Quite often, I get an email or text from someone asking me to validate some information that has come out from a news story or on the internet. It is quite rare to find a story or article on the internet that is accurate. There is usually something that is inaccurate just because a blanket statement is put out without a full understanding of what the FICo score is looking at.
It is easy to look all over the internet and we see many suggestions on how to improve your credit scores. Some of these "so-called” credit experts give some incorrect and even outright bad advice. I reach out to major news outlets when they have incorrect information. Sometimes they correct it and I give credit to those organizations who make efforts to correct the information. Other times they do not and that is disappointing.
The bad information is centered on one of four common problems.
1. Limited Access by Many Reporters, Educators, and even Lenders to the Classic FICO® Credit Scores.
2. Guidance from a Non-FICO Credit Score Model such as VantageScore that can run opposite to the FICO Scores.
3. Failure to Understand the Entire Credit System from Lenders , Credit Bureaus, Credit Files, and Credit Scoring.
4. Failure to Identify ALL and Understand the FICO Score Factors.
I felt like I would put some of these together to show some of the bad advice being given.
From The Budget Mom –
She has put out several videos about credit scores. Most of the information is generic, and some of it is outright incorrect. Here is an example of a few of them.
“You have your Amounts Owed which is 30% of your credit score and this measures how much debt you are carrying in relation to the credit limit you have been given.”
“The goal is not to use more than 30% of your credit limit.”
These comments are incorrect. 30% -- and even 25% -- will drop your FICO credit scores.
From Ask Sebby -
Ask Sebby says that the percentage of on-time payments versus total payments goes into your credit score.
This is not true. FICO has four distinct levels of delinquency. When a person reaches that level of delinquency, the credit score drops further. He continues to say that credit utilization is a credit card thing. He continues to state that credit utilization is not impacted from student or auto loans, or mortgages. This is bad advice. How far we pay down debt on loans is a big factor in a FICO credit score.
From Sherry Beckley
“30% of your credit score is credit utilization.”
This statement is not true. There are more factors in Amount Owed of a FICO credit score. What about open accounts, accounts with a balance, bank credit cards, or amount owed on lines of credit.
From FOX 9 Minneapolis
They bring in Axel Hutchins to talk about credit scores. “Making sure you are underneath 30% of your credit utilization is extremely important so that you don’t go over 30% utilization.”
Again, this is not true.
On inquiries, “Each time someone checks your credit you lose 10 points.” This is not true. A hard inquiry can drop a credit score anywhere from a couple of points to upwards of seven points. It depends on several factors that is in another blog.
From Fox 32 in Chicago
“Paying Off Your Credit Cards Every Week will Boost Your Credit Scores.” He says that this is incorrect. Actually, this can be true.
From Fox 35 in Orlando with Sara Rathner
“A good credit score is anything above 650.”
It should be anything really above 760. You may get something at 650, but that consumer will pay a lot more.
Another media outlet is CNBC Select and their Expert Financial Advice. I have reached out to them many times when incorrect information about credit and credit scores have been written in several of their articles on their website. Never once have they researched it to make sure the information in their article is correct. It is quite evident they have lacked the research necessary to offer correct guidance. They rely on unreliable experts.
I don’t know where these people come up with this other than regurgitating information found on the internet. If a so-called credit expert cannot name all 35 factors that go into a FICO® credit score, their knowledge is shallow and their advice will usually be incorrect because they do not understand how each factor interacts with the FICO credit score.
Consumers need correct information. Consumers get frustrated when they read contradicting information or when they follow incorrect suggestions and discover months later that the suggestions are inaccurate. If someone hasn’t researched it and validated it, they should not be saying anything.
On this Blog, I put the information what I know from my research to be correct. I have researched the FICO Credit Score for 21 years and written two books. Those books are being used at the university level for education purposes. I teach at several universities every year and have also instructed hundreds of professors across the country who teach personal finance.
My first point of instruction to them -- teach correct principles. If you do not know it for sure, please reach out and let's find the answer.