From the desk of the CEO…
So this 2020 thing has lasted for what, three years? We have all made significant adjustments. Many didn’t go on vacation; many have received their virtual “teaching degrees” via the University of Life; picnics have been cancelled; work / income has been lost; and we have ALL endured so much political non-sense. We are on information and false information overload.
I don’t want to blame anyone for my problems, and especially for my feelings, but it seems much of the media messages that we are consuming have taken genuine fear and concern and turned it into anger and mistrust. Refuse to give in to hatred. Like you, I yearn for things to calm down regarding public health, social unrest, and economic turmoil.
We are not the same as we were just seven months ago. We often commented how “different things are than when we grew up.” I predict that COVID will be a paradigm shift for all going forward. There will be parts of society, parts of us, that will be changed forever.
What’s that? You are sick of hearing about COVID19? You don’t want to read one more word about contagion rates; the effectiveness of masks; hear one more cliché (the “new normal” comes to mind); or how cancelling international travel a day earlier may or may not have indirectly led to the stock market plummeting. There isn’t a soul I know that isn’t tired of bad news.
Good News
School is back in session; football is back on TV; and the last time I went into the grocery store they actually had more than one roll of toilet paper on the shelves. Things are beginning to change, albeit painfully slow. If the current trends continue it will not be long until we open our doors. We have never stopped serving our members needs. In fact, despite all of the challenges, we continue to grow our company to meet necessities and fulfill dreams through our loans.
If things are better, it is not without monumental effort and tremendous sacrifice. We need to keep the course of what has gotten us here. We must continue to keep a focus on wearing masks, social distancing, washing our hands, and following all of the precautions that have kept us safe to this point. Things ARE changing, but our behaviors must not… at least not yet.
The easiest thing to do is to disregard the safety precautions that have been thrust upon us. Especially now that it appears we are rounding some sort of corner. However, real change comes with hard work. It is seldom easy.
Don’t give in because you are tired. Don’t give up because you feel disenfranchised. Keep your eye on the prize… Stopping the spread of this virus so we can move on with life.
At First Choice we are committed to staying the course and not giving in to the “easy way”. We serve nearly 7,000 members. Unique individuals with unique needs. It is too easy to assume you all want the same thing delivered in the same way. It is too easy to assume that you will always stay with us. Very rarely is easy the path to success. We must continue to challenge ourselves to get better… to continue to strive to earn your business.
We are very proud of our reputation and that you have chosen us among the many options that you have for financial institutions. To those of you who have just one service with us, “test us.”
If we have taken care of your loan, we can take care of your checking. To those of you who trust us with a little, we are able to handle a lot.
We have charted a course to serve Lawrence County’s financial needs. We want to be YOUR First Choice.
Why is my score so different?
A young man recently came to our office. He was a little bit frustrated. “I don’t understand why my credit score keeps changing. All I do is pay bills month-to-month. I am concerned about my credit so I have an app to monitor it. But, when I just went to look for a car, I got quoted a different credit scores at each dealership I went to. What gives?”
These are excellent question. Lets try and address them: What does give?
Unfortunately, it is often not a straight-line process to get a consistent score. But before we get there, lets discuss some of the factors leading to his frustration.
Credit Score vs. FICO Score?
A “credit score” is a generic term. It is a number that represents the risk a lender takes when someone wants to borrow money. Generally, the higher the score, the less risk.
Most lenders use the Fair Isaac Corporation (FICO) score to determine credit risk. However, not every FICO score is the same. There are different models that each lender can ascribe. Some place a higher value on most recent activities. Some devalue debt attributed to medical bills. Still others take into account various average debt in regard to secured versus unsecured debt. Confused yet?
There is an app for that.
Actually, there are several. Many consumers have done what we have preached for years, check their credit report to make sure of its accuracy.
There are so many tools that consumers can use now. In fact, a credit score is often prominently displayed on several credit card providers statements for free. One of the more popular apps is Credit Karma.
Credit Karma, and many like it, are GREAT services at helping you to see the month-to-month impact of decisions on your score and helping you to keep your information correct. However, these apps are credit monitoring services. They are not to be used as a basis of determining lender’s risk.
For instance, Credit Karma uses a credit score called VantageScore. It derives data from two of the three major credit bureaus in the US. Theirscoring model is transparent,
but independent from those bureaus.
It is a wonderful free tool. However, Credit Karma is a for-profit company that makes money by giving you a free credit score in exchange for learning more about your spending habits and charging companies to serve you targeted advertisements. This is not a deceitful practice. Many companies make money in this way, like Facebook and Amazon.
Timing matters- some things are slower than you think
Credit Karma updates scores every seven days. However, most lending institutions update monthly. This makes sense considering the normal payment cycle that we all enjoy. When you make a payment on your house, the mortgage company does not alert the three major credit bureaus daily. They update once a month.
Timing matters- some things are faster than you think
There is nothing wrong with shopping it is how deals are found. However, if you go from one dealership to another, they are gong to keep running your credit score.
The dealers want you to drive that car off the lot.
They will look for the best deal they can find. Many of them have several options to finance you. The challenge is that each one of those companies will pull your FICO score through their model. That can mean at each dealer could have your credit pulled as a “hard hit” 5-9 times. Those inquiries can add up quickly and drop your score. (Incidentally, that is why we encourage our members to get a preapproval before going shopping. That way you know how much you can spend and how that fits into your budget. If you know the most you can afford, it is easier to negotiate.)
How does FICO figure out my score?
I can’t tell you; it is a secret. No really, it is. Fair Isaac Corporation uses a complicated proprietary algorithm to determine an individual’s credit score.
However, we do know that they use the following weighted factors:
- 35% is on payment history
- 30% is on total amount owed
- 15% is the length of reporting to the credit bureau
- 10% is new credit applied for
- 10% is the type of credit you have (secured vs. unsecured)
Does it really matter?
In preparation for this article I signed up for two free credit monitoring services. I had applied for a loan last month so I had a recent pull of my FICO score. The first score I received was 910. Which is problematic, because the highest FICO score possible is 850. Their scale had a high score of 1,100.
I got a second score from Credit Karma. According to the app my score was 27 points higher than my FICO score at the credit union. The data was accurate, and it was close to my score, but because of the things we discussed earlier, they are not the same.
From experience, some of our members report that their Credit Karma score is closer than 27 points away. However, some have a greater disparity.
Keeping current on your credit score is a great idea. For those who have had missteps in the past, we want to help raise that score and protect it. It can literally save you tens of thousands of dollars over your lifetime.
Wait…we’re missing something…
The October Newsletter is the one where we typically would publish the Annual Kid’s Club Picnic pictures. We are so saddened that this year’s event had to be cancelled. We can’t wait to bring it back in 2021. We miss our kids!