I have only one credit card which I charge everything to (credit limit is more than enough at over $10k) and which I pay off in full each month and have no absolutely debt, therefore my credit score is absolute dogshit.
Yes my car insurance jumped $100 the minute I paid off my car.
I’ve found that this is usually a “staying with a single insurance provider” problem. I usually end up switching every two years or so, but I check everytime my six month renewal comes up. I’ve found that my premiums pretty consistently go down so long as I keep looking around. The last few times I switched from geico to progressive then back to geico, and the cost went down each time I switched.
Fun fact. At the last call to make sure my insurance was switched over properly, I had the csr angrily explain that in order to get the same affect, all I had to do was ask for a reevaluation of my policy. It turns out that the automated systems that send out your new price every renewal don’t do a good job of adjusting the premiums down and you’re supposed to ask a person at the company to review things if you don’t like the automatic price.
I plan on continuing my personal policy of switching providers every few years anyways. I’d rather have the new customer prices than deal with a person on the phone going through every option to see if the new price is actually better or worse than the competitors offers.
I’ve always heard the best way to keep the costs down was to keep switching insurance providers. Unfortunately my wife chose to buy insurance from her high school friend
Ugh yeah. And I have renters insurance through the same brand. I’ll have to look at swapping.
Just change agents to keep your long term customer discount.
It’s your fault for their dumb system you dunce. Ask next time dumdum
I had the csr angrily explain that in order to get the same affect, all I had to do was ask for a reevaluation of my policy
“If it’s hurting your customer retention, it sounds like you stupid fucks need a reevaluation of your pricing policy”
As a fellow bureaucrat, I absolutely understood his frustration. Why go through the entire process of switching insurance, risking missed coverage days, and other bs, when you could just call and have a person look at the generated evaluation numbers to fix things? He wasn’t mad at me; just had his professional bride bruised when he found out that I was getting the same effect as the official process by doing (in his eyes) even more work than a simple call would be.
I actually love finding these things in my job. Whenever someone does something that looks really silly on the surface, but as soon as you look into it from a user persective you find out it’s just as good (or better) than the official process you originally expected. It’s always trippy finding them because you have to turn your brain around to understand why they did it. And you always wanna keep it in your back pocket if you ever end up in a similar situation.
I do pretty much the same, it does seem like it’s usually around the 2 year mark that they try to raise premiums. I may try the policy evaluation thing next time just to see what happens. But yeah, it’s always a good idea to look around at other carriers when they pull this crap.
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Not saying the UK has it right (cos we definitely don’t) but the ‘loyalty penalty ban’ has really helped.
You can’t be charged more for staying with an insurer than if you were a new customer.
it’s your car now, not the bank’s. so you can reduce your coverage and lower your premiums. the higher rates are to make sure the insurance company doesn’t lower their profits when you drop the ‘full’ coverage.
Yeah. Between this and the “switch providers” advice I will be looking at it. I am not sure I want to reduce my coverage though. Where I live people are absolutely batshit. I know everyone says this…but I’ve never felt more in danger driving than I do in Connecticut, surrounded by people rich enough to murder me with their car and think of it as an inconvenience.
Yeah, it’s crazy what people do with insurance. We have a really odd car insurance plan. We just have a single mid-2000s Carola as our only vehicle. So we don’t bother with full coverage. If the car gets totaled, oh well, we’re out a few thousand. But what we do go all out in is the liability policy. I’m not worried about the 20 year old Toyota. I’m worried about losing our life savings if I cause an accident and end up putting someone in a wheelchair for life. So we buy the largest liability coverage we can, and then we have a million dollar umbrella policy on top of that.
To me this seems the only sane way to do it. Not only do I want to make sure I’m not financially destroyed if I cause a big accident, but also, just from basic compassion, I want to make sure that anyone I might hurt is well taken care of.
The shitt9est thing about credit is that payments that don’t improve your credit can still hurt it when you miss.
Late on rent or your cell phone plan? That’s a ding on your credit report. You can’t get a loan because you haven’t established that you’ll pay your debts.
Pay your rent on time for 30 years straight? No credit history. You can’t get a loan because you haven’t established that you’ll pay your debts.
After reading a good number of replies the thing that amazes me is that US banks aren’t on fire right now.
I’m trying but those sprinklers are really strong.
You have to get the molotov behind the curtain
Its crazy, the only debt I’ve held is student loan debt and I have paid the bill every single month. Otherwise I use checks and a debit card, I had money to buy a used car upfront.
Went to get a credit card. My credit score is below 700, and I was deemed “unqualified” because, get this, I don’t have a history of paying off debt, because I have not held enough debt to prove I can pay it off.
Now they want you to pay a secure credit card the privilege of having you as a customer, always with a high annual fee and absurd interest rate, and then after a couple years of bleeding maybe they’ll give you actual credit. Meh. If you’re above 620 you should qualify for FHA first time buyer’s loan, which is honestly one of the few ways to not get fucked right now. We’re going to do (housing crisis) indefinitely so even shit property goes up.
Yeah, it’s dumb, but you should be using a credit card for all your purchases and paying it off every month. I do this, and my credit score is over 800. Make sure you get a card that has cash back rewards so you can get paid for having to do this. Just be extra sure to budget it accordingly and not go into debt.
been playing their game a long time. basically add up credit limit on all your cards. divide by usage %. on time payments and years with good credit, net worth, are factors too. i don’t know their equation. sitting about 820 with no debt and 7 lightly used cards. used to play balance transfer until they quit offering incentives. 10k until finally paid down. always pay down principle as fast as you can. saves years of payments/interest. https://www.investopedia.com/ has lots of good reading. think they also sell stuff so.
I use a rewards card to pay for things like service calls/repaires (latest was $650 for a AC repair) I pay it off over a couple months. I could have paid it right away but the rewards give me free protein and gas and that is something these days. I do it in halves to spread it out and leave me extra liquid cash I can withdraw if I need it. I am considering holding about 500 or double that in small bills in case the financial system shits the bed for a few weeks in winter due to the tariffs and economy. Right now, nothing makes sense irt to the markets so I think it is all vibes and denial happening.
Just dealt with this. I didn’t even exist in the credit system. I’ve even been told if I had BAD credit I would qualify for something.
Eventually I did get connected to a small local credit union and got a pretty good deal on interest as a 'first time buyer’s program.
My credit rating is so bad that I had to have my brother co-sign a lease for me fifteen years ago. The landlord told him his credit rating was the highest he’s ever seen. My brother (and his wife) were in debt up to their eyeballs - over $100K in credit card debt and a mortgage they were deeply underwater on. They’re still in bad shape financially; meanwhile I now own my own home outright (having paid cash for a fixer-upper after saving up for a few decades). I still have shitty credit and it’s not affecting me negatively in any way.
fun fact, credit score is not a thing in most of the world.
It’s reasonably common in the developed world. And it’s a good idea that lenders be able to easily know how responsible borrowers are with repayment. That the US’ implementation of credit scores is problematic in some areas shouldn’t be used as a blanket dismissal of a credit scoring system.
i think that article describes many different systems and grouping them under a concept that’s not necessarily related. the us system is definitely an odd man out.
How so? They all seem to be used for estimating risk when pricing a loan and are based on financial history.
the big difference i can see is that most systems described seem binary. if you don’t pay your debs, you get a strike. the american system, as i had it explained to me, is based on cash flow, so you need to have debts to pay in order to get a good score.
Most of them mention a range of scores. China and India use scores which by themselves give about 3 billion people with credit scores based on statistical modeling.
A lack of cash flow is a lack of financial history which makes one less predictable and therefore riskier which lowers your score.
Not unique to the US, we have the same thing here in Canada
the uk also has something similar. which makes sense.
They want an established history showing you pay things you’ve agreed to pay. I’ve never made a lot of income, but I’ve always paid my bills on time, so even with a smaller cash flow I still have great records of always making sure I have enough to pay what I’m expected to pay, so I’m seen as reliable to any possible debtors.
The US credit score system is from the 60’s. Things worked just as well before it existed…
I didn’t think it started in the US until the late 80’s.
The modern version we know is from the late 80s.
This is technically true but extremely deceptive if you don’t know the history. From “Creditworthy: A History of Consumer Surveillance and Financial Identity in America” (Lauer, 2017; Columbia University Press):
Chapter 3: “By the late 1890s systems for evaluating the credit risk of individual consumers existed in metropolitan centers throughout the United States.”
Chapter 4: “During the early twentieth century millions of Americans came under the watchful gaze of newly formed credit bureaus. But these bureaus were only one arm of the emergent consumer credit apparatus. Their counterpart was the credit department of individual stores, where credit managers interviewed, documented, and tracked customers for their own benefit and that of the local bureau.”
Credit reporting has existed for a very long time in the US. So while a computerized score wasn’t there until the late 1950s (basically as soon as such a computerized score could exist, underscoring how eager banks were to implement it), your comment being technically true has no real impact on the argument of the merits of credit scoring.
From Wikipedia about the history of Equifax:
Equifax was founded as the Retail Credit Company by Cator and Guy Woolford in Atlanta, Georgia, as Retail Credit Company in 1899. By 1920, the company had offices throughout the United States and Canada. By the 1960s, Retail Credit Company was one of the nation’s largest credit bureaus, holding files on millions of American and Canadian citizens. Even though the company continued to do credit reporting, the majority of its business was making reports to insurance companies when people applied for new insurance policies, such as life, auto, fire and medical insurance. RCC also investigated insurance claims and made employment reports when people were seeking new jobs. Most of the credit work was then being done by a subsidiary, Retailers Commercial Agency.
People latch onto the fact that credit scores were invented and ignore decades of credit reporting prior.
before, bankers used other ways to discriminate, such as (and if you know anything about US history this should not be a surprise) being Black.
not to defend credit scores. they suck. but what existed before sucked too and we shouldn’t go back to them.
Redlining still happens today. They just discriminate in more ways now.
I wonder if that means that borrowers in the rest of the world have to pay a premium when they borrow money because the bank is taking a bigger risk.
i mean there’s still a way to mark that someone isn’t good at paying their bills. its just not a “score”. it’s yes or no.
Sure, so if you’re late once you’re a “no”? That’s gotta suck.
it lasts for five years i think. some places have a three-strikes system.
here, there’s also a system that allows you to basically cancel your debt if it gets overwhelming. if you qualify, you can sign up to let the state take all the money you make above the level of minimum subsistence for five years, which they use to pay off your debt as far as possible, and after that the remaining debt is zeroed. there are a bunch of criteria, there basically has to be no way for you to pay it off by selling things, but it’s there.
So, you can basically declare bankruptcy? That’s good.
Why is it you think a three strikes system is better than a score?
no, your debts stay through a personal bankruptcy. this is different.
with a strike system, you’re good until you’re not. a score system means you can be rejected from some places and accepted at others, giving scummy lenders an in.
also, there’s none of that “your score is low because you have nothing to pay off” nonsense.
No, the whole point of bankruptcy is that your debts are cancelled.
At the end of the process, your qualifying debts will be discharged, meaning you’ll no longer be responsible for them, so long as you satisfy the bankruptcy terms.
https://www.investopedia.com/terms/b/bankruptcy.asp
with a strike system, you’re good until you’re not.
How is that better?
a score system means you can be rejected from some places and accepted at others
And that’s worse than being universally rejected? In reality, if you’re completely shut off from credit, it will just encourage illegal loans from loansharks, etc.
also, there’s none of that “your score is low because you have nothing to pay off” nonsense.
You don’t have a history of dealing with debt, so they don’t assign you the ultra-safe score. If another place doesn’t have that, they’ll simply have to charge a higher rate to everybody because they can’t tell who is going to be good at handling debt and who isn’t.
fun fact, neither is the social credit they complained that china had, but the western credit score is basically a social credit that punish people for not consuming beyond their means.
China social credit started out as something like a credit score where you would get beneficial services/rates with a better score from lenders such as Sesame Credit.
The government took that and applied it to many spheres of the society in a pilot program. I don’t know how it is today since I haven’t looked into that since 2019.
So when you have some car insurers, for example, that offer to put a gps device in your car in exchange for better rates, this is how the social credit system started through private companies.
You can raise it well without going beyond your means, but then it’s a slow and annoying racket.
hard disagree.
a perfectly responsible person would only buy things he can afford. his credit score would be non existent.
you only get it if you have debts, if you finish paying your debts the score goes down, so you have to consume to maintain it.
also, a perfect score isn’t ideal. lenders are more interested in loaning to people who will fail some payments, as that means higher interest and more profit.
so you are punished by not overconsuming, and you are punished if you consume and are perfectly responsible.
I’ve made it to what is typically classified as an “excellent” score with practically no debt and have paid no interest all while spending within my means. Here’s how I did it.
I have several credit cards that I keep paid off every month. I almost always buy things with store promotion credit (no fees or interest), which is typically another credit card or small loan, and pay it off within the promotional period. I do this with purchases I need to make anyway, like a washing machine, and not on anything frivolous.
I paid all expenses for a nice vacation recently with new travel cards. I could have paid out of pocket, but now I can pay it off slowly with 18 months interest free and get the points.
I do drag these payments out a little during the promotional periods because while I can pay outright I do like keeping cash reserves for emergencies. That probably does help.
The only loan I have ever had was a very very small student loan. Paid that immediately after covid loan pauses ended. I did recieve a credit hit of about -20, but in 3ish months I was above where I started. I’ve noticed everytime I pay off any large credit it takes an immediate hit, but always grows higher in a few months.
So far I’ve not been denied on any credit I’ve accessed and typically get good terms, so I’m not sure how true it is that I’ll be denied for having a good score. But I am just barely at that “excellent” score.
Now the downside and credit to your point is this took a very long time. If I bought a ton of things I could barely afford and just barely made payments, maybe even missed a few, my score would have grown so much faster. Paying on an irresponsible loan for 5 years is considered “better” than me paying my credit card off every month.
Imo that’s the racket, people that spend irresponsibly grow their score much faster. It does indeed promote overconsumption.
But it is still possible to grow a good credit score with slow incremental work. It’s unfair and a bad system. I’d rather not have to do any of this, but it’s possible.
what you described is a fucking nightmare of a system. so painfully convoluted and unfair, and the only one who wins is the shareholders because of all the consumption.
Pretty much yeah, but until my fellow citizens wake the fuck up I still gotta access the system to live unfortunately
And didnt exist until 1989 in the US. Credit scores and Tay Tay are the same age.
Sorry, but Tay Zonday was born in '82, so predates the credit score. (There’s only one Tay Tay for me and it’s Zonday)
…TIL he’s older than me. What a wild world. He looked he was in high school when he went viral.
Credit reporting has been a thing prior to that, but yeah, scores are relatively new.
However if you were a minority or a woman it was also a bitch to get a loan prior to it. Though women couldn’t even have their own bank accounts till… the 60s/70s?
Women earned the right in the 60s, but it wasn’t until the Equal Credit Opportunity Act passed in '74 until banks were forbidden from requiring a husband’s signature.
The Equal Credit Opportunity Act prohibits financial institutions from discriminating against applicants based on their sex, age, marital status, religion, race or national origin.
https://www.forbes.com/advisor/banking/when-could-women-open-a-bank-account/
I worked for a Credit Union as a developer. I can attest that at least where I worked, there was a host of yearly modules you had to complete to ensure you were up to speed on how to not be an asshole and they took it quite seriously.
Really? In my country, women can still have their own bank account
There was a typo. Women were not allowed until the mid 70s
Is credit score in the US the same as social score in China but you are owned by your billionaire instead of the party?
it’s actually worse, which is fun
Yeah, credit score is a social rating in the US
Just trolling, Russia has a credit score system
I would love for each person living in the USA to reach zero debt. It would probably collapse the damn system. It’s ridiculous how much of it relies on you having debt and some stupid credit score.
It’s not stupid, it’s actually an ingenious way to rig the system to keep the siphon tapped into poor people’s bank accounts.
just paid all credit cards to zero, FICO 8 went up 16 point, FICO 9 went down 15 points 🤷
Got a new car loan.
20 points up.
When I was a a young adult, I got a new credit card. The credit check dinged me for 10 points.
When I asked why, and how I can fix it, the credit card company support person said, “Just carry some debt.”
Its a ridiculous system.
I keep my one credit card paid off to 0 every month, have never paid a car loan, only debt I have is a mortgage, and my score usually just floats around 825.
Basically the same for me except no mortgage, and I’m also in the 800s.
Though once you’re over 750, you’re essentially at the highest tier in every lender’s eyes already.
Yep, and I was at that point years before getting a mortgage.
On the topic of the title: In my own case, I didn’t even pay all of my debts, all it took was to pay off my student loans. My credit score dropped 30+ points from that and has never recovered since.
And to all the liars who said some variation of “it’s just a temporary drop” … You are liars. That is simply not true, at least not for everyone, and you lied. Maybe consider stop giving advice about things when you’re clueless.
And to anybody who might consider listening to those clueless liars, please note that a whole lot of the advice you might read from people online is coming from clueless liars.
Okay, I’ll end my rant there.
But… The fuck is the alternative? It’s not worth being late on payments to keep a loan open nor is it worth racking up interest if you can pay it off early (*) only because you want to keep a few extra points on your score. ~30 points isn’t that serious depending on what your score is. If it’s low it can matter more, but if it’s higher it doesn’t matter too much. It’s very rare that ~30 points will make or break you. In short, I wouldn’t consider paying extra interest only for my credit score to stay higher.
(*): Depending on the interest rate of your loans it’s not always worthwhile to pay off early. Everyone’s risk tolerance is different, but, hypothetically, if your interest rate is less than what you can get in a high yield savings account you’re better off putting the extra money into savings. If you’re risk tolerant then bonds or total market index funds may be a better choice as well. This really gets into the weeds of it, but my point is that ~30 points really isn’t worth paying extra interest money for.
My credit score dropped 30+ points from that and has never recovered since.
How much time is “since”, and your credit score according to what/who? If it’s Credit Karma, keep in mind that its scoring method “VantageScore” ‘zaps’ a closed/paid off account from your credit history immediately, but none of the credit reporting bureaus work that way, they continue to consider the paid off loan with respect to account age/etc. for a number of years afterwards.
Based on how the blanks are filled in above, you may have your fair share of “clueless”, so I wouldn’t be so hasty to call people “clueless liars” (not to mention that if someone is wrong because of lack of knowledge, that by definition is not a lie).
Keeping a mortgage is also used as a tax write off. So a lot of people who could afford to pay off their homes don’t because of that as well.
I’d like to see the math on that.
That’s because it’s generally false. It’s only correct under certain circumstances like being in the house flipping game, etc. and likely requires you to have a tax lawyer.
Paying a mortgage generally costs more than the deduction.
Doesn’t everything cost more than the deduction unless the tax is more than 100%?
You’d think.
But it gets weird when you are doing a lot of business because other factors come in that DO NOT APPLY to normal homeowners.
That’s the only reason I qualified with any exception which is the inverse of what op was doing.
The real death of America is everyone drowning to death in made up fees.
Junk fees have been lurking for years but post covid, they took a life of their own…
The sad reality most plebs just accept it because they must consoom🤡
You say that like it’s an option chosen by idiots, but we literally must consume, as in people have to fucking eat, and we don’t have the option to just nope out of capitalism and grow your own food on your own land unless you have a stupid amount of capital.
Only my experience, but I’ve worked both as a teller and as back office in financial institutions for over a decade. Out of all of the people who were chronically overdrawing their accounts, I honestly can’t remember a single one who was doing so off of buying essentials, it was always frivolous luxuries.
Hell, over the years I’ve even heard a coworker talk about how they have no money until their next paycheck at the end of that week, and then later that same day, talk about what designer sneakers they want to buy when they get their tax return.
There are definitely people who struggle to make ends meet, but the fact is, the majority of the times ends aren’t met, it’s deliberate. People in the US are more likely to have a problem with overspending than underearning, on average.
Most of my exposure to junk fees have been at restaurants which can be avoided followed by some forced bulls shit service which can’t be avoided.
Point being there still places don’t try this shit, they should be rewarded for it.
If you are paying fees on discretionary consumption, you are the problem.
That’s one example practical example of how inflation works.
Gorcery stores don’t have fees or haven’t seen them do it yet at least.
Maybe don’t condescendingly blame people living under capitalism for the cruelty inflicted by the ownership class, you fucking pleb.
Y’all so easily give agency to fight. Day in, day out same limp dick retorts about how you cant be bothered to make better consumption choices.
Got forbid you are old to take action and fight the regime
Ohh well keep consuming, boy, I am sorry you can’t be bothered to take any direct action to hurt the parasite class profit.
Refer to my previous comment.
Comment is non sequitur
Now get back to paying junk fees, daddy counts on you being complacent 🤡
No kidding! Way back in the 80s I had a US Bank account called “The Only Account”. It was a checking and savings account where checking always had a balance of zero. When I wrote a check or withdrew money from an ATM, they automatically transferred money from savings to checking to cover it, and then the checking balance immediately went back to zero and that was that. No overdrafts. Ever. There was an annual fee of I think $20/year.
I don’t know where that idea went, but banks and even credit unions now act like they never heard of such wacky nonsense. “Overdraft protection” consists of loaning you the money, no matter how much you have right there in your savings acct, and they charge a fee each time and of course also charge interest on the loan. Ridiculous.
“Overdraft protection” consists of loaning you the money, no matter how much you have right there in your savings acct
That is not universal, many financial institutions let you set it up so that your savings automatically covers overdrafts.
I’ve had that be the case in my Ally accounts since like 2010 at least, for no fee. Hell, Ally doesn’t even charge overdraft fees at all anymore, apparently.
Srsly? When I had the Only Account it was in Oregon, then I moved to Seattle and couldn’t find a bank with that feature. Even US Bank, where I had the account in Portland, didn’t have it in Seattle. The clerk gave me a kindergarten explanation of how it’s not one company, it’s more like a family with lots of cousins all over. I LOL’d mentally because I knew it for a fact was and is one company (I had even traded their stock in the past, symbol USB). But anyway apparently their accounts and features varied by state and Washington state didn’t offer thar type of account. I will have to look around again now, thanks!
My credit union has this. That feature has kicked in for me a few times for me just this year.
You didn’t explain what would happen if your checking account had a $0.00 balance and your savings account had a $0.00 balance.
Seriously can someone tell me what happens? Because money keeps coming out of my savings…
If you flat out had no money I believe the check would bounce. At least I don’t remember ever hearing of the automatic loan scheme until I moved to Seattle and merged into my wife’s credit union. If your CU has an only-account type feature you should check your statement to make sure money that moves out of savings is to cover checks or debit transactions that would have come out of the checking account.
Some finttech cash management accounts offering this.
I didn’t realize it was a thing before. 2000s was peak fuck the pleb over draft fee bullshit.
Stop trying to max your credit score. You don’t win any extra prizes for having an 850.
Having a good credit score (>670) isn’t difficult. Have a couple of cards, keep your balance under 1/3 of the limit, and pay it on time. That’s it. You’ll have a 700 in short order. Getting it above 750 is just more of the same.
I get that there are perfectly responsible people who don’t leverage credit to gain their needs and then are rejected by the banks when they go looking for a 200k loan. But that’s not the world we live in. Bill the Banker isn’t the guy whose lived in your community for twenty years and goes to your church. That world is gone and had problems too.
This impersonal world sorta sucks, but I’m not close friends with my neighbors and some of them seem like people I wouldn’t get along with anyways.
The real rub of it, in my opinion, is we are subject to these standards without being consulted or, really, considered.
But honestly, don’t worry about maxing your credit score.
Problem is that those “non-persons” can’t stay in their lane, and have to pollute and disrupt society with their predatory tactics, instead of going to some forest and “pulling themselves by their bootstraps” alone.
These are strangers asking for money. They have no objective evidence that they are a good bet. Why would the bank give them a large loan for a long time?
I wouldn’t give that person money and you wouldn’t either. Hell, I wouldn’t give a lot of people I know that loan. Less about them and more about me.
This post is about insurance premiums and has nothing to do with credit scores.
The rest of the comments, on the other hand.
Credit-based insurance score is applicable though with relevant overlap.
Think Lexisnexis instead of equifax/transunion etc.
An insurance score is calculated by insurance companies based on information in your credit report as well as your claims history.
The post is about insurance premiums, but OPs title is very clearly about credit scores
Oh I see that now.
Credit Score exists to sell you more Credit Score. This seems to have come about as a natural extension of them being required to let you see your Credit History.
It’s Credit History that you want, and that lenders check. They may turn it into a score, but that score varies by lender and what you’re borrowing for, and frankly they may want more than just credit history anyway if you’re borrowing enough to buy a house.
If you don’t have any credit history, use a credit card for your day to day spending, pay it off in full each month. As a bonus, you often get extra consumer protections that debit card boys don’t get.
Credit scores include credit history and more. Credit scores are used by many lending industries. Credit history is one of the two major factors in determining a credit score. There are two less than major ones and two minor ones. But to reduce credit scores to just history is wrong.
Getting above 700 is quite easy but going above 800 without a car loan or mortgage has been pretty difficult for me and my partner. Credit cards alone even with high limits doesn’t look the same to the Bureau’s as a mortgage or auto loan for whatever reason.
Credit score in Murica is the dumbest thing I’ve ever heard. You’d think your credit score would be high if you always paid everything in time, were never late and never penalized. Instead you only have good credit score if you’re perpetually in debt. Wtf?
Think of it as a profitability index rather than a diligence index, and it will make more sense.
It will also be wrong.
The only credit lines I have and have had for the last 7 years (which is as far back as the bureaus care, at maximum) are credit cards. I pay them off every month, so I’m charged zero interest, and they’re rewards cards, so their profit off me is literally negative.
My credit score is over 800.
Your ‘reward’ is less than the transaction fee they charge the vendors. You use your cards a lot, they make a lot of transaction fees. As long as you never miss a payment, you won’t get the interest fee, but miss or be late with just one, any they will charge you interest on the full balance, every month, until you have a $0 statement. That’s fantastic for them, but they’re perfectly profitable on just your transactions.
Your ‘reward’ is less than the transaction fee they charge the vendors.
And that has literally nothing to do with customers’ credit scores/reports, and my point was to rebut the assertion that credit scores are intended to be measurements of how ‘profitable’ a borrower is, so it’s meaningless to bring up this irrelevant fact I already knew.
You’d think your credit score would be high if you always paid everything in time, were never late and never penalized.
That is exactly how it works. That’s exactly the situation I’m in, no real debt (only credit cards, which I pay off in full monthly, so no interest) and haven’t been since I paid my auto loan off over a decade ago, and I’m in the low 800s, where 750+ is the highest tier in the eyes of basically all lenders.
Instead you only have good credit score if you’re perpetually in debt.
Incorrect. I’m astonished at how persistent this misconception still is.
Having an active loan is by its very definition being in debt…
Technically, borrowing from a library is also ‘being in debt’, but no one considers themselves to be “in debt” to a library they’re currently borrowing from, because there’s no accrued ‘interest’, you just bring the items back at the specified time.
Using a credit card over the month and paying the exact same amount at the end of it, as you would have paid piece by piece over the month had you been using cash, is essentially the same thing.
I’m never in debt aside from a mortgage and have 1 credit card I use and pay off every month. No car payment ever. Bills are electric, trash, and cell phone. My score is 825. It was pretty high before the mortgage as well.
No offense, but you’re misinformed.
You get a good credit score by borrowing money and paying it back faithfully, not by being perpetually in debt. I carry a mortgage but no other debt, and pay off every credit card balance before charges or interest accrue, and my credit score is solidly in the top range.
I know it’s a crazy concept, but to be considered a safe person to lend money to, you have to actually borrow it sometimes and prove that you will pay it back.
You get a good credit score by having debt. That’s just kind of common sense, because they don’t know how to score you until you gain some debt. That part is mostly okay.
The dumb part is when you pay off that debt, such as a mortgage or car loan, your score actually goes down.
Your score might go down a bit when you pay off the loan, because those large accounts are no longer being reported as active (and therefore no longer reflecting your current record of creditworthiness). But it’s generally a small amount compared to the benefit of having that positive record on your history, and definitely not enough to impact your ability to secure a new line of credit.
Don’t get me wrong–there’s a whole bunch of legitimate complaints about how credit scores are calculated and used, but it’s also pretty simple to maintain a solid credit score without going into debt. In fact, having that available credit and not carrying a debt benefits your score.
You have to go into debt. If you have a credit card and still pay it off each month, that’s still short term debt. A mortgage is debt.
The point is that if the credit score is supposed to represent your trustworthiness to a potential lender, it is absurd that paying off a debt can lower your score at all.
it is absurd that paying off a debt can lower your score at all.
I think you’re missing an important piece.
The point is that if the credit score is supposed to represent your trustworthiness to a potential lender today
My bolded word added. If you pay off all debt and a month goes by (and your score drops) its because they don’t have evidence that you still have the resources to service the future debt.
I mean, “going into debt” is kind of charged language and I don’t think most people would apply that to using a credit card and paying it off monthly, even if it’s technically correct.
And to the second, If you had to choose between two people to lend money to today: A person who just today made the last payment on a mortgage after 30 years of on-time payments, or the identical person who finished paying off their mortgage 2 years ago and has not made a mortgage payment since, I don’t think it’s absurd to suggest the former is a slightly safer bet to lend money to. But again, it’s effectively a rounding error in your score.
Hard disagree with your first sentence.
If you are using a credit card for everything, you are going into debt.
If you pay it all off every month, you are very skilled at going into debt.
Thats kind of the whole point of on time payments and carried balance as % of max balance as components of credit scores.
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You could just be doing the same thing with less steps by using a Debit Card.
But, the former activity boosts your credit score, and the latter activity does not…
Despite both people being equally responsible.
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However, if you lose that discipline, or an emergency happens, and you are on paradigm one…
Now you get charged interest, late fees, cash advance fees.
But, in the old school, just use and have a normal, more local bank account model, pre mass proliferation of credit scores…
Your bank is going to know you, probably trust you, and can offer you a loan themselves, a personal line of credit, and they’ll probably give you lower rates, less arcane fee structure.
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Also… banking locally (with an actual local bank) or using a local credit union…actually keeps money within your local community.
The local bank is only gonna be giving business and home loans… to local people.
The local credit union is not going to be massively tied up in things like collaterialized debt obligations trading on Wall Street.
Smear that all around nationally, globally, you end up with a system that is much, much more prone to highly financialzed, massive scale boom and bust cycles.
During the booms, the rich get hyper rich.
During the busts, the poor get decimated, the ‘middle’ become poor.
IE, Neoliberal globalism, austerity, etc.
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The full picture is much more complex than this, but hopefully this is simplified enough that you can see how … just using credit for literally everything, all the time… primarily benefits wealthy capital owners, and actually makes the economy more fragile, and spreads this fragility, and thus precarity, around like a cancer.
The all credit all the time model is why during financial crises, the banks get bailed out, and the people get austerity.
To do otherwise would collapse the finance sector, and well, we can’t have that, because then the hyper rich would actually suffer.
Making having a credit score functionally mandatory to particpate in society, means you are functionally mandated to be reliant on this system that routinely, reliably, predictably booms and busts, transfers real wealth upward to the capital class over time.
Really not that different than being born as an outright and literal debt slave, its just less obvious, less direct, works more slowly, more gradually.
The system does not need to be this total, this unavoidable, this unregulated, this inequitable.
Hell, most of the rest of the world still calls itself capitalist, but doesn’t operate in this extremely permissive to the capital class manner that the US does… hypercapitalist, profligate.
There is a lot in this comment, and unfortunately Lemmy is not the greatest forum for in-depth, point-by-point debate; but I did want to at least let you know that I read it all and appreciate you taking the time to write a thoughtful post, even if I don’t fully agree.
I do want to address this specifically though:
You could just be doing the same thing with less steps by using a Debit Card. But, the former activity boosts your credit score, and the latter activity does not… Despite both people being equally responsible.
A credit score is not, and should be construed as, a measure of responsibility (I see this line of thought a lot!) It’s simply a measure of how risky it is to loan you money based on your established history of being loaned money. (You and I would probably fully agree about it being inappropriate for credit scores to be used for anything outside that scope, however!)
Fundamentally, credit is a tool. Like any tool, it can be used wisely to your benefit, or carelessly to your detriment. If you treat a credit card as though your credit line is money you did not otherwise have, then yeah you are not going to have a good time (well, not financially at least). If you treat it as a layer of insulation between your bank account and the rest of the world, well the consumer protection benefits of a credit card versus a debit card are a no-brainer. That includes things like theft, as well as an emergency expense that may take you a few days or weeks to arrange cash to fund.
Calling credit card use “going into debt” feels similar to saying that wearing a seatbelt is “tethering yourself down”. Maybe literally true in some sense, but also part of responsible daily life in another sense. I mean, if I pay for my electricity bill with a credit card, surely you wouldn’t tell me I was going into debt to keep my lights on?
I actually do use a local credit union for my checking and basic banking needs. They are pretty good for things like auto loans. Funnily enough though, they were my first stop when mortgage shopping, and not only were they offering over a point above market interest rates, it felt like I was the first person in a decade who had tried to apply for a mortgage with them, and they weren’t sure what to do with me. So yeah, banking locally can have its perks, but it can also be hit or miss in my experience–definitely not a panacea and did not give me confidence in using them for major transactions.
If you have a credit card and still pay it off each month, that’s still short term debt.
What exactly is the difference between taking cash out of your wallet for each expense in a given month, and keeping the cash in there and taking it all out at once at the end of the month, the exact same amount as the sum of the cash you would have taken out over the month each time you purchase something?
If you’re never carrying a balance to the next statement cycle and therefore charged no interest, you’re only “in debt” in the most pedantic sense possible, as what you’re paying back is not a penny more than what you’d be paying anyway in cash. The literal only difference is when you’re paying that same amount.
I’ll disagree with you that it’s pedantic at all. It’s important to highlight that charging things to a credit card is debt.
You can disagree all you like, but you absolutely are being obtuse and pedantic, as much as if I said “It’s important to highlight that borrowing a book from the library is debt.”
Yes, literally, and technically, it is, but in reality, no one actually thinks of borrowing a book from the library in that way, because there is no interest accrued.
Paying your month’s expenses all at once instead of one at a time, by using a credit card instead of cash and paying off the statement balance every month, is functionally identical to borrowing from a library, not to taking out an installment loan with an interest rate.
You don’t get a good credit score by having debt, there is more to it than that and it is misleading to to state things that way. There are a variety of factors used for credit scores and they are weighed differently depending on what company is doing the credit score. If you want a good credit score then having access to lots of credit you aren’t using while paying off debts on time regularly will get you a good credit score. Telling people they can get good credit by taking on debt is bad advice that is more likely to lead them down the road towards bad credit.
We know you’re good for themoney now you don’t have the extra outgoings!
Gotta g get that $ somehow
