FICO Facts
I’ve written before about how credit scores are crap and how the American fixation on credit scores is a symptom of our infatuation with credit based purchases and our proclivity to buy that which we can’t afford and to “need” something we want immediately. However, I recently learned something even more telling about the disgusting American credit craze. I learned what the FICO score (the fabled “credit score”) is actually comprised of. 35% of the score is based on your payment history, or the timeliness of your active debt ”reduction” such as mortgage, car and credit card payments. 30% of the score is based on the actual amount of debt you possess. 15% of the score is based on how far back your credit history goes, or rather how far back you’ve possessed debt. 10% of the score is based on what kind of debt you have and the final 10% is based on how many recent new credit accounts you have established. What does this all mean? It means to have a GREAT credit score, you need to have a lot of different kinds of debt. If you have no credit card debt, a paid off mortgage, no car payments and a million dollars liquid in savings you’ll have a TERRIBLE credit score. Also, if you don’t interact with debt for 2 years your credit score goes to zero. What kind of ridiculous system is that? Oh that’s right, it’s an American system.
The photo today is one of my favorite shots from our recent trip to the Bahamas. It’s of a signpost outside the restaurant Cracker P’s which shows how far you are from a bunch of different cities around the world.
