For many consumers who are genuinely trying to restore their credit worthiness, the strategy can seem deceptively simple: Pay down your debt, pay on time and watch your credit score gradually increase. Too bad it’s not that simple. The major credit-scoring agencies devise rating factors that are just not obvious to the average person.
Let’s say you’re paying those heating-and-cooling bills on time every month. Surely you’ll be rewarded with a rising score. Surprise: That’s not necessarily true! Many families in a pinch will tend to focus on those critical necessities, so credit scoring firms factor that into the equation.
Credit raters simply assume self-interest is at work, and while that may be a good thing for keeping a home warm, it’s not necessarily a sign the person will pay their department store credit card bill on time.
A key point to remember is that credit rating strategies are not intuitive to most Americans. Part of the reason for that is that the credit rating companies closely guard those proprietary formulas. They’ve got a lot invested in ranking data, and so do other entities, such as banking firms and even landlords that have large holdings in rental properties.
One should never assume credit restoration is an intuitive process. There are very large players in this economic sector that will expend a significant effort keeping their formulas close to the chest.