Could Your Credit Score Be Wrong?

Could Your Credit Score Be Wrong?

Do you ever worry that one wrong move could plunge your credit score?

Well, the recent financial crisis resulted from many wrong moves: foreclosures, mortgage defaults and unemployment were rampant across America. But based on new numbers from FICO, the average credit score in America has stayed the same.

About 200 million Americans have scores from FICO, the most widely used credit-scoring system among lenders, but experts are starting to question the accuracy of its methods.

According to SmartMoney, new figures show that the average FICO score stood at 690 in April. This average is approximately the same as last year’s number and the average score in 2007, before the recession hit.

Some analysts are trying to explain the results by saying that the recession has had an equal effect on either side of the median point, which would keep the average the same overall. But many think the results are simply inaccurate.

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SmartMoney offered two possible reasons for the error: FICO has flaws in its formulas or their numbers have lost meaning. Experts in the field are beginning to doubt whether a credit score is still a good indicator of the likelihood a person will repay her lenders. They have also raised concern about the ability of the scores to detect a deteriorating credit climate.

In the face of these potential scoring issues, lenders are continuing to raise the minimum score required to qualify for lower interest rates. So, it’s more important than ever to keep an eye on those three numbers. Don't know where to find your credit score and report? Start with our checklist.

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