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FICO Is an 'F' Word

by Don Current on August 13, 2010

Credit Repair Scam

Photo courtesy Thetruthabout

You’ll get a lot of advice these days on how to improve your FICO score. There are even companies out there that are happy to take your hard earned money in order to improve your FICO score. In my opinion however, it’s a huge waste of your time and money to focus on that. The biggest reason to have a good FICO score is to help yourself go further into debt. That doesn’t sound like a great idea to me.

First I’ll address the companies that claim to help you improve your FICO score. THEY’RE A SCAM!!!!! Was that clear enough for you? There is absolutely nothing they can legally do that you can’t do yourself. Do not throw your money away by giving them a single dime.

One of the reasons people claim the FICO system is a benefit is that it helps you get faster decisions on credit. This is supposed to be a benefit to you? I don’t think so. The one it benefits is the lender not the consumer. A fast credit decision gives you less time to think about your purchase and therefore benefits the high pressure sales tactic. Let’s say you went in to buy a new car and were told you needed to come back tomorrow after they’ve had a chance to review your credit. Don’t you think it would lower their conversion rate on sales? Score one for the sellers and lenders, not the consumer.

How about this one. You can improve your FICO score by having a low balance versus your total available credit (credit utilization). Doesn’t this encourage you to have more credit cards and lines of credit? Of course, if you have more available credit, there’s a good chance you’re going to make use of that. Score one for the sellers and lenders again!

Now, many of the things they recommend to help you improve your FICO score are actually good things. They’ll tell you to review your Credit Report to check for errors. Good thing. They’ll tell you to pay your bills on time. Good thing. They’ll tell you to reduce your balances and limit your credit applications. Good things.

Most of the things that will help you improve your credit score are actually good ideas, but I just don’t think the score itself is worthwhile. If you absolutely need credit for a mortgage let’s say, then work with a lender you have a long history with and request a manual underwriting. They’ll do things the old fashioned way and actually verify your history for themselves. No, it won’t be fast, but that’s a good thing.

In the future, if you hear someone use the ‘F’ word around you, tell them where they can go.