A ‘perfect’ credit score is a myth
NEW YORK – Feb. 6, 2019 – Question: I'm currently purchasing a house and I noticed on my credit report that my score is 807. One of the items hurting it is length my accounts have been open.
I have Lowe's, Home Depot and Discover cards all with zero balances. Should I close them? If so, all at once or filter them over the course of time? I've always liked having them for just in case, but I don't use them very often if at all. Thoughts? – Todd
Answer: You've been bamboozled. Tricked. Hoodwinked. We all have. Collectively, we've decided we're going to let an otherwise meaningless score mean a lot to us. And in the process, we've made decisions that make no sense whatsoever, and in turn damaged the meaningful signs of financial stability.
Todd, this isn't necessarily your fault, but if you let me, I'd like to save you from caring about your credit score any more than you have to.
You have an 807. That's enough. It's fine. Stop. Despite popular belief, the goal isn't to have a perfect score. I hear that all the time. "I have perfect credit," someone will lob at me in an attempt to elicit some sort of figurative cookie. But it takes every ounce of restraint not to scream back "Who cares?! It doesn't matter!"
Your credit score is no longer a measure of your financial health. More than anything, it's used to gamify your involvement in the selling of your data. The credit bureaus, or data bureaus as I prefer to call them, sell what they call your "decision analytics" to companies who want to sell you things and want to know exactly how you think and act.
Because every time you swipe a card, dozens of data points are captured about your transactions. Those data points, when aggregated over time with your other purchase data points, write your financial memoir.
"We don't eat much junk food," you assert. Well, that's not what your purchase of an economy box of Ding Dongs every other Thursday at 8:57 a.m. at the grocery store on 95th Street says. I'm not kidding.
The decision analytics data know more about you than you know about yourself. It's very powerful and valuable information, which is sold over and over and over again. You can't escape your own decisions, because your decisions are used against you to provoke more suboptimal decisions.
This isn't science fiction. This is real.
If you ever find yourself sleeping too well, and you'd like to terrify yourself with the ins and outs of decisions analytics – and more specifically data crimes – read Marc Goodman's "Future Crimes: Inside the Digital Underground and the Battle for Our Connected World."
So, to answer your question, once you close on your new home, close the credit lines you don't need. And yes, your credit score will temporarily suffer. Your credit score easily qualifies you for great interest rates, and you have plenty of room to spare. Plus, I'm guessing you won't be buying another home anytime soon.
Simply put, sometimes we're encouraged to make poor decisions in order to improve our credit scores. You can't take the bait.
Not too long ago when I was refinancing my mortgage, the lender told me to improve my score, which was somewhere in the high 700s, by diversifying my credit. "Diversify my credit?" I replied with a scrunched face.
I was told my purposeful decision to maintain only three credit lines, which included two mortgages on two different properties, wasn't good enough. Did it affect my rate? No, of course not.
But the bank wanted me to know I was making a poor decision by not borrowing more money, and my "poor" credit score was the result. They encouraged me to consider taking out a home equity line, a car loan or any other different type of loan that could display my ability to handle different types of credit. Hard pass.
You don't have an actual problem, Todd. You've just been convinced that it's a problem. This medium shirt doesn't fit because my biceps are too big. See? That's not an actual problem.
And by the way, that was merely an example. Sadly, my arms have plenty of room in my shirt, but at least I don't care about my credit score.
Peter Dunn is an author, speaker and radio host, and he has a free podcast: Million Dollar Plan.
Copyright 2019, USATODAY.com, USA TODAY, Peter Dunn – "Pete the Planner"
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