Score dating game
But those three-digit numbers you get every month aren’t necessarily the ones lenders use.
In reality, you have dozens of scores, some based on previous versions of FICO scoring models and others developed by the three big credit bureaus.
While the overall level of household debt has returned to its pre-recession peak, it remains low when compared with income, says Mark Zandi, chief economist at Moody’s Analytics.
Debt service—principal and interest payments as a percent of income—is at an all-time low, helped by mortgage refinancing over the past decade.
In our society, it’s a three-digit number that can open or shut doors.
Not surprisingly, many hyper-competitive consumers obsess over it.
While late credit card and mortgage payments are also starting to tick up, Zandi believes those measures “are simply returning to historical norms.” Looser underwriting and hard-hit consumers in energy patches like Texas and the Dakotas are driving some of that.
But there’s a third possible explanation: The weakening predictive power of credit scores as consumers learn how to game the system.“The scoring models may not be telling us the same thing that they have historically, because people are so focused on their scores and working hard to get them up,” Zandi says.
A big reason for this is that American consumer finances are generally in good shape.It took Stan Kelman three years of monitoring and tinkering to muscle his wife’s credit score to a perfect 850.“It’s a personal achievement,” says the 44-year-old business analyst and data scientist.Trying to get multiple cards in a fairly short period is interpreted as a sign of potential financial trouble, but if you’re looking for a big-ticket item like a mortgage, scoring algorithms will assume you’re only trying to buy one house when several lenders check you out.So let’s say you’re a good consumer, you’ve never paid late, never did anything credit rating agencies might consider naughty. Getting to the big leagues, let alone the magic 850, usually requires a little more effort.