December 08, 2009
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'POP!' Goes the CC Score Myth, Pt.4
The effect of your FICO score.In wrapping up, I've considered two more "quasi-myths". They could be either true or untrue, depending on your vantage-point:
Myth 6: A perfect credit card score is required for the best terms: Here, possible vantage points might be: General credit; Only credit card credit or Stable market conditions. Actually, with General credit and Stable market conditions, this would be a myth. The structured-tier standards of always still apply. Hence, there are boundary divisions that will layer your credit terms in three or four steps. Pretty fair, better credit scores secure better terms and medium credit scores receive medium credit terms.
No so, however, with credit cards. When the credit bubble burst as Mr. W left office, there was an iceberg dead on that we never hit. This was the great, intangible God-send of the bank bail-outs that shallow naysayers can't understand. Credit card debt is "unsecured", meaning that the huge lenders are simply "out" when a consumer bails. When we allow all of our good paying jobs to leave the country, the meltdown begins. For credit cards, Charge-offs come quickly: credit scores are decimated, lending banks close their doors forever and the general American public loses their savings, investments, retirement, jobs, homes, etc (because the banks never pretended to have 90% of the monies that were extended to all that credit card debt. The money was virtual and never meant to exist. That's how banks have always operated.
Give them some credit, they survived. Give the bailout gesture some credit. Although not perfect, the bailout saved us from an unfathomable meltdown. Not unscathed, however, the credit card consumer market will still be a long time in recovery. Charge-off rates, although finally peaking, are still rampant. The only good credit card terms for the foreseeable will go to those with almost impeccable credit card scores. Even then, only for the lucky.
Myth 7: Credit card scores are everything: Definitely a myth. The FICO credit card score is a well respected index, refined over the years to be the single-most trusted common element. A great credit card score means a lot. A "good" credit card score, however, doesn't mean much because the credit supply has shrunk. But, the voluminous credit report contains so much "stuff". It's an arena where people can bad-mouth you in front of a world-wide audience and you may not even know it. Make sure you know what they're saying about you.