Perfect Credit

[Anonymous]

Over the years, I've heard friends, family, coworkers, et al. brag about their perfect credit even though they probably couldn't find their credit report without assistance. Piecing together details overheard, I've often realized they might not even have great credit.

I've also found that people who believe they have awful credit, once they check, frequently they have better credit than imagined.

A few years back, it was reported that billionaire Warren Buffett had a FICO score of 718--actually slightly below the national median score of 723.

Perfect credit is something of a chimera: you'll exhaust energy pursing it, likely never find it, and even if you did you might wish you hadn't found it.

Imagine for the moment you have a $1,000 CL on your store CC (Lowe's, Home Depot or Sears), and a major home appliance conks out. You head out to the store, discover they're offering 12 months no interest no payments, and the new appliance is $600. Well, that's a no brainer. Of course you take that deal.

But wait. What's this? Now your CC is at 60% util. Oy dios mio! The end is nigh. Not really. If you aren't planning a major purchase anytime soon, take the no interest, no payments deal and PIF with monthly payments of $55 and you PIF after 11 months. Or take a piece of your IRS refund that you're expecting next January. Or whatever. But whatever you do, don't waste your time morbidly tracking your falling FICOs. Once the CC is PIF, your FICOs will be back where they were, you will have been enjoying a brand new appliance before you're paid for it, and you won't have paid a dime in interest.

If I were that one lunatic with an 850 FICO score--and whoever they are you just know they're a lunatic--I'd trade with Warren Buffett to have his billions in a heartbeat. Heck, I'd say most in the 750 club would accept a 650 FICO score for just a couple of millions.

[smallfry]

If you live long enough 820-830 is easy. 850 would be too if they released the algorithm. I think the hook is the unpaid mortgage no one really wants.

[marty56]

IMHO I think score buckets prevent people from having a perfect score. 

[RobertEG]

The issue is not about perfect credit, or even credit worthiness.

FICO is not, and never has been, a measure of credit worthiness.

It is a measure simply of risk in repayment of debt.

FICO does not record income or assets.  It looks at what you owe on certain debts only, how timely you pay what you owe.

Joe Plumber, who has always paid on time, and yet makes only $24K a year, can easily surpass the FICO score of millionaire Warren Buffet, if the Buffet regularly misses payments.

Sure, Joe Plumber may have a much harder time of securing even minor credit than Warren Buffet, but that is not a FICO issue. 

[MattH]

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@RobertEG wrote:

The issue is not about perfect credit, or even credit worthiness.

FICO is not, and never has been, a measure of credit worthiness.

It is a measure simply of risk in repayment of debt.

FICO does not record income or assets.  It looks at what you owe on certain debts only, how timely you pay what you owe.

Joe Plumber, who has always paid on time, and yet makes only $24K a year, can easily surpass the FICO score of millionaire Warren Buffet, if the Buffet regularly misses payments.

Sure, Joe Plumber may have a much harder time of securing even minor credit than Warren Buffet, but that is not a FICO issue. 

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Buffet is not a millionaire, he is a billionaire, but for somebody so rich he is famously frugal (for instance he's lived in the same nice-but-not-ostentatious Omaha house for about fifty years).  When he got a private jet, he named it The Indefensible out of embarrassment!  I'm sure he has always paid his bills.  If his FICO score isn't especially high, that's probably because his balances look high or something: balances that are pocket change to him would be pretty big for most of us.  The FICO scoring model is based on statistics, which works fine for people like you and me because there are millions of people with financial situations very similar to yours and mine.  But only two other people have more wealth than Buffet, so there just aren't enough folks with comparable finances for statistical analyses.  Therefore the FICO model would have limited validity at his level.

[Anonymous]

I was just posting about this in another thread...

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The issue is not about perfect credit, or even credit worthiness.

FICO is not, and never has been, a measure of credit worthiness.

It is a measure simply of risk in repayment of debt.

---

Then why are debts that have been established less than a month more than enough to drop a credit score thirty points? If that's the case shouldn't payment history be THE primary factor in determining a credit score? High account utilization shouldn't mean anything unless a balance is carried for a considerable amount of time. That would establish a history of inability to pay. I know, I've been there. High balances, no money to pay down. I get money, I pay everything off, score goes up... so why does it go down thirty points in a month whenever I accidentally let a balance show on a statement before paying it off? If it's about ability to pay debt back... I just paid down three grand in debt over the course of two months. I had a 100 point jump in score from October last year to January this year. Yet somehow I've lost nearly half my ability to pay in their eyes? 

Why does a $400 balance on a $750 limit look worse than a $1000 balance on a $4000 limit? It's a much smaller amount of money, probably more easily paid off. 

The more I play this game the more I realize how stacked the deck is. The unfortunate part is that it's not stacked in anyones favor. It screws everyone equally. I lose thirty points, lenders end up giving money to people that enjoy a short-term increase in score for whatever reason but have no real ability to pay... it's no-win for things to be considered on such a short time scale.

[smallfry]

It's not a stacked deck and FICO has given everyone enough parameters to at least reach High Achiever status if they will only do 2 things. I've done my share of complaining but FICO really is fair if you know how to play the game. You don't need $100,000's in credit to do it either. I started at nearly 0 ten years ago when I lost 25 years of perfect credit. Even with a relatively low AAofA my scores are all in HA status.

Never ever pay anything late. Do not apply willy nilly for lines of credit that you have no real use for. If you think dozens of credit cards will get you through many months of no employment you will find in the majority of cases that the lenders have shut you down.

Get 3-5 credit cards use sparingly pay on time and you will your scores approach 800 in a short period of time.

[Anonymous]

Like I said, last month I was nine points from "high achiever" status and I got there by paying all my stuff off. Since that time I took a minor hit for opening a couple of new cards (all of my older cards are worthless, to be honest), which I fully expected. What I DIDN'T expect was for one card being at ~50% util to drop my score by thirty points. 

I guess it doesn't really matter. I don't forsee my Discover card purchase messing up my score, and I don't plan on using my Chase card for anything ever again except whenever I can't use my Discover or Amex. Just seeing how much of a jump you can take for something so minor is ridiculous.

[MattH]

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@Anonymous wrote:

I was just posting about this in another thread...

---

The issue is not about perfect credit, or even credit worthiness.

FICO is not, and never has been, a measure of credit worthiness.

It is a measure simply of risk in repayment of debt.

---

Then why are debts that have been established less than a month more than enough to drop a credit score thirty points? If that's the case shouldn't payment history be THE primary factor in determining a credit score? High account utilization shouldn't mean anything unless a balance is carried for a considerable amount of time. That would establish a history of inability to pay. I know, I've been there. High balances, no money to pay down. I get money, I pay everything off, score goes up... so why does it go down thirty points in a month whenever I accidentally let a balance show on a statement before paying it off? If it's about ability to pay debt back... I just paid down three grand in debt over the course of two months. I had a 100 point jump in score from October last year to January this year. Yet somehow I've lost nearly half my ability to pay in their eyes? 

Why does a $400 balance on a $750 limit look worse than a $1000 balance on a $4000 limit? It's a much smaller amount of money, probably more easily paid off. 

The more I play this game the more I realize how stacked the deck is. The unfortunate part is that it's not stacked in anyones favor. It screws everyone equally. I lose thirty points, lenders end up giving money to people that enjoy a short-term increase in score for whatever reason but have no real ability to pay... it's no-win for things to be considered on such a short time scale.

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Such complaints are nearly always blaming the messenger, and betray a deep misunderstanding of how data mining works.  I have never worked in the financial world, but regularly use very similar statistical algorithms in my work as a pharmaceutical researcher.  Things that lower one's FICO score do so because the empirical data show those factors have a positive correlation with the probability of a person defaulting in the near future.  Things that raise one's FICO score do so because the empirical data show those factors have a negative correlation with the probability of a person defaulting in the near future.  FICOs primary customers are lenders who want to maximize their risk-adjusted return on investment by accurately rank-ordering customers and prospective customers by default risk.  If some other scoring model were demonstrated to have substantially better predictive value than FICO scoring, then some big lender could gain a huge competitive advantage by switching to that model; FICO knows this and therefore has a strong incentive to do everything in their power to make their models as accurate as possible.  The only exceptions to the rule that factors affect FICO scores based on nothing more or less than statistical correlations are certain factors which lenders may not consider due to specific anti-discrimination laws.

[Anonymous]

Scoring models serve the consumer and their consumers are lending institutions. The more subprimes a scoring model can deliver, the more the consumer likes the product.