You are hereA Credit Scoring Guide from an Insider who Speaks English, not Jargon

A Credit Scoring Guide from an Insider who Speaks English, not Jargon


By Dave - Posted on 13 June 2008

A review of John R. Ulzheimer's You're Nothing But a Number
 
John R. Ulzheimer, You're Nothing but a Number:Why achieving great credit scores should be on your list of wealth building strategies. Credit.com Educational Services: 2007, ISBN-13: 978-1424335121
As I'll be discussing in a future article, these days Credit is (Almost) Everything. Your credit score affects not just home loan rates or credit card acceptance prospects, but insurance rates, job prospects, and increasingly even your potential marriage prospects (!).
 
John Ultzheimer is rightly concerned that many credit “experts” offer misleading or downright inaccurate information about credit reports and scores. In You're Nothing but a Number, he attempts to dispel the confusion and misinformation.
 
Given the complexity of credit reports and scoring, I was a bit surprised by the brevity of this $25 paperback. Yet Ulzheimer covers all the essentials, and the short length, along with its unusually clear and engaging prose, makes this perhaps the best credit book for a spouse or teen who needs to know the basics, but may be less than fascinated by the subject matter. The “about the author” blurb on the back cover notes that Ulzheimer was voted a top instructor at Emory University's continuing ed program. After reading You're Nothing but a Number, I could see why he earned this distinction.
 
The book's main weaknesses seem related to its admirable clarity and accessibility. Perhaps aiming not to confuse or overload, Ulzheimer sometimes oversimplifies in a fashion that might unintentionally mislead his readers.
 
In some cases the result is a simple and easily remedied misstatement. For example, Ulzheimer states that “[C]ollateral is only used in the installment loan world” (p.94), neglecting an entire class of loan product that many readers either have or will consider: the home equity line of credit. Other times, he somewhat oversimplifies connections between cause and effect in the service of a perfectly legitimate point. One example s his claim that if he had only left himself as an authorized user on his wife's (excellent) credit accounts, his “credit reports would have eventually ceased to exist and my credit scores would have followed, thus making it impossible for me to establish any new credit without jumping through major hoops” (p. 23). This statement risks leaving the readers with the impression that if they don't already have credit in their own name, they might have to go through “major hoops” to remedy the situation—possibly discouraging them from making the effort. In fact, many issuers will establish credit in their name relatively easily if they are already listed as authorized users on the accounts of their spouse or family member.1
 
At other times, Ulzheimer will suggest a course of action without explaining that there may be good reasons for taking the opposite course. For instance, after dismissing pre-screened credit solicitations as “junk mail”, he closes with, “I highly suggest you opt out” of pre-screening. While no one needs more junk mail, in truth many of the very best credit card offers are only available through such pre-screenings. Over time, harvesting the best of these offers can garner their target thousands of dollars worth of bonus rewards, low- or no-interest periods, and other perks that would otherwise be unattainable. Similarly, he dismisses the idea that a retail store's discounts might offer sufficient reason for a credit application, saying “if you opened a store card at the Gap in December, that inquiry is likely to lower your credit score until the following December. Is that worth 10% off of your purchase? It certainly is not” (p. 37). As is often the case in this book, the idea is sound generally speaking. But the specific circumstances really do matter a great deal here.2 In short, by sacrificing precision at the alter of simplicity, Ulzheimer's advice is sometimes compromised. I also worry that he risks alienating readers sophisticated enough to realize that credit decisions are sometimes more complex than he suggests, even though You're Nothing but a Number has much to offer them despite these flaws.
 
Generally speaking, this book would benefit from more scholarly rigor. This could be done without significantly reducing its commendable narrative clarity. Structurally, a valuable reference like this needs a well-constructed index; instead it lacks one entirely. Also lacking is supporting citations. In fact, the book advances several contested claims about scoring models, credit reports, and the like without any evidentary support. For example, Ulzheimer suggests a linear relationship between credit utilization and score, as opposed to there being discrete utilization “thresholds” or “breakpoints” that might affect scores more than others (p. 34). I understand why Ulzheimer would not wish to include references for such claims in the body of his text, but a few well-sourced footnotes would help persuade those of us who have seen contrary evidence over the years that his conclusions were the correct ones. Often he seems to suppose instead that because he brings impressive experience and a former insider's knowledge to the table, his readers should simply take his conclusions at face value.
 
One final criticism. I didn't discern much continuity or thematic development from chapter to chapter. Instead it seemed to me like Ulzheimer simply identified specific issues that seemed significant enough to warrant discrete chapters, without giving much thought to sequence or larger structure. This makes it harder than necessary to trace the core ideas in the book.
 
After several critical paragraphs, you might now wonder how much I actually liked the book. I want to close by stressing that despite my reservations, I consider that You're Nothing but a Number an unusually strong and remarkably accessible treatment of a crucial subject by a highly qualified author. In its current form, it performs an important public service, and is arguably the best book of its kind. It's precisely because of those strengths that I hope Ulzheimer will revisit the book, perhaps working on a second edition with a more supporting documentation, a detailed index, and an occasional qualifications and elaborations on key points. If he does, I will purchase and read it with great interest. But even if he doesn't, I would still recommend You're Nothing but a Number to almost anyone who wants to become more informed about credit and credit scores.
________

1This may change as the credit industry phases in the latest version of the FICO scoring models, which are slated to remove “authorized user” accounts as a factor in credit scoring. Impressively, this book does address this very recent change in score modeling.

2For instance, what if I have little to no other recent inquires—meaning this one additional inquiry will make little or no difference in my credit score—and my purchase on the 10% promotional day amounts to several thousand dollars, as it might if I'm buying a living room set or entertainment system? Or what if I reasonably anticipate using this retail card to take advantage of other attractive promotions in the future...so that it isn't just a one-off, ten percent discount?

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