9 Credit Score Myths, Debunked

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The consumer credit rating system is based on a FICO score that is intransparent to the consumer, often erroneous, and very difficult to correct. If you think abou this, why do we allow such a tyrranical system to exist?? What real purpose does it serve? Who does it really serve?
The recent real estate bubble proves that credit scores have been very poor predictors of future behavior. The consumer credit scoring system thus appears to be more of a punishment for those who may face default, than anything else. The problem is that there is no differentiation between poor financial habits and simply being left to the winds of an economic downturn, in which the consumer is blameless.
It would be one thing if FICO were an optional system, but consumers are dependent on the score for prices of all kinds of financial services: health insurance, property insurance, car loans, apartment leases, etc. And, there is a collective punishment by creditors, not based on their direct payment history, but based on what other creditors are reporting.
It is also noteworthy that the banks themselves, if judged as consumers are judged, based on their past performance, would very often be out of business for the way they loaned (i.e., spent) money. But the banks can turn to the Fed for free money. So the FICO system does not prevent losses by creditors, and only serves to punish consumers, irrespective if they have been irresponsible or not. How can this be legal?

InquiringMind of OH 6:08PM June 09, 2010

The credit bureaus don't sell scores along with the reports they sell for employment screening. Scores and reports are two separate things and there has never been a verifiable example of a SCORE being used by an employer. If any of you have a real example of a SCORE being used for employment screening please let me know. TC of NV, I'd love to talk to you about your comment "I can tell you for a fact that where I work we do use them."
Now, credit REPORTS, yes they can be used. But not scores.
Also, CreditKarma doesn't provide your actual FICO score. They give you your TransRisk score. Ever heard of it?

John Ulzheimer of GA 9:38AM June 09, 2010

Actually, you can get your credit score for free: http://www.creditkarma.com
This is not an advertisement, just passing along a service to those interested

js of CA 1:24AM June 09, 2010

If an employer offers this as part of the benefits package, employees should take it.
This can cover up to 60% of your income if you're out for a week or more.
That way, income will still be coming in to pay the bills while you're recovering from whatever kept you out ill for a bit.
Don't pass that up if ever offered the chance to take Short Term Disability coverage (it can be very inexpensive in terms of premiums, but a financial lifesaver if out of work due to illness or injury).
And that, of course, can help keep decent credit scores in place.

DecentFICO of IL 10:11PM June 08, 2010

It's a myth that credit scores are used by "all" employers. They are used by some. I can tell you for a fact that where I work we do use them. Usually depends on the place. Financial Institutions, you can be guaranteed they'll look at them.

TC of NV 2:13PM June 08, 2010

credit scores are used by employers.

mike of MA 11:57AM June 08, 2010

Hi Kimberly
I am in the US on a work visa and have a good credit score. If I were to return to my country of residence for a couple of years would this affect my credit score.
So say I came back to the US after a couple of years would my credit score change. If yes, is there a way to avoid it. Please let me know

Sandeep of CT 11:49AM June 08, 2010