Have you heard about the newest gadget you can buy for your car? You hook it up to your car and then as you drive it will give you a very rough estimate of how fast you are going. Plus it will give you a vague estimate of what the speed limit might be in the area you are traveling! This service has a monthly subscription fee of only $14.95 per month! The service I just described doesn’t exist and I made up the scenario just to prove a point. We as consumers can easily see the flaws in a product like this one, but when it comes to our credit we fall for things like this all of the time!
Let me explain. There are all kinds of “credit scores” on the market, but the credit score model used by the over whelming majority of lenders is the FICO credit score. Other scoring models will evaluate the information on your credit report and give you some kind of scoring range to show you where your score falls. Referencing back to the example above, Police Officers gauge our speed on miles per hour, not on some “other” calculation; therefore we are concerned with what they use to determine our speed. Similarly we need to concern ourselves with the model that lenders are using when it comes to our credit score. Here is a quick tip for you: if you are buying a credit score online, or getting a score from any source and it doesn’t say “FICO score” on it, chances are it is not a score that any lender would ever use to determine your credit worthiness!
Next, if you are concerned with your FICO score (which you should be unless you can pay cash for everything you will ever need in your lifetime) then you need to make sure you are getting advice on things you can do to improve your FICO score, not things you could or should do to improve some other credit score that has no merit. So many of these monthly monitoring services, credit score simulators and other services give you advice on ways you can improve your “credit score” not actual advice on how to improve your FICO credit score. If I can get a ticket for speeding I would much rather be able to look at the speed limit sign that tells me the actual speed limit that I am being judged on rather than receiving a ticket based on someone else’s guess of what the speed limit is.
Lastly, why would you ever pay a monthly fee to look at something you can view for free and, with a little research, get free advice on how to improve (I’m talking about your FICO score), which as you now know is really the only score that most lenders currently care about.
Most of the companies that have developed these other products (monthly monitoring services, credit score simulators, etc.) suck us in with catchy advertisements or by using reputable people in industries that we would assume are giving us correct information when promoting themselves and their services. In reality they are not much more than services that prey on our lack of knowledge as consumers and add even more confusion to the topic just to rope us in to a monthly subscription fee. My advice for most people is stay away from these kinds of services. They will just cost you money and confuse you even more.
