In the world of credit reporting and scoring, the facts and figures behind the industry are complex and can be very confusing to those new to the subject matter of interpreting your credit report. To best explain much of the content I teach, I use analogies to describe the functionality of credit reporting and scoring.
One of the common misconceptions about credit is that we as consumers have a credit score that is “on file” in our record. I often hear people say “I have a 750 credit score” or “my score is 676 on Equifax.” The reality is that even though they may be correct, these statements may technically not be accurate.
Truth be told, their credit scores may have been what they claim at the time the report was pulled, but it does not mean that at the time they disclosed their scores their statement was accurate. See what I mean about confusing? This is why I use analogy and leads me to today’s topic/analogy, “Your Credit Report” The Movie!
You credit report is very much like a movie. The opening credits begin when we add our first account and begin our credit history. Throughout our lives our “credit movie” is always playing behind the scenes. Sometimes it may look like a comedy, an action movie or sometimes it can be a tragedy. The type of movie playing depends on our personal spending habits, life events and much like a movie, no two credit reports are exactly the same.
So what does this have to do with my credit score you ask? Well here we go. When you are watching a movie and hit pause, what happens? It freezes that frame at that exact moment and displays an image. What you see is what you get and you can only see what is on the screen at that exact moment. Fast forward 20 seconds and the view can be entirely different.
When a lender hits submit and requests a copy of your credit and scores, the same principle is applied. Whatever information is reporting on your credit file is freeze framed at that moment. What it looked like 24 hours ago has no meaning and of course we can’t fast forward our credit as much as some would like to!
Whatever is going on in that “scene” in your credit report movie is used to generate your credit scores. Because the scenes or accounts on our credit are constantly changing, we can never truly know what our scores are at any given time. Account balances can change, new inquiries can report, collections can show up, late payments can post and so forth.
Credit reporting is not exactly “real time” meaning, if I use a credit card today, the new balance will not be reflected on my report tomorrow. With that being said, it is relatively fluid and things can change literally overnight. We won’t know what may have changed or what our scores are until we hit pause or submit.
The process of how are scores are generated is cause for an entirely different analogy and blog. In the interim, the next time someone says “I have an 800 credit score, you can correct them and say “your score WAS 800 last time you hit pause!!!!!
As always thanks for reading, I hope you found this helpful and here to help you understand the mad mad world of credit reporting.
Credit Repair Resources LLC