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I’m Confused About Credit Scores. – Barbara

“Dear Steve,

Age 62, single never married no dependents. Like many leading edge Boomers, I am dealing with trying to maintain a modest lifestyle based on a modest income that has severely declined due to unemployment / underemployment intersecting with approaching retirement age.

Similar to the southern plantation owners in “Gone With the Wind”, my former lifestyle based on being a full-time wage earner with full benefits is . . . Gone With the Wind.

I plan to submit another more detailed question in the near future; right now I am curious about the usefulness of credit scores.

Steve, thank you for the straight shooting information and help you provide to those struggling with financial issues, and thank you for reading my question.

Please provide general information about credit scores (not credit reports):

1) What are they?

2) How do they differ from credit reports?

3) Who provides them?

4) Of the multiple organizations that provide them, which one is the most valuable / meaningful to a consumer seeking to manage his/her credit? Or, like credit reports, is it helpful to purchase multiple credit scores?

5) What is a fair price to pay only for a credit score? (I have already received my 3 free credit reports from www.annualcreditreports.com and just need the score)

6) Due to massive changes during the last 2+ in the economy and financial / credit industries, in your opinion, has the meaningfulness of credit scores as a credit management tool for consumers changed, and if so, how?

Gosh, this all sounds like a college blue book test, doesn’t it?

I have searched your website for this info but was only able to find how to raise a low credit score.

I have read the credit score article on Wikipedia, which is helpful to a point.

What I’m seeking is your particularly unique insight into how helpful credit scores really are as a tool for consumers to use in today’s economy.

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Barbara”

Dear Barbara,

Let me tackle your numbered questions first.

1. See Credit Scoring: How it Works and How You Can Improve Your Score and Inside Information on Credit Reports and Credit Scores.

2. A credit score is a number that is calculated using a secret formula that is designed to help creditors instantly identify consumers that would generate them the most profit at the least risk. Most people think a credit score is a calculation of how great you manage your money. It’s actually not.

3. The grandfather of credit scores is Fair, Isaac & Company. This is typically know as the FICO score. You can order your FICO score through MyFico.com. However, any credit bureau can create their own score formula. There is no national standard on this but FICO is probably the one most commonly used.

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

4. See above about MyFico. You can also get a free credit score through CreditKarma.com. While the credit score through CreditKarma.com is not a FICO score, it is a TransUnion credit score and can at least get you in the ballpark for free. Your scores from all three credit bureaus will typically be +/-30 from the middle score.

5. Around $16 for one score.

6. I think it is a meaningless number in the face of financial problems. The goal should not be to fix the score but fix the underlying problem. If doing that drops the score, it can always be easy rebuilt with some effort and time.

If you want to learn tons of information about credit scores, click here. I never realized how much stuff I’ve actually written about credit scores. Wow!

Thanks for the compliment. You rock!

Please update me on your progress by

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