FICO score folly
Took advantage recently of Wells Fargo’s latest promotion and checked my Experian credit score for free. The service, offered through Nov. 15 to the bank’s customers, is part of Wells Fargo’s push to help educate and strengthen relationships with customers.
Like most, I check my credit reports once a year through annualcreditreport.com. I do not ante up the $12 every year to check the FICO score, however. The credit report tells me what I really want to know – if somebody has stolen my identity and opened up accounts in my name and if one of my creditors has made an error in my account.
Still, the score is that mystery item behind door No. 2, so when offered a free peek, I figured why not take advantage. Promise of advice on how to boost the score also enticed, particularly since my credit is clean and I carry no debt beyond my mortgage. I’d been told those factors can actually work against your score, and I wanted to see for myself.
What I’d heard was true enough.
The score was solid yet not as high as I would have thought for somebody who uses credit cards regularly and always pays his bills on time. And in the “key factors” that could lower my credit score was the following.
- Mortgage balance is too high: Never mind that we just bought the house less than two years ago, have it on a 15-year term and actually pay extra toward the principal every month.
- Low credit limits on credit cards: Never mind that the reason the limit is low is because we repay in full every month, so the lenders have never raised the limit.
- Oldest open account is too recent: Never mind that I closed some old credit cards because I didn’t want to pay the annual fees implemented last year.
- Lack an auto loan: Shame on me for paying for my cars in cash.
- Too many inquiries on your credit report: Shame on me for buying a home and setting up utilities, switching insurance companies and my wireless reporter.
Bottom line, the FICO score is a joke. It actually rewards those who embrace debt rather than those who work hard to minimize it. I would hate to think that if I were a lender I would look past a clean credit report of an obviously responsible person and focus on the score.
A Wells Fargo spokesman, Jay Lawrence, acknowledged the bank takes a bigger picture look in making lending decisions.
"You can rest assured that we look at more than the score, such as your history with us, your income and any collateral," Lawrence said. "The score is important, though."
Anyway, if you’re interested in seeing your score for free and are a Wells Fargo customer, go into your branch and get an access code. And share your thoughts on credit scores in the comments section below.