As a loan underwriter, I’ve seen the following:
596 credit score – someone with no debt and over $8 million in cash
496 credit score – someone with MINIMAL debt, net worth over $5 million
717 credit score – someone with literally nothing on their credit report
817 credit score – filed bankruptcy within 6 months
This is the foundation for my argument that credit scores are useless.
But don’t take my word for it. Here is what the Consumer Financial Protection Bureau (CFPB) says: “consumers should not rely on credit scores” as a way of getting inside the minds of lenders.
The CFPB found that consumer and lender credit scores are often significantly different. In 20% to 32% of the cases they examined, reporting data was scored differently depending on the end product. In fact, the differences were so great that in some cases “the scores were one or more credit-quality categories removed from each other.”
Here is a true story from another blogger:
“It dropped below 800 soon after I paid off all my cards and started closing accounts,” he marveled in the post, which used an off-color synonym for cow dung to describe the validity of credit scores.
Continuing on, he wrote, “I had the highest credit score at a time in my life when I was leveraged to the hilt and I lived paycheck to paycheck. Now that I have my own business, a healthy retirement, and can pay for everything I need/want, I have a low score and I’m dubbed a higher risk even though my ability to pay is very high.”
In summary, if you want to know what to do if your lender turns you down because of a bad credit score. You need to sign-up for my email list in the right column.