This last weekend, I had the unfortunate necessity to do some shopping for some basic home items (e.g., toilet paper, diapers, etc) at Target. What I saw at the local plaza was a mass of people getting ready for the holidays. I suppose it is a good sign for the economy to see that much consumer spending but I was not in the mood to fight through the crowds pushing a bulky stroller through the aisles at Target. While some people were buying stuff they needed, a good percentage of the purchases I saw were definitely “gift” ideas. I wonder if any were being bought for me…

A gift for everyone

But in a very real sense, I, along with everyone who use credit got a present from Fair Isaac in the form of transparency. They released some crucial information about how FICO scores are affected by negative scenarios. We have always known that maxing out your credit limits was a bad idea but we never really knew how much damage that did to our precious score. Now we do. The same goes for debt settlement and bankruptcies. That they were bad was common knowledge, but now we actually know how big a hit we take to our scores whenever these scenarios happen. Also, we get a glimpse into what kind of damage one in eight homeowners face when they had to foreclose during this economic downturn.

A gift that keeps giving

These scenarios can happen to anyone but now this very valuable information can be used as preventative medicine. By knowing how badly a mishap will affect our credit score, we might be less inclined to have lapses in judgment. I am not saying that foreclosures and being late on our bills are always preventable (because special circumstances do exist) but by knowing the degree and extent of the penalties, we might be more careful when it comes to using our credit. This information empowers us to make better decisions in the future. And better decision making skills are gifts that keep on giving.

Future gifts?

The one part of the equation that I wish was disclosed was the positive reinforcement of good credit usage. In the future, I wonder if they will release how they calculate the exact impact of being timely with our bill payments and how it positively affects our credit score. For now, we will just have to keep paying on time every month and put that request for next year’s wish list.

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