When Credit Scores Are Dumb

I recently went through a process that required my credit score to be checked. When I received it, I had to laugh out loud.

My credit score was extremely high, but there were reasons it wasn’t “perfect.” These reasons were listed on the document, and they furthered my belief that credit scores are a pretty dumb way to measure “financial healthiness.”

Here are some of the reasons my credit score wasn’t absolutely a perfect score:

  1. Lack of recent installment loans (I paid my house off in January!)
  2. Lack of long-term credit relationships(I paid off all my non-house debt in February 2004)
  3. Lack of credit accounts (Duh!)

Think about this for one minute. Most insurance companies establish premium rates based in large part on credit scores. Many employers check credit scores of potential employees.

Here’s what you must know: Your Credit Score would be more aptly named if it were called a “Debt Management Score.”

Your credit score has NOTHING to do with:

  1. The amount of money you have in a bank account
  2. The amount of money you have invested – for college, retirement, or dreams
  3. Other assets you own
  4. Your overall net worth

When people modify their behavior to keep paying debt payments “just to keep their credit scores high” – THAT is financially dumb behavior.

Your thoughts?


  1. Sean on May 30, 2013 at 6:08 pm

    I agree with your post but it leaves me with a question. For the people who don’t own a home and would like to. How do you bring your credit score up while living without installment debt? Especially those that have had past credit issues. Most of us can’t purchase a home in cash and will need a mortgage.

  2. Mark on May 31, 2013 at 9:42 am

    Sean – pay all your bills on time and give your credit score time to recover. Been there brother – there is hope. Shop for a mortgage at multiple places also. I’m amazed at some of the deals I see being offered to people I wouldn’t have imagined could afford it.

    But then again they might be some of the people living to maintain a credit score so by that measure they look “healthy”. My take on this post, Joe, is this is a good illustration of WHY our culture has become so consumerism driven. Keep people chasing a credit score by making it a measure of financial status, and the only way to keep the score is to keep buying stuff with credit. It’s brilliant if you’re a big money fat cat or politician (often one in the same)

  3. Bryan Collins on May 31, 2013 at 10:11 am

    Last year when we purchased our home in Columbia SC, I found out my “mortgage credit score” was zero. For lack of installment loans, credit cards, and no mortgage. Things that went against me were paying off a vehicle loan 2.5 years early, no revolving debt, and not having a mortgage loan for over 6 months. Wellsfargo would not take into consideration that my total assets were well above the loan amount. To solve my problem I had to take out a Lowe’s credit card, charge a $32 trash can and wait 30 days for Lowe’s to report to the credit bureau.
    I will always keep the trash can as a reminder of how stupid our financial systems have gotten in America.

  4. Mark Asbell on May 31, 2013 at 4:46 pm

    Wow – great story Bryan. Thanks for sharing that. I’ll probably tell that story again and again when I get questions about credit. So did the $32 trash can credit purchase make your score shoot back up to where you could get the loan?

  5. Bryan Collins on May 31, 2013 at 5:38 pm

    Yes, once Lowe’s posted to the credit bureau. It took about 3-4 weeks which held us getting the loan for the house that long. I was told that the “mortgage credit score” is calculated from your FICO score X revolving debt X whatever they make up along the way. I was also told that that a credit score is different from a mortgage credit score. Like I said….I do believe things are made up along the way (especially now that banks and mortgage brokers are outlined via gov rules & regulations). Crazy!

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