The “wearing of the green” is a customary part of the celebration of St Patrick’s Day. A look around your workplace today will likely reveal many of your co-workers sporting green clothing and accessories. Both the clothing and accessories are likely to include shamrocks, one of the national symbols of Ireland.
St Patrick is said to have used the shamrock, a three-leaved young sprig of clover, to explain the concept of the Christian “Holy Trinity” to the (then) pagan Irish.
The shamrock is also useful in understanding how your credit score works. Your credit score is actually a “trinity” of credit scores, reported by a trinity of credit bureaus; Transunion, Equifax and Experian. (It’s a little-known fact that one of those bureaus, Experian, is actually an Irish Company, headquartered in Dublin, Ireland.)
Each of the three “leaves” of your credit score is different. This is because not all creditors report to all three of the bureaus, along with the fact that each of the three bureaus uses their own unique formula, or algorithm, to calculate your credit score. When it comes to applying for a loan, the leaf of your credit score which is most important is the middle one. Lending institutions throw out your high score and your low score and focus on the one in the middle. This mid-score is a major factor in determining whether you obtain financing or not.
Why do lenders single out the middle score? You would think that all three credit scores, even if different, would be very close to each other. Guess what? They’re not! It is not uncommon for us to see credit reports with huge differences in the scores that are reported by the three credit bureaus; sometimes the differences are as high as 75 to 80 points! It is also not uncommon for us to see derogatory items on a credit report like a tax lien or an unpaid court judgment being reported by one of the credit bureaus, but not the other two.
Lenders know that the information that is being reported by the bureaus contains inaccuracies and deficiencies. By using the middle score, they get rid of the report (the high score) that has likely missed something which could be negatively impacting your credit, and they get rid of the report (the low score) which has likely included a negative item that is inaccurate or doesn’t belong to you.
Sad, but true. They don’t use an average or a mean to determine your true credit score because throwing out the high score and the low score provides a method for weeding out inaccurate information – inaccurate information on the one hand that may boost your score, and inaccurate information on the other hand that may depress your score. Seems like a lot of “blarney” doesn’t it?!
As they say in Ireland’s native Gaelic language, “Beannachtai na Feile Padraig oraibh!” (“Saint Patrick’s Day blessing upon you!”)
Saint Patrick’s Day Blessing upon you, and your credit score! Enjoy the green beer later today!