I do a quick check of my credit score approximately on a monthly basis. I’m not sure exactly why I do that, considering that I’m comfortable financially, my life is pretty much the same it’s been for some time, and I don’t foresee any major changes.

I have one credit card, and a five year auto loan that has about a year and a half left. That is the extent of my outstanding credit. My monthly purchases on the credit card fall within a very narrow range and I pay it off every month. The auto loan is current and I’ve never been late with a payment.

Given the above, one would expect my credit score to remain the same, with a few minor fluctuations on a month-to-month basis depending on how much I charge on my credit card. And it does, mostly. But in the last month my credit score dropped 32 points (almost 4%), and I have no idea why. There have been no recent inquiries, no new accounts, no missed or late payments, and the outstanding credit card balance is within the normal range of what I charge on a monthly basis. In short, nothing has changed.

At least, nothing on my side of the equation has changed. Whether something has changed in the way the Vantage credit score is computed is an open question. It’s an open question because only the people computing the credit score know how it works. We’re being graded on hidden criteria. The scoring system is proprietary. Most of us who are affected by it have no way of knowing how our scores are computed or how our individual financial decisions will affect that score. And yet, credit score is a huge determining factor in one’s ability to get a good rate on a house or car loan–or to obtain a loan at all.

Sure, we know some general rules: don’t have “too much” available credit or use “too much” of it. Don’t have “too many” inquiries or open “too many” new accounts. But be sure to have “enough” available credit and be sure to use “the right percentage” of it to show that you know how to handle the responsibility. And be sure to have a first mortgage because that shows your ability and willingness to handle long-term credit commitments.

You paid off your home mortgage? Shame on you! We’re gonna subtract points because “you don’t have enough experience with a first mortgage.” That’s right, paying that 30-year loan off in 20 years is a bad thing.

There are general guidelines (Vantage, for example, says that I should have at least $50,000 in available credit and using up to 10% of it is “Excellent”, which is ridiculous), but there’s no hard detail that says exactly what the grading criteria are and how they interact. As far as consumers are concerned, a bunch of numbers go into a black box and the MagicScore™ comes out. We don’t get to know how it all works, and apparently we’re not even told if the innards change and suddenly we’re being graded completely differently.

In a just world, we’d at least know how the score used to decide whether we get a loan, and at what rate, is computed. I realize that credit score isn’t the only determining factor, but it can be a deal killer (i.e. everything else looks good, but the MagicScore™ is off).

I’ve long held that credit scoring, as currently practiced in the United States, is essentially arbitrary. Incidents like my score’s recent drop, with no indication of why it dropped, strengthens that perception. The companies that market the scoring systems (Vantage is a joint effort of the three major credit bureaus, FICO is a product of the Fair Isaac Corporation) and the financial institutions that use them, seem to have absolutely no desire or incentive to tell us how the scoring works. And consumers have nowhere else to go: buy into the credit score scam or go visit Guido.