What your credit score actually means

It’s not just you. Credit scores are confusing as hell.

This video is presented by Secret. Secret doesn’t have a say in our editorial decisions, but they make videos like this possible.

When credit scores were invented just a few decades ago, they were hailed as a way to democratize lending. Today, they’ve become so essential that not having one can essentially lock you out of daily life. Having a low score can make life challenging, too.

These scores have a long history — and a lot of problems. In this video, we’ll show you where they came from, how they’ve changed over the years, and actually explain what that three-digit number means for you.

Sources and further reading:
Check out Frederick Wherry’s book, Credit Where It’s Due: Rethinking Financial Citizenship, which he co-authored with Kristin S. Seefeldt

[tHebUm]

My family was neither poor nor wealthy, but my mom worked in a bank so I was forced to get a credit card at 18 to start building credit and she'd taught me being responsible with money before that--definitely was nice to have an 800+ score by the time I was financially on my own. Now if only homes weren't totally unaffordable no matter your credit score.

[chad]

I think the most ironic thing about credit scores is when you pay off a long credit account (like student or auto loan) it tanks your score because you “closed” an old account which lowers your average length of credit…it’s like they reward you more for being in debt forever lol

[benbovard]

Considering I was raised to never owe a debt to anyone, especially after growing up during the Recession when my parents were forced to go thousands into debt, the interest of which they are still paying off to this day...being forced to build a credit score by intentionally going into debt just so I can have access to things like a house and a car seems highly unethical, and almost criminal.

[AwokenEntertainment]

it's scary how necessary having credit has become in modern times..

[andrewlalis]

When I lived in the netherlands, instead of credit scores, the bank would just run an inquiry into your finances directly. Imo that's a bit less confusing and dystopian than tracking people's every action in some secret databases.

[adrianr.]

Basically people in debt determine if you’re worthy of debt based on your current debt and others debt

[dqge_]

Most people believe that social credit is extreme. But this system has been put into place decades ago yet nobody bats an eye.

[DeltaDemon]

My father did not have a credit card until he was 50 and the bank he dealt with all his life (with a mortgage and everything) was not widely recognised. So, when he wanted to take a house mortgage with another bank, they refused him. It was rough even getting the credit card. That's why I got a credit card straight in first year University to build up my credit score.

[mattl]

I have never understood why a contractual obligation (rent, cell phone) isn’t included in your credit score. When you sign a lease or phone contract you are in debt the same as someone who buys a car and finances through the dealership.

[ItsRuve]

One of the most infuriating parts of this is that someone running a credit check lowers your score 🙃 And don't even get me started on it also taking a hit when you literally finish paying off a loan and close it...

The whole system has been cobbled together so stupidly and does so much to damage to so many people. I hope future generations completely abolish this garbage and replace it with something that actually makes sense

[tammysanchez]

If you can follow this advice you will raise your score from whatever it is to 750 ish

[calyodelphi]

Something that I think should be done is a federal law that requires ANY entity that relies on credit scores to make any sort of decisions about individuals to also have to report information back to the credit bureaus. If an apartment complex wants to require a good enough credit score for an application to be approved, then that apartment complex should be required to report the tenant's on-time rent payments back to the credit bureau so that the requirement for the tenant to have credit history just to get a place to live goes back into building the tenant's credit history.

[kostiemuirhead]

Fixing the credit system might be good... Figuring out why nobody is able to live sustainably without credit and what changes need to happen to make people able to afford to live again might be better.

[salokin]

It's funny how people talked alot about "China's social credit system" which is sus, but that basically already exists in regards to credit. Bad credit cuts you off from a LOT of opportunities and it can take a lifetime to fix.

[jkae]

What frustrates me about the scoring system, is that if I’ve missed a small repayment of $30.. it has the same impact of lowering my score as someone who’s missed a payment of $3k. Small amounts are treated the same as larger amounts, which doesn’t seem fair.

[Deletistjerk]

Just another problem Congress has not fixed in the last 50 years.

[derradfahrer]

(high level summary) The ECJ (European Court of Justice) just released a ruling a week ago, that basically said, that a credit score can not be the only or main factor for a bank to decide whether or not someone can get a loan. Same would apply for companies like mobile carriers, etc.

[lukemccrory]

It's amazing how people's criticize China's social credit score for being authoritarian, but we have the exact same system, just centered around money.

[bukharijabarazman]

When we wanted to move away from human segregation, we created computer segregation…

[kingderald]

The annoying thing is. We all know these issues but yet NO ONE is standing up to make the changes. These are the issues that are more important.