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Customer Review

93 of 105 people found the following review helpful
5.0 out of 5 stars Just about everything you need to know, April 23, 2005
This review is from: Your Credit Score: How to Fix, Improve, and Protect the 3-Digit Number that Controls Your Financial Future (Paperback)
L.A. Times and MSN Money columnist Liz Pulliam Weston knows money and she knows credit, and in this information-packed, no-nonsense book she gives you just about everything you need to know about that "open sesame," that shibboleth of numbers, that Holy Grail of liquidity--your credit score!

First, what is your credit score and why is it important? It's a three digit number ranging from 150 to 950 (p. 16) that creditors use to determine whether you are a good risk. If it is low, they won't lend you any money, meaning you can't buy a car or a boat or a house unless you pay cash; and if it is somewhere in the middle, you'll pay higher interest rates than those with a higher score.

Second, how can you find out what your score is? As Weston explains there are three major credit bureaus, Equifax, Experian, and TransUnion that calculate "real" credit scores (either FICO or NextGen). You can contact them over the Net or by phone (Weston gives addresses and phone numbers), but here's the rub:

"Congress recently did give US residents the right to get free copies of their credit REPORTS annually from each of the three bureaus. But that doesn't include the right to free SCORES; the bureaus can and will continue to charge for those." (p. 25, my emphasis) The point here is that you can get your credit report for free, but they won't tell you the score!

So I checked out some Web sites and found out that they wanted me to sign up for their credit monitoring services after which I would get my score, or I could get the score by itself for a flat fee. Since I found out my score a couple of years ago when I refinanced my house, I declined the offer. One thing I didn't like was having to give out my Social Security number to get the score. As Weston advises, under the heading of "Get Stingy with Your Social Security Number" (p. 108), you should "...keep your number to yourself. If the business insists that it needs the number, you can either do business with someone else or 'misremember' a digit or nine to protect your privacy." Hmm. Never thought of that.

However the credit bureaus mentioned above are presumably safe, and at any rate for most people there is no other way to get your score. (And of course, "misremembering" won't work in this case.)

Third, what information goes into making up your score and how can you improve it? And finally how can you repair damage done to your credit and lift your score high enough to get credit and good interest rates?

Weston goes into detail answering these questions. She relies on the experience of people who have been there and done that, and upon her personal experience as well as information culled from the many letters and emails she gets from readers. She makes "what makes for" good credit scores crystal clear.

By the by, it is interesting to note, as Weston does in Chapter 9, "Insurance and Your Credit Score," that bad credit can affect what you pay for insurance as well as what you pay for credit. She writes, "Insurers...believe credit is an excellent predictor of whether you'll file a claim--better, in fact, than almost any other factor, including your previous driving history." (p. 130) So what we have are credit-based insurance scores for all kinds of insurance, auto, home, health, etc. What insurers have discovered is that there is a strong correlation between low credit scores and high risk (for them). Although correlation is not causality, and does not in a scientific sense constitute proof, the insurance companies will tell you that they make money from those with high credit scores and lose money (through claims) from those with low credit scores. Weston even has some stats on pages 132-133 attesting to this fact.

Why the correlation? I think most people would say (and Weston makes this most reasonable surmise) that people who are careless with their money are likely to be careless in other aspects of their lives as well.

One more thing: you can get a fair idea of how credit worthy the credit people think you are by the amount of junk mail you receive offering to lend you money! I have a pretty good score and I must get fifty to a hundred offers a year. And of course I have no need to borrow; but isn't it always the case: those who least need credit are the ones who can most easily get it, and those who need it the most are the ones least likely to get it! Life is an eternal Catch-22.

By the way, another annoying Catch-22 of the corporate world is revealed by Weston as she quotes "Glen" whose insurance costs increased because his wife max'ed out her GAP card. He calls a number and is told that his credit is scored "according to how the insurance company wants" it to be scored. He is then told that the insurance company "can't discuss the criteria [because] it's proprietary"! Ah, yes, the old proprietary dodge.

Anyway, in this age of identify theft and other kinds of information fraud, this book belongs on the syllabus for Personal Finance 101, an ongoing, real-world, absolutely required course for all of us living in the postmodern age.
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