You Better Pay Attention to the Man Behind the Curtain…………

Mornin’,
Lots of people here - must be the morning chill that just doesn’t want to go away very fast. Coffee is fresh ‘cause we are going through it pretty good. Anyway, pull up your chair on this end of the table – they’re talking government bailouts at the other end and even the Norwegians are starting to get worked up, so steer clear of that.

Remember at the end of the Wizard of Oz when Dorothy and friends start to figure everything out and she is told to “pay no attention to The Man Behind the Curtain”?

That’s what I think of every time I’m asked to explain credit scores. For those of you who are unfamiliar, credit scores are ratings (it’s a number, the higher the better, up to 850) provided by the three major credit bureaus and they are used for many things, from loan and insurance underwriting to apartment rental applications. Incidentally, the three credit bureaus use the same company to calculate the score so, if the credit information on file is the same, the credit score will be the same no matter which credit bureau is used.

The problem isn’t that these scores are being used (they are really accurate) rather it’s the fact that they are next to impossible to explain. It kind of feels like The Man Behind the Curtain is pulling his magic strings and out pops a number. Because of that, it is easy (too easy) for people to say “I don’t get it so I am not worrying about it”. Well, you better pay attention to this number because it will affect many different parts of your life. The most direct way is that you may be denied credit or pay a higher interest rate because of your score. While NSFCU does not have different rates for members based on their credit scores, many places do and the mortgage market is now utilizing these scores in a big way after the mortgage / housing mess. It can also effect whether you are approved for insurance, how much it will cost, etc. The list goes on and on.

What to do - here’s the explaining part again. There are literally hundreds of factors that go into the score and they all interrelate in different ways. Some of it is very easy to understand: pay your bills on time, don’t have too much debt, etc. Others can be confusing like sometimes closing an account raises your score and sometimes it lowers it. Because of the complexity of the process it makes sense to go right to the source. Here’s how you can pull the curtain back – check out this brochure and get all the details:

http://www.myfico.com/Downloads/Files/myFICO_UYFS_Booklet.pdf

The most important thing to remember: know your score and protect it. You don’t want that return trip to Kansas cancelled because your credit card isn’t approved.

Mark