Page 39 - increase your credit score

My debt didn’t change. I still had the same amount. But, somehow, the system said I was
less risky because of my lower utilization rates.

I’ve also read first-hand accounts of consumers whose credit scores dropped slightly after

they paid off a loan. The idea here is that the consumer no longer has that account (debt)
to prove they’re a responsible borrower.

These are the types of quirks that led several experts to tell us the three-bureau system and

FICO/VantageScore models have flaws.

“The FICO scoring system rewards people for taking on more debt, different types of debt,
and using debt,” Charleston financial planner Brad Kingsley told us. “The current credit

scoring system – that is based solely on debt metrics – is broken and far from an accurate
representation of someone’s financial standing.”

Ben Woolsey, a former credit-card industry employee and president of Credit Card Forum,

echoed what Brad said.

“I think these models aren’t perfect. They try to approximate risk, but they have some
blind spots,” Ben told us. “For someone who has stable income and who’s paid off a

financial obligation over time, just because they’ve retired a type of debt that shouldn’t be
correlated to an increased risk.”

Myth 6: Defaulting Is the Best Way to Handle Overbearing Student Loan

Balances

A relatively new philosophy, this concept of sticking it to the federal government and
private banks by defaulting on your loans has picked up momentum as more and more

students are frustrated about their post-graduation debt.

Think back to the preface of this book: One of the mentalities keeping us in debt is this

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