I’ve only ever encountered this particular scenario once. (I live in Canada. I don’t know if it’s prevalent any where else).
But I applied for a job once, and got an interview. In the interview, they wanted to see a copy of my credit score. I left the interview immediately. All I’m going to say is it was an American company hiring…
That’s bullshit I keep a zero balance on my cards and have a perfect credit score. Car is paid off,I don’t own a house and only have a couple hundred dollars of student debt.
Perhaps it’s the lack of consistency in someone’s life. A credit score is just a system to tell banks if your are going to be profitable or will you keep up payments for them. Paying a card off is the ultimate revenue loss for a credit card company.
Not really, people with bad credit make them the most money, they stay in the debt cycle and have higher rates. They probably cover their loss risk in the first year of a lower credit score person in interest.
It amazes me that the western propaganda keeps talking about a Chinese social credit system that is an extension of existing social rankings and ratings in China which have existed for millennia, but no one blinks an eye to this American credit system that is horrendous. The Chinese system is mainly in place for business, not so much the individual, like in the US.
The US credit system is a way to make the poor, poorer with insane interest rates that are illegal in other parts of the world. The matrix for the credit system is unclear as it is managed by private companies. The whole thing is insane, but no let’s point at evil China where the system has no impact on normal people, unlike in the US.
+50 .ml credit
Good job, comrade. Nutomic is proud. /s
I think you’re overstating it by pretending that no one is paying attention to credit score. Especially when you say this under a post that literally points it out, it rings untrue
Banks are not government associations. They are scammers. Don’t interact with them. Take out your money. Don’t get in debt
Meanwhile people mock a fabricated Chinese social credit system that doesn’t exist (I know – I’ve lived there)
It’s not poorly implemented. It works exactly as designed. What most people fail to understand is it’s not a rating of how likely you are to repay a loan, it’s a rating of how profitable it is to loan to you.
So if you pay off your cards completely, you aren’t paying interest, and you’re not as profitable a customer as someone who has 10k in debt that they’re paying interest on every month.
Yup
Goes up if you make minimum payments on credit cards
Goes down if you pay off a credit card
Goes down if you miss credit card payments.
Mine goes up when I have a zero balance. My score always drops if they do the check while I have a balance on the card.
They also don’t exactly have an 850 rating if they’re $10k in credit card debt though.
My wife has a really high credit score. It’s taken me years to get her to understand that it’s not a rating of how good you are at paying your debts, but how much of a sucker you are.
So much straight up misinformation in this thread lmao. My credit score was in the 790s-810s up until this year. I’ve never missed a credit card payment, I’ve always paid it off in full every month, and I’ve paid off every loan I’ve ever taken out early. I’ve only started carrying a bit of a balance this year as we work on home renovation projects, and my credit score has started dropping because of it.
This myth is the dumber cousin of ‘tax write offs generate income’.
when you close your credit card your credit score goes down.
i called one of the three credit companies and asked, “Why?” They said because it makes me very hard to extend credit to without a credit card so that makes my score go down.
…
i’m also not a very good sea captain because i’m not a sea captain but it doesn’t cost me imaginary money points on my insurance premiums.
i’m also not a very good sea captain
It makes it very hard to extend maritime insurance to you. But you don’t notice that because you don’t need maritime insurance.
Part of the credit score algorithms are the amount of unused credit you have.
This makes some sense: other companies have been willing to extend you credit, and you’re not using it. Therefore your less likely to default (because you have more of a buffer if you need to spend), plus if you do, there are more lenders to shoulder the pain.
So when you close a card, you’re doing the opposite: you’re reducing the amount of unused credit you have. So your score goes down.
Footnote 1: you can offset the hit to your credit score if you can convince another card to raise its limit.
Footnote 2: if you have NO credit cards after closing your last card, then they have no insight (or at least far less) about how your finances are going because they can’t see that you’re regularly paying some other company. Additionally another part of the algorithm is how old your oldest account is if you have none than that part of the score is zero.
“Fun” aside: when I left for college, my father added me to his Amex (for emergencies) and that started my credit history. But he’d had the card since before I was born. For the next several years I carried a credit card that said “Member Since” a date well before I was born (and a credit history that said the same too).
Still not had a credit card and pretty sure I will be able to live my entire life without knowing or caring what my credit rating is.
Your score does not drop when you pay off a card. It’s drops when you pay off a loan.
And the reason is because your mix of credit changes. The formula says you’re lower risk if you use more types of credit responsibly. Having a mortgage, a car loan, and some revolving credit is better than just two of the three.
I think it’s important to mention why this is:
Your credit score is NOT a measure of just “how likely are you to pay off your debt”.
It is a measure of how likely you are to earn creditors money rather than lose them money.
Successfully keeping up with 4 monthly payments indicates you’re a likelier source of profit than only having one line of credit you pay each month. You likely have more expendable income, you’re more likely to pay interest instead of paying down extra principle, you’re clearly accustomed to carrying debt, etc.
This is a common misconception. Credit scores are actuarial risk, not profit utility. Having some debt load is a portion of that equation because it basically prevents dividing by zero. This is very basic actuarial science - you cannot produce a risk/utility metric without actually having priors, and within those priors there’s a concept of Fisher Information, which measures the likelihood that some sample of a random variable reflects true information about an unknown parameter. Simply put, the more information you have, the stronger the model. So the more debt you manage the more information about your debt management practices is available to the actuary. Up until the point that you have too much debt that it becomes very certain that you are high risk. If you have little credit history, but that history is perfect, you will still usually be in the lowest risk tier, but that might be like 780 instead of 850, or whatever, and that’s merely a reflection of certainly within the model, not your actual behavior. A person with similarly perfect behavior, and a lot more of it, should be intuitively seen as a lower risk.
If that’s the case my debtless ass should have a much lower score. I’ve paid off a bunch of loans (mortgages, car, etc) and have <1% utilization now. Credit score just stays high.
I think it’s more accurate to say it’s a measure of risk , but it leads to the same result. Good, consistent repayment history means you are a known low risk. Without that consistent and recent history you are an unknown risk. Giving credit to low risk borrowers is where the profit is.
You’re missing their point.
If you pay off a loan, your credit score will likely decrease. Why would someone who’s able to pay off a loan be considered a higher risk than someone who pays $x a month to slowly pay down the same amount?
It’s absolutely about potential profit over risk. In the latter situation, the bank makes way more money.
It’s not just risk (negative income fot them), it is also the potential gain.
A guy that gets stuck in debt via overdraft all the time, but manages to scrounge just enough extra income to pay it off, is a gold-mine for them.
I received a letter that my capital one credit card account was going to be closed because I haven’t used it in a year or two. They don’t like people who don’t use the cards or pay them off every month. It ends up costing them money
You’re correct about the late payers and minimum payment
20+% interest is legal loan shark
They are a higher risk because they no longer have an active demonstration of reoccurring on time payments.
There are many paths to earning profit for a credit issuer. Debt traps are one of the more predatory paths. Some credit issuers want to issue high rated bonds that provide low, but safe, income over a long period. Some don’t get profit from interest at all, high-end reward cards, for example. I haven’t paid a penny of credit card interest in decades yet I’m issued cards that provide me with over $20k in benefits every year, these companies make almost all of their money off swipe fees charged to the merchants and partnership deals.
It absolutely is “a measure of how likely are you to pay off your debt”, because that is “a measure of how likely you are to earn creditors money.”
It’s not some grand conspiracy. It’s a record of previous behavior to predict future behavior to determine if you fit their business model.
Your mix and your average age.
Same as if you close a credit card.
Paying off a credit card will massively increase your score. From having a lower overall balance, having more available credit, and a lower credit utilization.
It’s because the average age of your accounts decrease when your loan account gets closed. That 30 year mortgage going away really shifts the numbers around, when most of your credit cards are likely under 10
The formula says you’re lower risk if you use more types of credit responsibly.
And yet it says you’re higher risk if you had more types of credit, but eliminated one by paying it off. Literally doing the thing you’re meant to do.
And we all know that they can never alter the formula, so I guess that’s that.
We’re talking about why the formula is very stupid in certain cases, so “it’s like that because the formula says so” isn’t really an argument. Like… We know.
You’ve been saying the same bad advice up and down this thread.
If you reliably pay your credit card bills in full by the due date, your score climbs and climbs. Not instantly, over time. Reliability isn’t a one-off.
If you cancel your credit card, you have less evidence that other institutions are happy to lend to you, and your score could go down.
If you apply for a new credit card, your score can go down because that’s also what people who are running out of money do, not because your borrowing to limit percentage is low.
The highest credit scores are for people who have been loaned plenty of money, and who always make their payments.
Deliberately causing them to charge you interest just makes you poorer and does not show that you’re a good risk to loan to. It’s the front door for ballooning debt, and that’s what they want none of - people who get declared bankrupt or have other debt interventions are a massive loss to them, and what they want to avoid like the plague.
In my country you have to show 6 months of bank account history for all your accounts. You can have zero credit history and get a mortgage, they only really care what your income and regular expenses are. No credit score as such. If you’ve never applied for a loan, nobody but your own bank and possibly the government would know what your finances are up to.
Without a credit score, how does your country deal with wealthy people repeatedly borrowing money and not repaying it?
Welcome to criminal offense? You get sued, plain and simple. Bank or lender sues you, and either you cooperate or your shit gets taken and if it’s still not enough, you get part of your pay docked each month for x time.
In poor people cases, that goes down to minimal pay (exceptions happen if needed, for example caring for elder I believe).
Rich people have enough shit for taking most of the time that it gets resolved at first step.
Bailiffs can place an arrest their income streams and bank accounts and sell their cars and homes.
Also there’s a debt registry you can be put into if you’re like 3 months overdue and don’t come to some kind of agreement with whoever you borrowed from. Usually the banks are pretty lenient if you go to them with a proposal to pay off the debt in small installments because it’s less messy than going to court and getting a bailiff appointed
Ok, so in your country the debt registry functions as a credit score to warn lenders about deadbeat borrowers
Yes but it’s pretty difficult to end up there and most people never do. Meaning all our data is safe.
How does a credit score help? In my country we have a register for things like cars than you can see if any debt owed on it, so I guess tracking is on the asset side. Otherwise, wouldn’t it just be fraud and the banks would take legal action? That would still produce a record that could be checked too.
I realised it’s all fake anyways when my back went out and I was unable to walk for 3 years while I was on the wait list for surgery (I’m ok now).
I went from high credit with a decent paying but physical job to unemployed and no longer able up work in my industry. My partner had a few months of unemployment at the same time and I wasn’t able to pay my $11k credit card debt and he couldn’t pay his $20k debt. We borrowed money from my younger brother to pay rent for a few months.
Spoke to a free financial councillor, she talked to the banks for us and they happily just waived both debts. She told us to ignore both of our zip and afterpay debts, and not to reply to their debt collectors. And just like that we were debt free after owing 40k between us.
Came out the other side better off financially even though our credit score has tanked. And even though I don’t earn an income now or have any debt/credit, my credit score keeps rising?
Shits made up and the numbers don’t matter.
I’m curious how any bank would “happily” waive a debt of tens of thousands of dollars, just by being asked. “Happily”, yet they still send their debt collectors? I don’t think I understand. 😅
The debt collectors were for zip and afterpay.
My partner’s credit card debt was forgiven, I think the financial councillor was able to prove that he’d paid more over the lifetime of the debt in interest and repayments than the debt was worth, then proved our inability to make more repayments. She told me mine would have a bigger impact on our credit scores because it was written off by the bank rather than forgiven, but we don’t plan on taking out any more debt, that doesn’t really matter.
The “happily” was a little facetious, the bank I was with was actually quite rude and difficult to work with lol. I’d had issues with them being unprofessional and straight up lying to me in the past and closed all other accounts. The credit card was still open though because it was taking time to pay off.
Please ELI5 the terms “zip and afterpay” for those of us unfamiliar with them. I think I can guess the meaning from context, but would like to be sure. TIA
“buy now pay later” schemes. They are basically a credit card where you pay in instalments rather than a minimum monthly repayment like a credit card. Technically not lines of credit so they skirt around lending laws and can be given out to more people, but it also means they can’t do much to recover the debt if it goes bad. Which is why the financial councillor told us we could just ignore them if we can’t afford it anymore.
(I was in my early 20s when I racked up those debts lol)
TYVM for the explanation. I was not aware they weren’t considered LoCs & people could just walk away from them. Seems kind of a risky business model in that case, so I wonder why there’s been such an explosion of them over recent years. There must be some way they’re able to protect themselves from that.
Ah, well - another rainy day research project to throw on the pile if I’m so inclined.
Thanks again for the reply!
Haha well, from what I’ve heard, you’re not technically supposed to walk away from them but they don’t have the same legal recourse as banks so they just sell to debt collectors as the default action when you don’t pay.
There must be some way they’re able to protect themselves from that.
Remember in 2008 when it was found out that banks were trading bad debts as ‘good’ but then It exploded in their face and caused a global recession, but the banks were ‘too big to fail’ so they were all bailed out by tax payers and only one guy saw any prison time, so they can claim being tough on crime?
Yeah… i dont know why they keep doing it.
Not OP - They provide installment plans for purchases, kind of like Klarna if you’ve ever heard of them.
Ah, TY - glad I asked, as that’s not what I was guessing at all & that makes a LOT more sense.
Again, TYVM!
It’s most likely some form of “buy now pay later” “credit but not credit” nonsense
And even though I don’t earn an income now or have any debt/credit, my credit score keeps rising?
Have you pulled your credit reports to see? It will tell you what’s happening.
Here in Australia it’s basically a myth.
There’s two agencies that keep track of what debts you have, and whether you’re behind on your payments or whatever.
The “score” is just an effort to reduce that information to a single number, but lenders are interested in the file, not the score.
For example, the file might show that your score is good, but if half a dozen lenders have requested your file in the last 2 weeks that indicates that you’re desperate for finance, but 6 other lenders have found a reason not to give you any money.
Lenders are in the business of lending money. If you need to borrow $100k to buy a $500k house, any lender will be happy to give you the money.
Basically, your score doesnt matter just be sensible with your finances.
A lot of people in here arguing about how this works. Short answer is it doesn’t work that way. Period.
because a lot of lemmy posters think they are geniuses, when they are simple arrogant idiots who spout ignorant propaganda to feel superior.
it’s wild to me how many like basic facts of reality are viewed as some sort of conspiracy or exploitation.
credit scores are ridiculously simple, and if you have a crappy one it’s because you don’t pay back what you borrow. but sad losers will make up this elaborate nonsense and spout lies to make themselves feel better as to why their score is in the tank, rather than fess up that they simple don’t pay off their loans.
a lot of the commentary here reminds me of weight loss people complaining they can’t lose weight, when they cut back from a 4000 calorie diet to a 3500 calorie diet, but only burn 2200 calories a day… and they wonder why they can’t lose weight. because if you only burn 2200 calories, you need to eat less than 2000 to lose weight.
basic arithmetic.
Right. We use credit cards exclusively. We pay them off every month, never carry a balance. Our score is always in the high 700s sometimes 800 ish. 🤷♂️
this is not true and it keeps people paying interest they don’t have to so i’m pretty sure it was spread on purpose precisely for this purpose by the banks.
paying off and cancelling a card lowers your credit score not because you paid it off but because you’re down one line of credit. by far the number of lines of credit has the biggest impact on your score (aside from major shit like bankruptcy or loan defaults.)
paying off your credit card balance before it generates interest every month does not affect your score at all aside from increased age (a good thing). your utilization rate is not calculated from your end of month balance but by how much you use the line of credit regardless whether you pay it off or let it sit and charge you interest.
so do not let debt sit in your credit card balance because you think paying it off makes your score go down if you have the means to pay it off. always pay it off if you can, and never charge more to it than you can immediately pay off except emergencies.
Yeah, this. I have 850 credit, and I’ve never carried a balance on any of my cards, not even once. As long as you make your payments on time, even if it’s more than the minimum, your credit will slowly creep up. The annoying thing that lowers credit is paying off a loan. Wrapped up your student loans? Credit dip. Pay off the ol’ car? Credit dip. Really annoying.
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Like others said, I’m calling bull on this. I’m young and haven’t had my card for a long time, but I pay it off in full each month and I’m in the high 700s. The only things I can remember reducing my score are: 1. My credit history is too young, 2. I only have 1 line of credit rn, and 3. I had high revolving utilization one month. So now I try to keep my utilization around 30-35%.
If you don’t pay off in full you are now paying interest on your card. I did take econ class in high school (basically US financial education, and if it’s not federally required then it’s a mandatory class in my state.) and while it left much to be desired, this was one of the few things we learned. Basically the biggest lesson from that class was interest sucks and you should avoid it at all costs in anything, wether it be a credit card, payment plan, loan, etc. Always try to pay outright if you can, and reduce your credit usage to what you can actually afford. We would literally do the math to show how much more money you spend over time.
and reduce your credit usage to what you can actually afford.
Just be sure not to reduce it too much, otherwise it will lower your credit score.
That’s right, having a credit card but having a credit utilization under something like 30% will hurt your score.
Defend that one.
Wrong. My utilization has been under 10% for 20+ years.
You’ve been saying the same bad advice up and down this thread.
If you reliably pay your credit card bills in full by the due date, your score climbs and climbs. Not instantly, over time. Reliability isn’t a one-off.
If you cancel your credit card, you have less evidence that other institutions are happy to lend to you, and your score could go down.
The highest credit scores are for people who have been loaned plenty of money, and who always make their payments.
Deliberately causing them to charge you interest just makes you poorer and does not show that you’re a good risk to loan to. It’s the front door for ballooning debt, and that’s what they want none of - people who get declared bankrupt or have other debt interventions are a massive loss to them, and what they want to avoid like the plague.
What horribly wrong advice. There is no defending it, your wild crazy accusation is just wrong.
It might depend on the particular credit score assessment. Mine is always low - 6% currently - and I have an 850 FICO score. Per FICO that’s one of the reasons it’s so high.
Whatever score the Chase app shows says I’m at 826, so also no apparent penalty for low usage.
Huh, I’ll have to take a look at mine. I usually just do credit karma. My score has gone up considerably since the years where I was worrying about credit utilization percentages. I’m wondering if it has to do with how many other things you’ve got going on that also indicate good credit.
In other words, when I was just out of school with shit credit and student loans to pay back, they had very little data on me to determine my “worthiness” or whatever, so my only real option was to open credit cards and to use them maybe?
Maybe now that I’ve been consistently paying my shit back for decade(s), they don’t put as much weight in credit card utilization %?
I wish I had a screenshot from years ago, but it was like the exact opposite. Like some “Your score is low because your ‘WELLS FARGO N.A. XX86’ credit card utilization is only at 11%. Please increase utilization of this account” bullshit. And all of the links they’d give you were about how you want to keep it at like 30%.
Maybe I’ll go to credit karma today and see whats up. I hate credit cards, and I hate carrying a balance but it was drilled into my skull. My credit score is great right now so maybe I should just pay em all off.
Sorry if im rambling, I took a nice strong edible today.
Edit: Is it possible that the discrepency between the 850 and the 826 as reported by Chase (a bank) to be itself the “penalty” as you say?
Regarding my FICO score, the details on my utilization percentage says it makes up approx 30% of the score, and as you can see in the screenshot above, that highlighted as a positive, not a negative.
The score I see in the Chase app is my VantageScore from Experion, a different credit agency. Not sure what their max is but 826 is an excellent score too.
As far as carrying a balance goes on my credit card, we do not. We use it for most purchases and pay it off in full at the end of the month. So while it has a balance month-to-month, and makes up most of our utilization, nothing carries over and we pay no interest but instead get cash back. We have high limits on most cards so that keeps our % utilization low, which really is an advantage.
On our recommendation most of our adult kids do the same re: using the credit card as a debit and paying it off monthly. I know at least 3 have their scores in 800s too. If you have the discipline, having the high limit with a low utilization seems to be advantageous.
I meant to add I wouldn’t trust Wells Fargo with anything given their corrupt & recent history. Doing the opposite of what they suggest is probably better with nothing else to go on.
True. But to be clear I literally just put the first thing that came into my head in there. I should have just used a fake company instead so as to not distract from the point.
Ah good, because fuck Wells Fargo!
That doesn’t seem to be true from my experience. My credit limit is more than 10x my normal usage per month and i never carry a balance forward. My credit score is 825 right now.
That’s great. I’m sure you have more than just a credit card, and those other things have a much larger affect on your score. And there’s probably a million other variables in there.
I am not going to claim to know the exact formulae used… But it’s my understanding that something around ~30% utilization for credit cards is optimal in terms of the agencies giving these scores.
Say all you’ve got are student loans (that you’ve been consistently paying back for like a year), and you’ve got a score of say 600 and you want to try to establish credit.
If you open up a credit card with a $1,000 limit, your score will immediately go down to like ~585 or something, despite the fact that you don’t owe any money on that card and have $1,000 more credit available than you did before. Yes, it’s fucking stupid.
(I’m admittedly pulling these specific numbers from my ass, but this is nearly exactly what my experience was many years ago).
The hard inquiry for opening that new card lowers your score. The avg age of accounts drops with the new card and that also lowers your score. The $1k credit limit doesn’t raise your credit enough to offset the drops but over time the impact of those will wear off and your score will go back above 600.
What the OP in the image probably means is that paying off a non-revolving account (not credit, something like a personal loan or car loan) can drop your score. It will drop more if its a large account because it drops the total value of all accounts or the total value of non-revolving accounts you owe on (not the remaining value, it uses the total for some reason afaik) + your credit limits from cards.
The best way to raise your credit is to just have an assortment of different credit cards, continually pay them off in full, and have some other type of account in the mix like an auto or personal loan that you continually pay off.
Opening all of those at once will tank your credit for a bit because “credit seeking behavior” is a ding against you. That’s not an actual term I don’t think, but opening a bunch of credit lines at the same time is a bad look and could be a sign of financial distress that scares off lenders. So just start with 1 card and 1 loan then open a new card every 6 mo to 1 yr. Then when you eventually pay off the loan your score may drop anyways so use that time to open a new loan so you offset the impact of the drop.
The system is dumb but it isn’t incomprehensible and it’s actually possible to game the system a bit. There are companies that offer pre-paid debit cards but they report to the credit agencies as if you have a credit card with like a $1200 limit and they always report that you have a 20% utilization and always pay on time. That way you build credit without ever actually using credit or racking up debt.
The only reason I have a great credit score is because I opened a credit line at 18, and have a house, which I was only able up get because, when we got married, our parents and family helped raise 10k instead of having a large wedding. Add our 20k in savings that we were only able to get because we lived with my parents, and we were able to put a down payment on the house. Thanks to crazy house prices, we look well off. On paper.
We have less than 1k in savings, so any surprise bill or breakdown might have us having to take a loan. I’ve been learning how to fix and repair everything we own. Basically me, every time something breaks. I spent the last 6 months doing maintenance on our 2 vehicles. Transmission filters, brakes, radiator coolant, diff oil, etc. I realized I’ve become my grandpa who drove a 35 year old POS, but kept it running well.
I seriously don’t know how us regular ppl are supposed to better our lives when everything is predatory and something as simple a credit score fucks you.
my usage decreased to 0% and my score went up 10 points this month to 799.
My usage is less than 10% my combined credit limits are ~100k my scores are around 800-817 depending where I check. Actually when I went to buy a car 2 years ago I overheard the sales guy and the finance guy who were talking about it say “holy shit, she has really good credit.”
Edit to correct my numbers after I looked them up
I didn’t say it was the entire score (unless all you have is a credit card).
You can call up the agencies yourself and ask. They will tell you that the optimum is something like ~30% credit utilization. More or less than that will affect your score negatively.
I imagine how big/small that affect is depends on all sorts of other factors.
Edit: It’s stupid. Shortly after college, when I had to start paying back student loans, I decided I wanted to try to “build credit,” so I got one of the few cards they were willing to give me. My (already not great) credit score immediately dropped.
When I looked into why, I learned about “credit utilization” and why you always want to carry a balance if you want to build your credit.
It’s fucking stupid.
You’ve been saying the same bad advice up and down this thread.
If you reliably pay your credit card bills in full by the due date, your score climbs and climbs. Not instantly, over time. Reliability isn’t a one-off.
If you cancel your credit card, you have less evidence that other institutions are happy to lend to you, and your score could go down.
If you apply for a new credit card, your score can go down because that’s also what people who are running out of money do, not because your borrowing to limit percentage is low.
The highest credit scores are for people who have been loaned plenty of money, and who always make their payments.
Deliberately causing them to charge you interest just makes you poorer and does not show that you’re a good risk to loan to. It’s the front door for ballooning debt, and that’s what they want none of - people who get declared bankrupt or have other debt interventions are a massive loss to them, and what they want to avoid like the plague.
The bigger impact than credit utilization would be the hard inquiry that they use to determine whether to give you the card as well as the avg age of accounts. Low credit utilization may drop your score an extremely tiny amount (only like 1 or 2 points) but the new inquiry and lowering avg age of accounts is a much bigger impact (tens to dozens of pts drop)
Credit utilization /= carrying a balance. I put most purchases and payments on CCs, pay them off completely every month, and my credit utilization is typically something like 10% without paying a cent in interest, and I have an excellent credit score.
From years and years of first-hand experience, there may be a swing of a couple 10s of points when you get closer to that 30% utilization, but it has nothing to do with whether you are carrying a balance and paying interest. Further, that 20 or 30 points basically background noise when it comes to qualifying for new credit.
People get so fucking hung up on whether this or that will change your score by 15 points and how that signals some grand conspiracy. Open a line of credit or two, use it responsibly to demonstrate that you can manage access to that credit–pay on time and in full–it really is that simple.
I just find it interesting and convoluted, not trying to imply anything about any kind of conspiracy.
This is incorrect and I’m not sure why you’re trying to die on this hill everywhere in this thread. Look bro, of you’re upset you’re carrying a balance and you didn’t have to be because someone lied to you, I get that. But when you’re confronted with real facts, you’re supposed to reevaluate the situation.
Credit cards also report monthly. What balance you have when they report, may not be what it is when you pay your bill. So if your limit is $1,000 and they report when your account has $1,000 spent, theyre reporting 100% utilization. But if report day is 3 days before you make your payment of $1,000 it’s still being reported that way and not $0.
It’s a signal that you aren’t actually using your revolving credit, which makes it less relevant for determining your credit worthiness. The formula is stupid only to the extent that the input data is bad. Otherwise, it would be an easy hack to raise your kid’s credit score to open a bunch of credit cards for them at birth, and do just the bare minimum to keep the accounts active.
They could report a long history of the balance, and use some kind of historic weighting function, or they could report both the amount currently due, and the amount paid each month, or both. The institutional players don’t want to reveal more than they have to to each other. Each of them is trying to know the most about you, and deny that to others.
Otherwise, it would be an easy hack to raise your kid’s credit score to open a bunch of credit cards for them at birth, and do just the bare minimum to keep the accounts active.
I think this might actually be a thing that people do (however, kids don’t have a credit report til they hit 18):
but I pay it off in full each month and I’m in the high 700s.
I’m young
And now you know why you’re in the 700s. Give it enough time, it’ll come down.
Bull shit. I’m 57 and been paying my cards off every month for decades. My score is 800+.
About 30 years ago I got charged $1.56 in interest because the “interest free” period was 30 days from the purchase date, not the billing date.
…fuck that shit.
I said never again and it hasn’t happened ever again.
But yeah, seconding your comment.
Thanks man, really gives me a reason and motivation to keep living /jk
I love when teachers would tell me “if you think it’s bad now, wait till you’re an adult!” it really adds flavor to the “where do you see yourself in 5 years?” questions and all that 😊
Don’t listen to the person above. Keep doing what you are doing and it will go up. Especially as you have more times of credit. Mortgages, car loans etc.
Yeah, I know. I just wanted the guy to consider if they were being an asshole for a few minutes.
I can totally recognize the fact that I’m lucky to have parents who are doing financially well and are willing to provide most of my basic needs while I finish college, which allows me to have a good credit score as I really only have to pay for gas, car stuff, and miscellaneous things.
But I can also pat myself on the back at least for not blowing through my cash and maxing my cards on stupid shit like cars & designer clothes.
And besides, it’s not like anyone gets a prize for winning the “Struggle Olympics” I just want to not be miserable in the future, and I’ll take anything I can to reach that goal.
If you think it’s bad now, you’re right. Being an adult is way better.
