ARE YOU FUNDABLE, OR DO YOU JUST HAVE A GOOD SCORE? MERRILL CHANDLER
Your personal credit identity is the single most important feature
of a highquality credit profile. Lenders, credit bureaus, and
FICO® do not think of you as a person in the traditional sense.
You are an identity—a data set that they can quantify and track.
Since you were never taught how to correctly apply for credit,
you probably applied using various versions of your name and
different addresses. Since the credit bureaus collect every scrap
of data you submit in your applications, they have a record of
every version of your name, every address you’ve ever applied
under (even Aunt Mae’s where you spent the summer). Credit
bureaus do this so they can collect and merge all your data to
better identify you. The bureaus have spent tens of millions in
data development and management, when it seems to me that it
would just be simpler for them to instruct borrowers how to
establish a credit identity and use it consistently when
borrowing. But alas, such is not the case. One of the first things you will see when you pull you're myFICO.com
credit report is the veritable mess of inconsistent information that is listed under your personal information
section (credit identity). It is vital that you present a single, clear, and concise identity to your current creditors
as well as any future lenders.
The second area that contributes to a highquality credit profile is what I call your “revolving accounts portfolio.”
This is the collection of all of your revolving accounts: credit cards, credit lines, charge cards, and HELOCs
(home equity lines of credit). The most important score contribution to you’re revolving accounts portfolio is
your balance to limit ratio (known in the industry as utilization), followed by the average age of your revolving
accounts portfolio. Next priority is the quality of each individual account. Quality is defined by the “tier” of the
lending institution and the contribution of the
account to the quality of the profile. While I can't
go into great detail here, you need to know
credit instrument quality ranges from Tier 1
banks and 100% contribution to Tier 4 lenders
and 40% contribution. Until now, we were never
trained on how to build a highquality fundable
credit profile and so many of us have lowvalue
“junk” cards which show a lender a lack of credit
sophistication.