One of the biggest misunderstandings most employees have about personal finance, is the belief that they have "a" credit score. That confusion has led many to submit credit applications only to later be denied.
Most of us have many credit scores, calculated by different credit bureaus, scoring models, versions of those models and different dates of calculation. On top of that creditors, banking institutions, etc., may not all be using the same score.
So an employee may feel ready to apply for a car loan because the score in their chosen credit app looks strong until the auto lender pulls a different score. Or an employee may think they're close to mortgage-ready, but the mortgage process uses specific requirements and lending standards, and the application they once thought was a "sure thing" is a bag of disappointment.
The credit scoring system is more complicated than the average person has been taught.
The Real Issue is Score Literacy
FICO is one of the most important credit scoring brands in lending - and has been for almost 40 years. But there are more than 25 versions of FICO scoring models actively used by lenders across the three major credit bureaus (TransUnion, Equifax and Experian), with lenders utilizing specialized models for auto loans and credit cards. That alone can leave any borrower confused about readiness and utterly deflated if the outcome is denial.
Why This Becomes a Workplace Financial Wellness Problem
Financial stress doesn't stay at home. It walks in the door with your employees in the morning, and leaves with them when they clock out.
Employees bring financial pressure into the workplace because they are human. They may be worried about a denied car loan, a rejected apartment or mortgage application or a pending collection account. This stress can affect workplace focus, confidence, attendance, decision-making and long-term planning.
This internalized anxiety can lead to an increase in workplace distraction, reduced productivity and employee turnover.
Workplace financial wellness directly addresses this unspoken anxiety. Financial wellness workshops should not only tell employees the importance of budgeting, but explain why a person with decent income and credit can still be denied, overcharged and feel financially stuck.
What Workplace Financial Workshops Actually Accomplish
Strong financial workshops should make credit scores less mysterious and more useful. Depending on the specific financial workshop, employees should leave understanding:
- why they may have more than one credit score
- the difference between a credit report and a credit score
- why FICO and VantageScore may not match
- why lenders may use different scoring models
- how payment history, balance, age of accounts, applications and derogatory marks can affect scores
- why a "good looking" score doesn't automatically mean loan readiness
- how credit, debt, and income work together in major lending decisions
- how to properly manage debt
- how to establish or rebuild credit
- what to review before applying for credit, housing or a mortgage
This kind of workplace financial education is the kind of education that builds financial capacity in employees and leads to unspoken confidence that spills into workplace productivity and focus.
Why Businesses and Organizations Should Care
Employers, schools, workforce programs and community partners do not need to become lenders to care about this issue; they only need to recognize financial confusion affects the people they employ and serve.
If an employee cannot get reliable transportation because of credit issues, that affects their ability to show up to work. If housing is delayed because of misunderstood readiness, that affects stability. And if a worker is carrying expensive debt because they didn't understand credit options, that stress doesn't disappear during business hours.
Financial education is not a cure-all, but practical credit and debt education can help people make fewer rushed decisions by putting the power of education back in their hands to better understand the systems they're navigating.
And that's worth teaching.
Bring This Workshop to Your Organization
Proofing Dough offers financial education workshops for businesses, community partners, workforce programs and organizations that want their people to understand credit, debt, FICO, credit scores, credit reports, money habits and personalities to help them make better money decisions.
The FICO and Real Life workshop helps participants understand how credit scores work, the 5 credit score categories, why different scores may appear, what models lenders may look at, and the 5 C's of credit. This workshop gives them a holistic view of the FICO and VantageScore and how to navigate their financial landscape better understanding both.
Interested in bringing this workshop to your team or community? Request workshop information from Proofing Dough or visit the Workshop page.