniture financing, payday loans, retail store cards, and even household utility companies! So don’t be surprised if you see these inquiries on your credit report – or your score drops if you don’t pay on time and stay in their good graces.
10. A lot of people have no credit score!
You aren’t born with a credit score, and one isn’t automatically assigned to you as you get older. If you don’t have a valid social security number, don’t have a credit card or other debt, you’re probably “Credit Invisible,” a term that applies to about 35 million American adults.
Stay tuned for part two of those blog, with ten more little-known facts about credit!