Why Did My Credit Score Drop?

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Why Did My Credit Score Drop?

Sometimes your credit score shocks you by dropping for seemingly no reason. This can be discouraging and frustrating if you can't pinpoint a cause. While Credit Karma doesn't calculate your credit scores, we can point out some of the factors that can affect your score, and you may be able to trace a drop in your score to one of these factors.

1. Credit Utilization

Carrying a significant amount of debt on your credit cards could be one reason why your score dropped. Your credit card utilization rate is a snapshot of how much credit you're using, calculated by dividing your total credit card balance by your total credit limit. If you're relying too much on credit, a lender could view that as a bad sign.

Possible Solution: If you have the means, you can try a couple of different approaches to paying down debt. For example, you could use the debt snowball method, where you pay down your small balances first to gain momentum and make your debt seem more manageable (while continuing to make minimum payments on your other debts).

You could also ask your card issuer for a credit limit increase on an existing account, although whether you get this is at your issuer's discretion. Alternatively, opening a new credit card would also increase your total available credit.

You can monitor your current utilization by connecting your financial accounts.

2. Payment History

Since creditors are trying to judge how likely you are to pay back your debt, reliability is important to them. If you miss even a single payment, your score could take a major hit, especially if you've never missed a payment before.

Possible Solution: Moving forward, see whether your credit card provider will allow you to set up automatic payments, or link your financial accounts and turn on bill reminders to help avoid missing future payments. Continue monitoring your credit report as well to ensure all of your payments are being reported as on-time. You can monitor your credit reports from Equifax and TransUnion for free using Credit Karma.

3. Derogatory Marks

If you experienced a major drop in your credit score, a derogatory mark could be the culprit. Tax liens, accounts in collections and bankruptcies are among the most serious things that can happen to your credit score. Since they represent major delinquencies, they can reflect poorly on your ability to take care of your finances.

Possible Solution: Check your free credit reports with Credit Karma to investigate whether these derogatory marks actually belong on your report. If they don't, consider filing a dispute.

4. Average Age of Open Credit Lines

The longer you've had credit accounts open, the more creditworthy you generally appear to lenders. If you've closed an account recently, some scoring models won't factor in your closed account when determining your credit age, so your credit history may appear shortened and your score might drop. Opening a new account could also lower the average age of your accounts.

Possible Solution: Before opening or closing an account, use Credit Karma's Credit Simulator to see how the action could potentially affect your score, and be prepared for a change when you pay off a loan. If you're not sure if you should close an account, consider the pros and cons of doing so.

5. Total Accounts

While it's not the most important part of your credit score, having a good mix of different types of credit and an appropriate number of open accounts shows lenders that you have the experience to pay off debt responsibly. If you've just paid off the only loan you have, your credit mix might look a little less diverse to lenders. Similarly, if your total number of accounts suddenly skyrockets or nosedives, that could indicate that you're financially strapped and need credit or can't afford your existing credit accounts.

Possible Solution: Before you open or close any accounts, you may want to check your credit reports, where you can see the distribution of your open and closed accounts. Doing so will help you be aware of where you stand. If you're thinking about opening up new credit cards, don't fall for every offer out there - only open ones that you need.

6. Hard Credit Inquiries

Generally, when you apply for a new form of credit, whether it's a credit card, auto loan or mortgage, a hard inquiry is placed on your credit report. Normally, a single inquiry would initially only cause your score to drop a few points (if at all). However, if you've applied for several accounts in a short period of time, you could appear desperate for credit, and the damage from those hard inquiries might add up.

With that said, some scoring models (but not all) allow for rate shopping on auto or home loans without any additional damage.

Possible Solution: To avoid unnecessary inquiries, only apply for credit when you need (and can afford) it, and try to focus on cards that you have a good chance of getting approved for. Credit Karma shows you your estimated Approval Odds before you apply, so you can make a more informed decision.

If you're looking for a loan and need to rate shop, consider looking through consumer reviews to narrow down your choices. You can also consider getting pre-qualified or pre-approved for credit, so you have a better sense of what you'll be approved for before you apply. By doing your homework, you may be able to avoid unnecessary hard inquiries.

Building Your Credit Knowledge

Credit scores often seem like they're shrouded in a veil of mystery. Now that you know what might have brought down your credit score, try your best to keep an eye on your credit health. Even though these situations can't always be avoided, understanding their impact could help you make more informed decisions.

Editorial Note: The opinions you read here come from our editorial team. While compensation may affect which companies we write about and products we review, our marketing partners don't review, approve or endorse our editorial content. Our content is accurate (to the best of our knowledge) when we initially post it, but we don't guarantee the accuracy or completeness of the information provided. You can visit the company's website to get complete details about a product. See an error in an article? Use this form to report it to our editorial team. For questions about your Credit Karma account, please submit a help request to our support team.

Advertiser Disclosure: We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

All Comments

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2 Contributions
1196 People Helped

Helpful to 1195 out of 1265 people

Ummm, I guess with everyone complaining about CreditKarma seemed to have forgotten that it is a free service and is meant to be a guide, not an end all be all.  If you don't like it then you should spend the money and get the credit tracker memberships from one or more of the big three credit bureaus.  I'm amazed that people don't appreciate a place where you can look at your credit for no cost and get a good idea of where you might have problems.  It's free!!  Nothing that is free is going to be as good as something that you pay for.  

Reply by
shanseeme

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287 People Helped
Helpful to 287 out of 295 people

I get my score free with capital one and its very close to credit karma so it is a very good deal for free

Reply by
grannew

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79 People Helped
Helpful to 79 out of 88 people

I agree with you Enter Your Reply

Reply by
craigwenxian

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Helpful to 332 out of 346 people

I get free scores and details from two of my CC companies as well as creditkarma and creditkarma is more up to date. I am not sure why  credit details from CK would be more up to date than the other providers! CK appears to update weekly with fresh data whereas the others only do so monthly and may even be a month behind to boot. 

Example. I FK'd up for the first time in a decade last month. We had to take an emergency flight for a family matter. As always I used my AMEX Skymiles card. This card has a low credit line of $1,200 which has never been a problem before as I usually pay it off before the next closing date. Due to the stress of the situation I forgot to eyeball the upcoming closing date. The two roundtrip tickets plus in flight meals pushed me just over the limit. Normally not a problem except the closing date coincided with the return flight and I did not realize it until the next day. BAM!!! Even though my total utilization for last month was under 10% that one event dropped my score by 87 points! 

That was a week ago and creditkarma showed me that drop almost immediately. The other sources using the same credit agencies are still not showing the score drop although they are showing the exceeded credit limit! 

I did immediately pay off that card and have 1 day to wait until the next creditkarma update. I will be curious to see if they pull new data on that balance before the next closing date. 

What I am hoping is that my scores jump back up by the same amount as fas as they fell. 

Another thing I have found out and this is stupid in my opinion, is that individual credit card utilization is a larger factor in your score than total credit utilization. Also having credit cards you never use (zero balance) is also negative. It seems the best scores are attained by carrying a balance between 1% and 3% on each card you have for at least one day past the statement closing date. Going into the closing date with a zero balance will show that card as having a 0% rate of utilization even though it did have activity. 

Reply by
cja8565

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0 People Helped

exactly lol its a yard stick, not meant to be an erlenmeyer flask.  If you don't like it then stop being cheap and go pay for a site..

Reply by
bkinney5

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I totaly agree. This service is free so lets be nicer people. I for one am happy for Credit Karma and their info. Thank You  Credit Karma.

Reply by
memilien

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Right on the money jwilkins35!   I've had Credit Karma for a couple of years now, and I've learned that what they say is your score is generally 20 points below what the actual credit bureau score is.  With that in mind, you can keep track of your credit very well with this free service.  You do get what you pay for, but I think that Credit Karma is an excellent tool for those that may not have the means or just want to keep an eye out for any surprises. 

Reply by
rexangelic

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0 People Helped

Amen Brother! I am 66 years old and if I have learned only one thing in Life that is that the most ungrateful people are the ones clamoring about what's wrong with all of the stuff they've gotten for free! Jeeze! You feed a hungry 'Mongrel Dog' and it turns around to bite the hand that fed it. Amazing! And I can guarantee you that those same kind of people are almost always "part of the problem and never part of the solution." Ungrateful to the end!

Reply by
Silkytg

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Good post, however, I am with Veldemere where he/she says "Great incite. The credit bureaus and the companies that extend credit should be tried, convicted and jailed. And Creditkarma is no better as it relies on information from credit bureaus. Catch 22."  

I say --It seems no matter whether you pay your loans on time or have a collection, if it's with the same creditor, it's put in the same catagory "collections".  Since I am in a standoff with my bank on ONE (1)  paid loan, but have TWELVE (12) paid off "on time" loans with the same bank, they just put them all in collections. It seems like the credit reporting agencies are in such a hurry to post the credit issues on someone's credit report that they don't read that because you owe Joe Blow on one loan, doesn't mean the other 12 paid on time loans with Joe Blow are bad as well. 

Reply by
glennissr

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0 People Helped

" Nothing that is free is going to be as good as something you pay for"  Not true ..... My mothers love was free and you could never buy it......   :-)

Reply by
pappabear1971

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1 Person Helped

I appreciate a free site to check my credit score but, when this site is saying i have a 581 when I ACTUALLY have a 657, thats a HUGE difference. How is anyone supposed to use it as a guide if they are so far off the mark??? 

Reply by
gmni18

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1 Person Helped

When people subscribe to to programs like Credit Karma, they need to learn how to use the programs in order to get the most from them. 

Reply by
ofthebridge

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I agree...too many people expect the world for nothing. Credit Karma is actually a pretty good source AND IT"S FREE

Reply by
giant59

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1 Person Helped

I've learned not to apply for a new card KC feels I have a "GOOD" chance of getting ( I've been denied before ) but today I applied for a card KC thought I'd have a "VERY GOOD" chance of getting and once again, a denial. I won't try again based on KC's advise!!

Reply by
kittenladyt

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to shanseeme, you have to have a capital one card in order to get the "free" score so not really free.

Reply by
badfriend

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5 People Helped

Enter Your Reply 

I have used Credit Karma for a few years and every since then, I can see my credit score when ever I want to morning noon or 2am, this  is a good thing to me just saying. They have all my information correct and that's a great thing, some things I even forgot about. Now with that being said I will keep Credit Karma  on my computer and use them every chance I get to see if a debt is off of my report or if something is incorrect I can address that also, THANK GOD FOR CREDIT KARMA   

Reply by
Syed1969

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0 People Helped

Enter Your ReplyAgreed! It's FREE dudes what else you need. This is not the right place or Forum to talk about paid credit tracking agencies.

I always got the best and near to accurate results from Credit Karma.

Syed

Reply by
dstunner

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0 People Helped

I actually use Credit Karma and feel that it is a really good tool and it's  free.  I used Credit Karma when I was in the process of purchasing my home and the credit score Credit Karma reported was very close to my accurate Credit Score.  I think Credit Karma provide you with a lot of information regaring your credit score, i.e., items in collection debt ratio.  Like I mentioned I really appreciate being able to use a free site that provides a lot of information surrounding your credit score.

Reply by
sidley9

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You are right, credit karma is a service. They have no control of the results of their inquiries. They simply provide the results for you do do with whatever you want. AND checking regularly could also let you know if someone is accessing (or trying to access) your credit. I think its a great service, and I am sure glad its there. AND FREE! Thank you.

Reply by
msila

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0 People Helped

I made a large payment on one of my cards and my score DROPPED ! This is insane !

Reply by
rradina

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Wow @jwilkin35 -- nothing is free.  Here's CK's business model from Wikipedia:

"All of Credit Karma’s services are free to consumers. Revenue from targeted advertisements for financial products offsets the costs of free credit reports, credit scores and credit monitoring."

You might also want to check out their privacy policy:  https://www.creditkarma.com/about/privacy

They share with parent, subsidiaries and affiliates for purposes of providing "services" (i.e. advertisement) to us.  They also share information with external hird parties to analyze and compile statistics on us.

Ever heard of this famous widdom?  "...first take the log out of your own eye, and then you will see clearly to take the speck out of your brother's eye..."

Reply by
rwellence

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0 People Helped

Excellent point jwilkins35!!!!  I Love this site and it has helped guide me in a better direction as far as trying to rebuild my credit. I am THANKFUL that someone was KIND enought to allow us to use this tool for FREE!!!!  How can you complain about FREE, well I guess now and days we should expect ignorant behaivior!!!! Thanks again Credit Karma, you all are AWESOME!!!!!!!

Reply by
Tamogram

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0 People Helped

Well said!!

Reply by
Tamogram

2 Contributions
0 People Helped

Well said!!

Reply by
plantationhouse

1 Contribution
0 People Helped

I'm very pleased with Credit Karma. Free or not I think they offer a very good service and I would recommend them to anyone.

Reply by
TJackson12346

1 Contribution
0 People Helped

I totally agree with your comments.  This is just a guide for me.  I do purchase my FICO credit score.

1 Contribution
112 People Helped

Helpful to 112 out of 125 people

I'm shocked....My credit score went DOWN, even after paying a few things off.  What is going on ?   I'm at a loss, of what to do.  You pay some things off, and your score goes down ?  What gives ????  I will admit that my score is not good. ( do to certain things that happened in my life ) but what do you do when you are trying to pay down your debt...I'm 65 years old......Maybe I should go back to just paying the minimum and leave the rest of my money in my pocket.  For some reason you can't win for trying !!

Reply by
oneoldcurmudgeon

2 Contributions
78 People Helped
Helpful to 77 out of 104 people

When you hit 65 years the credit game gets tougher because the lenders think you will die and they will get stiffed with the balance you owe.

Reply by
dbowencredit

1 Contribution
5 People Helped
Helpful to 5 out of 46 people

Enter Your Reply  due to not do to

Reply by
iluvskittles83

2 Contributions
48 People Helped
Helpful to 35 out of 41 people

I agree. I'm at a point where I about to giveat up on the credit thing. Not worth the headache.

Reply by
LuapYllier

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4 People Helped
Helpful to 4 out of 5 people

The whole "credit score" is a device created by companies who give out credit to not only track your credit worthiness but to keep you in debt. the score tells them not only who is less risky but also who is more likely to use debt and thus be a source of income for the companies offering credit. your score will go down when you pay off or close accounts because from thier point of view you are a less lucrative customer. You are not paying interest. You recieve the highest score by having many long term accounts that always have a balance to pay interest on, always get paid on time, and never fill up or go over the limits. From the providers point of view you are grade "a" prime meat.

Reply by
credit00rz00407

2 Contributions
1 Person Helped

Enter Your Reply   pay off your cards but leave a small balance. but don't carry a balance month after month because the intereest grows everyday. thats what I try to do.

Reply by
lmhollis

1 Contribution
0 People Helped

Mine too! I paid off the card and colsed the account, then had it removed from my report and my score dropped 60 points! I don't get it. SMH 

Reply by
cleopuma

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22 People Helped
Helpful to 1 out of 1 people

I agree with you. I just checked my score, and one had dropped 55 points, the other 20+. I had just paid off my last cc alance of 213.00. No new inquiries, no new credit cards, and no new derogitory remarks. What fricki gives. Been trying to straighten out and raise my score for a year and a half not. Finally had "GOOD" credit on one, and upper 600's on the other.

Reply by
mellowde

3 Contributions
7 People Helped

Only a fool spends more than 10 seconds pondering their credit score or fico score.  You will find out soon that there are no hard and fast rules in the credit reporting business and only fast and loose rules apply.  I got off the roller-coaster years ago.  And have lived better ever since.  Find insurance, etc that doesn't rely on credit scoring so as not to affect what you pay.  Credit bureaus are merely tools for the banking industry.  Nothing more...

Reply by
bluelizard

1 Contribution
0 People Helped

I've seen the same thing. When I paid down my mortgage, my credit score dropped a few points because that account was my most aged account, and when that account closed, the overall age of my accounts dropped. But I don't think you should use your credit score as a reason not to pay down your debt as quickly as possible. Paying down your debt faster will decrease your Credit Usage factor, which is the most influential credit factor in calculating the credit score.

Reply by
clfrbn

2 Contributions
0 People Helped

You're missing some data if your score went down.  If you think paying the minimum keeps more money in your pocket you may be missing a lot.

Reply by
Dealerdeb1

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0 People Helped

I had that happen this past month I was in the 800's paid off 2 cards  in full just one balance  left. No missed payments,no inquiries,nothing. Dropped 22 points with a perfect history. I give up I don't even have a car loan left and I paid my mortgage off years ago. What gives with THAT?

Reply by
GotThisCovered

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0 People Helped

Enter Your ReplyI try to focus on building my credit with secured cards and after a while you can apply for an unsecured card. Capital one will tell you if you qualify before you put a hard inquiry on your report. You can dispute anything on your credit as well. The companies have 30 days to reply. If they miss their time frame it gets taken off.  I got alot of things off my credit like that. Any thing on your credit report that has to do with medical bills can be disputed by the HIPAA Act and it will be removed. Been working on rebuilding my credit since November and its up almost 100 points now. Anything that has been on there for a while I wouldnt even worry about, most things come off after & yrs. Secured card is the best way to start if you have terrible credit. I had no credit to speak of years ago and got 2 secured cards and paid them off every month. At the end of it all I was able to qualify for a home loan.... Good Luck in your credit building ventures...

1 Contribution
149 People Helped

Helpful to 149 out of 156 people

my score droped 44 points just beacuse i paid everything off. why should i pay interest when i can pay my bills ontime???????????????????

Reply by
DrMikeb686

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86 People Helped
Helpful to 86 out of 91 people

You may come across a situation in the future such as an emergency when you could need a strong credit rating. That's the only reason I can think of for you to carry some debt. It is admirable that you pay your bills on time, and inane that you would be punished for it, but that is the way the system currently works. 

Reply by
BudnViv

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Helpful to 72 out of 84 people

I am so glad you wrote in.  We have about $10,000 in credit card debt.   I have been thinking about taking one of these offers we constantly receive in the mail for a loan to bring everything down to zero, have one convenient monthly payment but keeping all our accounts open.....But use them for "little things" such as trips to the drug store, etc.  But if my credit score is going to nosedive with a plan like this....I am doubting the wisdom of this plan.  Any sound thoughts about the repercussions of moving forward with this idea?

Reply by
CruisingNOhio

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37 People Helped
Helpful to 37 out of 39 people

Enter Your Reply   Be patient.  It will go back up! I pay all of my accounts in full every month.  Pay them off, but don't close them unless there is a yearly fee - then close them!!!

Reply by
Avelode

2 Contributions
0 People Helped

Did you close any accounts? if you close more than 1 credit card per year your score drops.

Reply by
poolpool

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0 People Helped

Enter Your Replysame here... never late open 6 accounts to show i can pay off pn time, wham off 50 points ... Needed 5 k  in credit .. income is 33 k ... they dont care... 

Reply by
jessicasmith819

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0 People Helped

Same here, I paid three things off and my score dropped 30 points! What gives?

Reply by
JhnyMac

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0 People Helped

Enter Your Replyits not that you paid off.  Don't close any credit card accounts. That will drastically  lower you ur scores. They base scores on paying according to open account that are old and open accounts. Also sometimes if you leave a low balance and just pay min Pymnt and score will go up

Reply by
clfrbn

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0 People Helped

Your score doesn't drop BECAUSE you paid everything off.  You're missing something.

8 Contributions
35 People Helped

Helpful to 31 out of 33 people

If anyone from CK goes to the community forums they will see that many people had dramatic drops in scores despite improving their credit.  CK needs to explain what is going on here.

Credit Karma Team
Top Contributor
2949 Contributions
5345 People Helped
Helpful to 35 out of 53 people

Credit Karma doesn't calculate your credit scores  - we purchase them directly from the credit bureau on behalf of our members. Since we have over 50Million members, there are countless reasons why scores can change. While some users saw their scores change when we began providing a new score model in 2014, not all did - and that does not account for recent score drops. Everyone should review their own credit report to look for changes that may impact their score. 

Reply by
shroom420

6 Contributions
17 People Helped
Helpful to 13 out of 34 people

the CK team is pretty useless its like theyre reading a script and have no clue what they're talking about , clearly the credit cards are still using a differnt more logical system and CK is trying to justify their crappy system with fancy terms , they screwed up they need to fix it and revert back to the system creditors use not a system you think is correct  just because you get paid off by those advertiments 

Reply by
iluvskittles83

2 Contributions
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Helpful to 13 out of 14 people

CK is not 100% accurate about your score. It only gives a roundabout. You have to pull your credit report or go to FICO.com to get your real credit score. 

1 Contribution
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Helpful to 11 out of 11 people

It is clear to me that the credit reporting companies have no interest in cleaning up their act or being accessible to the public. 60 Minutes couldn't get in the door when they tried.

The "reasons" credit drops are chaotic. This is a very poor way to account for somebody's ability to repay a loan.

Don't forgot, companies that had very poor economic standing were getting A'ss and A+'s from financial reporting agencies - because if the agencies didn't give those scores, the companies would just go down the street and buy the good scores from somebody else.

This whole business is a scam.

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