My husband and I recently applied to refinance our mortgage. We didn't end up going through with it, because the estimated closing costs were too much for the deal to make sense. As a result of the application, however, we received a letter from the lender (Navy Federal Credit Union) that listed our credit scores and the reasons that the scores were less than "perfect."
Now, I was not unhappy with the scores. The scores were fine. It was the comments that got me wondering. I hadn't pulled our credit reports in a while, so I went ahead and did that so that I could see the actual information available and compare it to the comments.
First, there was "Time since most recent account opening is too short." Let's see...newest account is the car loan we got last April, 15 months before the report was printed. Hmmm....so the score is impacted if you get any new credit at all.
Second, we have "no recent revolving balances." Really, that is a negative? I'm not even sure how to improve this, unless I were to start carrying a balance on a credit card, and I'm not really interested in doing that.
Third, "too many accounts with balances." I looked over the credit report with a fine-toothed comb and discovered exactly two accounts with balances, one mortgage on each house that we own. I guess that is too much in the eyes of the credit bureau, even though it seems perfectly reasonable to me. We could pay off one of the mortgages, but it would take our entire emergency fund and again, I'm not interested in doing that.
And lastly, the one that really threw me, "length of time accounts have been established." My husband's oldest account is 22 years old credit card account that was opened when he was still in college. Were we supposed to get credit cards when we were six? Seriously?
So, we've got four things that we hypothetically could improve, two of which are out of our control and two of which wouldn't make financial sense. Basically, there is no way to improve our credit scores. I guess time will help a bit, because the newest account will be older, and the oldest account will be older, as well. Besides that, we've got no control over it.
There are plenty of things that an individual can do to improve their credit scores, such as making all payments on time and lowering your balances. However, there clearly reaches a point at which you have to balance making smart financial decisions with trying to reach that elusive perfect credit score. As for me, I'll stick to smart and not perfect.