Until I actually started attending a bunch of “Zero down” real estate courses the correlation between credit cards, credit scores, and percentages didn’t really make any sense to me. It’s when I finally got it through my thick skull that credit cards = loans that I finally put it all together.

As for your credit score, any time you do a hard check on your credit report your score goes down. There’s a law which says that credit companies (the big ones, like Equifax) are supposed to provide you with one free credit report per year, but I don’t know of its effect on your credit score per se, nor if they give the actual score to you (I though they did), instead of just a report to make sure you don’t have any fraudulently open accounts.

As for getting the score itself, there are two things you can do. The first is to inquire about a bank loan. Yes, it’ll lower your score (it’s a hard check, not a soft check) but you can ask to get your number right there. PITA, I know, but it’s the only SURE way I know how to get it. The second way may be to go here and sign up for this service (it’s offered by LendingTree.com), but I’ve never used it myself, so I can’t recommend it. Your mileage may vary.

As for you not getting credit because of the reasons above, that depends. See, the credit companies are looking for 2 things: either to make money, or to not lose money. They make money by giving you an APR which will cover your operating expenses, plus a certain percentage, for profit. (This operating expense takes into consideration how likely it is others in your credit score level are to default. The higher the percentage you get offered, the riskier you’re considered to be.) If they consider you too risky they just won’t lend you money, thereby ensuring that they won’t lose that money, at least not with you. They’ll either give that money to someone else, or invest it in some other way.

(Here’s a fun fact: companies only expect to get a certain percentage of what they lend out back anyway. What they can’t collect themselves they sell off, for pennies on the dollar! Ever hear of countries buying debt (like China, for example, which keeps buying American national debt)? People can do that, too! Let’s say Alice owes Visa $3000. Visa hasn’t collected in 3 months, so they sell off the debt (“pass it to debt collectors”). Bob decides to buy Alice’s debt, but instead of paying Visa $3000, he pays $1000. He hires CollectorCompany to bug Alice to get back his money. Eventually she pays and CollectorCompany gets a certain percentage of whatever Alice pays back. For example, if Alice calls the company and says “I want to negotiate my debt. I can pay you $2500, but not the whole $3000,” Bob can say “Sure!” and make a profit of $1500 (minus CollectorCompany expenses) or he can say “No! Pay the whole thing!” to which Alice may say “I declare bankruptcy!”, leaving Bob with $1000 lost. Visa, CollectorCompany, and Bob have to cut their losses, and Alice now has 7 years of a bankruptcy to deal with. A good time was had by all. To find out more about buying debt, check out CreditMaxTeam.com. You can buy debt off on a per zip-code basis, I think. Not sure because I haven’t done it myself (yet), but having friends in that industry, I’ve learned how it works.)

One side note: if you’re rejected for credit for any reason you’re entitled to a credit report to find out why. This won’t include your score, though.

By the way:

How does one build that illusive credit score if they are not allowed to get credit for anything in the first place?

You borrow from the mob.

Just kidding. However, this is a phenomenal question. In fact, it’s one I know just about everyone has had. The only real way to do this is through a pre-paid credit card. Here’s how one works: You give Company X $500 of your money. Company X then makes that money available to you via a credit card (with a $500 limit, or however much you deposited). Then, any time you use that money, you pay a certain percentage rate (13%, for example) on that money until the amount is repaid. (The interest is theirs, by the way, it doesn’t enter your account.) Eventually, when they see you can handle paying the card on time — especially since THEY didn’t have anything at risk — your credit score will go up and you’ll be able to start borrowing again.

Frankly, I think that whole idea is genius: you give me $500 to invest however I please. Then, I let you borrow it, but only if you give me more money as payment for letting you borrow your own money. I make money either way. Seriously makes me wonder about starting a credit card company!

Here’s a trick I recommend, which requires discipline, but will help you get on track quickly: take out one of these credit cards and put your total amount of monthly bills in it. Then, pay all your bills with that card. Make sure you pay that card immediately, before a penny of interest accrues. Do that for a few months and watch your credit score start to rise. You can jolt it by leaving small amounts to accrue interest (say, $200), but make sure you pay at least the minimum payment. You’ll build up your credit in no time. (If you already have cards you can do this anyway to both build up your credit and, if you have a rewards card, to collect your rewards by just paying your bills!)

Again this takes some discipline. Then again, if you don’t have enough discipline to do this, then for the love of God, shred your credit cards and never ever ever look at one again.

Remember, the system’s not there to help you, per se. It’s there so they can make money work for them. (I recommend you read the book Richest Man in Babylon to see this in action.) You just happen to be the vehicle they choose. As a consumer, this sucks for you, since all you’re doing is spending money. As a business owner or investor (which requires a shift in mentality) this is great, since you can borrow money for business ventures left and right, and so long as you pay everything back in time you’re good: they’ll let you borrow more money so you can make them (and, oh yeah, yourself) more money. They get theirs, you get yours. Of course, as a consumer, this option’s not all that available to you.

Hope this helps a bit more.

However, it does strike me as being a real problem if you cannot get your credit score without it costing you points. The last time my husband and I got our “free” report, it did not contain the actual “credit score” at all though it was promised. We did this with three companies. SInce we have no idea what our score is, we have no idea if it went down either.

One more thing. Who benefits when you can’t get a credit card because of those same reasons as not being able to get a house, car, etc.? Certainly not us. How does one build that illusive credit score if they are not allowed to get credit for anything in the first place? Too many people have that problem.

Thank you. This is informative.

PS. I agree with you about the protractor!

To cover their losses, they’re going to demand a higher return on investment from you if you’re a risky investment, which is why your interest ratings and credit card APRs are so much higher when you have bad credit.

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From your response:

So, people with a lower credit score = riskier investment for them. With a riskier investment comes a higher return to offset the losses. If the riskier investment’s return was the same as the safer investment you would just invest in the safer investment.

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So we’re basically saying the same thing here. Now, for another issue:
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From your response:

You’re going to obviously charge the 750’s a lower rate than the 575’s, but that doesn’t mean you’re going to make more money of either one.

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You’re right. However, the person with the higher score is more likely to get you your money back on time than the person with the lower score. The rate for that person is lower for that reason and because of the free market: if the costs of keeping a person with a 750 score happy are lower, then companies can afford to give them better rates, and this is where the market comes into play: people are always vying for your business. To get your business they’ll offer the services at a lower price, although the price they set is the highest they can that the market is willing to pay. Fewer people are going to want to give you business if you have a lower credit score (so there’s less competition for your business, with limits your options and allows them to raise their rates accordingly). Combined with the higher cost of doing business with that kind of population, rates have to go up so they can keep whatever profit margin they’ve set as their goal (for example, 10% quarterly profits). The lending institution may not make more money from either one, but you’re likely to make more (on time) from the person with the higher score. In the end, this leads to lower cost of business, which leads to a higher profit margin for them.
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The free market and competition how much money they can safely make, but the score is in the end just a metric which they use to grade how good of an investment lending you money is. The better the investment, the more money they can make off of you safely.
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By the way, trust me, I meant protractor. Those things have sharp edges, especially the metal ones!