I always assumed credit scores were an integral and historic part of the American financial system.
They were not, they are very recent，most of your parents didn’t have credit scores growing up, and as you can probably tell or at least intuit, it’s mostly just a b******* scheme for those with capital to accrue more capital by invading your privacy.
It's not like they didn't look through your financial history before then - they just didn't have to show their working publicly, which meant you could ne discriminated against for any number of things
So the same now, except now all personal data is located in one place according to the rules they set, from which they can sell your data and preemptively block you or refuse to meet you to discuss your practical repayment capability.
Your hypothesis is that before computers and data centers were used in business to cross-reference, centralize, analyze and store private and public data, and before a personal credit rating system was implemented, businesses were using cross referenced, centralized, analyzed mountains of paper files on all potential consumers nationwide, directly related to their business or not, to calculate 300+ million personal credit scores that didn’t exist yet?
You’re taking more than a leap, you’re jumping right off the cliff.
uh… that’s exactly how it worked. The Wikipedia page you linked mentions credit bureaus. If you go to that page you can see they were established in the USA by the mid 1800s. Yes, it was all done on paper. That’s how the world used to work.
No, that is not how it was done. Before, The time was put in to assess the relevant data your creditworthiness.
Today if you break a leg and have a hospital bill, your chances of receiving credit are automatically lowered.
There’s a huge difference between being investigated for credit worthiness and automatically being assigned a score filled with arbitrary private data irrelevant to debt or credit.
Are you a racial minority? Your credit score probably isn’t as good as a white guy’s credit score.
Assessing relevant data on an individual’s debt risk makes sense.
Collecting everybody’s private information so that three companies can determine, without ever meeting you or knowing anything about you, teally, the amount you are allowed to succeed or take advantage opportunities is b*******.
The 19th century credit bureaus and today’s credit ratings are completely different.
Uh, okay then. Damn I’m old. Apparently. 🧐 Funny though that the younger generation cannot imagine how life worked pre-personal-computers (or even before computers entirely).
It’s the same with each generation. You probably didn’t have to take academic tests on how many bushels of carrots you could bring to market a week because you weren’t educated as a yeoman, as previous generations to you were, when that data was more relevant.
I think the younger generation understands how things worked before computers became widespread, but it isn’t relevant to there life or much of the current global order, so it isn’t at the forefront of their mind.
before there was any transparency, decisions were made based on your credit score and report, but it was tough to argue when they didn’t have to tell you why
before there were standard scores and reports, there were still computers and networks. Each bank did similar by themselves
before there was centralized banking records per corporation, they had to collect similar data about you and each bank had policies for a banker to decide
Yes, before you had a predetermined credit score, your credit score was assessed on a case-by-case basis. I don’t know why you think things are transparent now.
Computers are not as old as you think they are.
Yes, before you had a predetermined credit score, your credit score was assessed on a case-by-case basis.
There is transparency to the extent that the decision is based almost entirely on your credit score and credit record. You can see a copy of your credit record any time, which is a fairly new thing. You can see similar credit scores and if they turn you down for anything they are required to tell you what it was. While you may not know the calculation, you know what goes into it at least well enough. Most importantly the decision is mostly objective and consistent, by computer, driven by this data. It’s not entirely transparent but more so than at any time in history
The decision should be based entirely on your credit score on record, which is determined by factors out of one’s control.
You can assume what goes into your credit score, but the more important point is that you don’t and that is proprietary information owned by a very small amount of companies that profit from your information.
Given the above, I can’t come to the conclusion that determining your individual value based on circumstances out of your control is objective.
As for consistency, if you get sick and accrue hospital bills you can’t immediately pay, your credit rating plummets. That doesn’t sound very consistent, relevant, or objective.
It requires trust to believe that they are telling the truth about what impacts the score in a positive or negative way.
Plus they say it in the most vague way so people can’t ‘game the system’ which is not an issue if the system is fair because ‘gaming the system’ is doing the thing they want you to do. Sometimes it looks like the things they say are accurate, but other times they appear to have the opposite effect because of some interaction they aren’t telling us. Like the fact that paying off a loan too early reduces your credit score even though having fewer debts is supposed to increase it.
They are pretty precise on what to do in order to game the system.
Get credit cards that you pay off every month. Keep your first free credit cards as long as possible to boost your account age. Keep you credit card account balance as low as possible. Take out as many 0% interest loans as you can.
Total debt has never been a function of the score.
The calculation is opaque to both you and the banker but it is calculated the same way by the agency that does it.
If your credit application is rejected, they are required to show you the score and you’re entitled to free copies of your credit report data (historically you couldn’t see your data or had to pay for it). The banker can give generic advice on improving your score and point out things in your credit report them at look bad and suggest ways to finesse them, but the calculation and decision are mostly out of his hands. He doesn’t really know
Plus before it was down to an individual, each of which had their own biased. While credit scores are all kinds of wrong, it does take the decision out of the hands of insividuals and makes it an objective, data driven decision
I will just leave this here. Your employers can snitch on you as well and just give all of your paystubs to…Equifax. It was shocking to see which ones did and which ones did not.
The first time I saw this I was shocked. Every single paycheck of mine is there and there’s basically nothing you can do about it without having negative credit impacts for having manually disabled it. Why on earth is this opt-out rather than opt-in? Then it wouldn’t look like you’re trying to hide something if you value your privacy at all.
I disabled that shit the moment I found out a few years ago. As far as I know it is only potentially an issue if a landlord or something wants to see it and isn’t tied to your credit score. I don’t give a shit right now anyways as my credit is good enough. If I need to give someone access to it, and it makes sense, sure, but I would rather hand over a copy of my W2 or paystubs personally.
It is entirely messed up that it exists and most people don’t even know about it. Dystopian nightmare indeed.
Also keep in mind that there are far more than three of these companies. There are dozens of not hundreds of less visible companies doing the same kind of consumer data brokering. The “big three” are just the face of the industry. They only make it easy to opt out because they know you’re captive to 20 other feed through companies.
When you opt-out with Experian, your information is not deleted from the Experian marketing database. Experian will mark your record as “Do Not Online Target” for a period of five years. You can renew your opt-out request after this five-year period. If Experian removed your information completely, we would have no way to know your preference.
What the fuck kind of bullshit is that? No way to know my preference? How about never! Thank you for letting me know that I have to write another email today and try not to lose my shit. Maybe I will setup an automated message to go out every year or something to “remind” them.
They should write it as “you must allow targeted advertising at least once every 5 years before submitting a new opt-out request for the next 5 year period”.
Back in the seventies/early eighties, I remember my grandmother getting financial privilege by showing the check numbers in her checkbook, which were in the high thousands.
If you ran around bouncing checks, you would get cut off long before that and have to start over at the dreaded check number 101.
Knowing that you can order checks with any number you want printed in them. I would trust it as much as i would trust a check with any other number. Maybe actually a little more than check #69420 or #58008.
It’s a silly system but really not that hard to do well. Put everything on credit card and set everything to auto pay the statement. That alone will give you good enough credit with little effort.
Right, but in order to have “good credit” others must have “bad credit”. There has to be a frame of reference to create a risk profile on a person. Capitalism is a zero sum game. If everyone is paying their bills on time and never missing payments and leveraging themselves responsibly, but you are $1 less leveraged than your neighbor, your neighbor will have a better credit score than you.
Yup, and pretend that your credit card is your debit card. I never pay for anything with my credit card unless I know that I can clear the balance immediately after if I had to.
We got a new card, no interest for a year. Put our entire kitchen reno on it. Credit score went down 47 points altogether. Paid it all off, credit score went up 17 points. All of this inside 6 months. It doesn’t make sense lol.
Everyone has some great points about credit cards in here. Just like to point out that despite how good they are most of you missed the point completely.
If my credit score goes down 50 points for a reported balance, once that balance is paid off, not returning to the original score is simply absurd. It’s a penalty just for existing in the system.
I recently was a cabinet seller, and basically 100% of my customers either paid cash or paid on the Lowe’s card to get the 5% discount, then paid it off immediately with a different card.
So, among the population of people doing kitchen renovations, it seems your case is toward the “overextended” end compared to how most people do it.
In your case it was probably just credit utilization ratio that got you. I doubt they’re considering the types of purchases.
Just saying, in my experience at a big box home improvement store, basically everyone who buys cabinets does so with cash on hand.
Interest or not, you should never carry a balance on a credit card. You should also never have more than 10% utilization.
Looks like you probably did three things which hurt your score… having a new account, carrying a balance, and possibly having more than 10% utilization.
I know the whole credit score thing seems stupid, but if you know how their calculations work you can get a high score in just a few years of doing everything correctly.
right, the thing that idiots do is load up their card once they get one and then make minimum payments… tanking their credit. and instead of paying it down… they open up a new one.
High utilization affects your score. For example, if you have a credit limit of $1,000 and have a balance of $900 when reported to credit agency, your utilization will be 90%. This will negatively impacts your score even if you pay it off on time. It is possible to avoid this by paying off purchases immediately, since your balance is only sent to the credit agencies once per month. Also if your limit was $10,000 the same balance would only be 9% utilization which is a lot better.
Oh interesting. A friend is a financial advisor and had told me that he often just pays his card immediately after making a purchase. That must be why.
Just talking about myself here. The individualist lens, as it were. I worry about collectivist thinking because I don’t like the idea of outliers being trimmed out of the plans. Largely because I’m an outlier.
I’ve read history of what happens when class consciousness is the primary method of thinking. I don’t think I would have done well in the Soviet Union, because I have a powerful compulsion to tell the truth, and people who told the truth there got disappeared.
I had an Uber passenger yesterday who got fucked out of her organization because she told the truth, and the story sounded like something straight out of We The Living.
Consider this: collectivism views the primary moral unit as the class. The class is the body. The class has consciousness.
Well, if you see things that way, then removing a person whose presence doesn’t enhance the class success is no worse than trimming off a fingernail or removing a tumor.
I’m an individualist because I fundamentally believe people are not replaceable, not fungible, and that they should merge their consciousness with others only with the understanding that this erases their individual consciousness.
Sorry to rant. I appreciate the support, but it kinda comes across as recruitment. People find meaning in the military, which is the epitome of collectivist effort. A centrally-controlled structure where nobody owns anything, people go through intense brainwashing to remove their sense of individuality, and typical operations involve determining a person’s capacity to extract as much as possible, and then providing that person according to their need.
And what is the product of this way of organizing humans? Why it’s death, destruction, and generational trauma of course. What else could it be?
Really appreciate it, brother. I know people struggle, for all sorts of reasons. Just please don’t use the word class to entice me. I’m an individual, not an instantiation.
In Norway having loads of credit cards is negative for getting a house loan as it is potential debt that goes against your payment ability for the house loan.
Meaning we do have a credit score system for getting loans and more stuff on various credit solutions, but credit cards works against larger loans.
Which can be a pain in the ass when you want to buy a house/apartment and have credit cards that might deny you the last bit of money to win the bidding war…
That seems like a reasonable approach though, unless I’m missing something. If you need “loads of credit cards” then you’re already but living within your means.
Store offers 0% on items you need, appliances, bedroom furniture. You’re going to spend thousands and they let you pay that shit over the course of 12 or 24 months. To me it’s a no-brainer. Only downside is I can’t use my Raynour & Flannigan card at Best Buy or Home Depot, so I need their cards too.
It was a response to someone asking why one would accumulate multiple cards. It’s a reason. I’ve done it. I have 800+ credit score. Guess it worked out. I think the most important factors are paying your shit down fast and maintaining a good ratio of high available credit with low usage. At this point I’m at three or four cards and one or two other lines of credit. In the past, it’s been more of each.
Basically, you don’t get a good score by not using credit.
Nothing wrong with having 3 cards, in fact that seems to be the sweet spot. Closing cards is never good so you don’t want to just go around willy nilly opening up cards.
You are absolutely right in that you have to use it to have a good score, but you have to use it wisely. Maintain a low balance, don’t allow cards to go dormant, keep requesting increases to available credit every 6 months so that your utilization will be minimized, and diversify your portfolio with three cards, and at least one line of credit that you never use, and a revolving account like a car or home once you are ready. Sounds like you figured out their formula, congrats on the 800+.
I was 812 until I bought a house, and that knocked me down to 760. Everything I read indicates that It will take at least 5 years of making extra payments on my house for me to get back to 800+, not that it really matters because the only reason I needed a high score in the first place was to get the house.
I was 800 or so before refi in October '21 (which I am thankful every day for my 2.275%), and it dipped, but I’m back to 820 as of today. I dip from time to time when my wife gets spend happy on a shared card of ours, but for the most part I hang out there.
Unfortunately it’s meaningless now, because even though I want to do a home equity loan to make my house a little bigger, I can’t justify taking out an amount greater than my remaining mortgage, at a rate triple or more my remaining mortgage, for the equivalent of 180 square feet of living space. It’s all useless. But I’ll plod a long and pay my bills and do whatever.
My brother, though, is the kind of guy who goes and finds cards that are offering some incentives for opening, and he gets them, and then just hangs onto them. I don’t think he has 10, but at least five or six at this point, and he also has great 800+ credit. He just likes to work though. I like to not think about things.
Lol why not? I did the same thing when I bought a washer and dryer and my score is over 750. I had the cash to pay it outright but why spend it when Home Depot will finance it for free?
If your total utilization is greater than 10%, or if you have a high balance carried over multiple months, your score will decrease. It will be a few months after the balance is paid in full and you utilization is reduced to below 10% that your score will recover. Then you are stuck with that card because if you ever close it, you will take another hit.
Opening a credit account is a commitment and shouldn’t be done just to get an interest free period on an appliance. You will be hit with a hard inquiry when you open the card, and will be hit if you ever close the card. An interest free period is not really a great sign-on bonus anyway because if you take them up on that, you will see a temporary hit to your score.
If you spend thousands a year at Home Depot (like a contractor or handyman) then a Home Depot card makes sense. I spend a lot at Costco so the Costco card makes sense, also the Amazon prime card makes sense for me because I shop at Whole Foods a lot.
A credit card should be paid off in full soon after you make the purchase. Get your points / cash back / etc and never allow a balance to hit the statement. The real value of the card is in the points/cash back.
If you have a bunch of recently opened cards with like $500-$1000 credit limits, that’s not great, but if you have several high limit cards that you are only using a small percentage of that limit, that is good.
Lol this is such a load of bs being taken at face value. No, having credit cards in Norway isn’t bad. They judge your rating by your debt, and responsible credit card usage does not create debt. This reads like it’s written by someone who doesn’t understand how credit works, regardless of country.
I have to imagine credit ratings are fairly ubiquitous, since banking is international, and who’s giving the money out? Would make no sense to penalize someone for having a lot of available credit. Maybe if you have 10 cards with low available credit, and they’re all maxed out and you’re just paying minimums, that’s bad. That’s bad in America too. Amount of available credit less amount of credit used seems to be a big factor.
Not sure if you misunderstood the post. What they write is how it works in Norway. If you have two credit cards with 50k credit limit each, then that count as 100k debt when the bank calculates your ability to pay off a loan, it doesnt matter if you haven’t used them.
Exactly. It is potential debt and it goes against getting new loan/debt from banks. No matter if you have used the credit card or not. The banks look at the available limit on an your credit cards or available credit and view that as debt when they calculate how much they can loan you.
Remember when there wasn’t a proprietary algortithm giving everyone a social credit score and instead you had to get a letter from an existing member to signify your trustworthiness?
I dont like the proprietary nature of credit algos, but I’m not a fan of the letter system either
The idea is fine, but when they’re run by the credit bureaus, they’re subject to extreme corruption. Even if run by the government, as they should be, they’d be subject to extreme corruption.
Credit scores didn’t exist but credit bureaus date back to the mid 1800s in the USA. Also, as others have mentioned creditors would do their due diligence and try to assert that you would be able to pay back your loans by doing many of the same things they do now.
This really isn’t some new, crazy concept like you’re making it out to be. The score has only simplified the process.
Bank-internal credit scores existed since 1965 at Citibank… Then some Citibank employees formed their own company, FICO, to sell scores to banks without data or computing power to do so
I am not on our mortgage on the house that I own with my husband. I am employed, full time. At the time I had no debt, and the car loan was in my husband’s name.
They told me I couldn’t be on the mortgage because I had no credit score.
The score simplified the process for creditors of pre-assessing your risk as a debtor so that they don’t have to put in the work to actually assess your rush a debtor, leading to an irresponsible and imbalanced credit system that you can’t benefit from unless you are born on the right side of the tracks.
I didn’t say the concept was new or crazy.
This is a way for operators of capital to accrue more capital and more easily distance themselves from everybody else, whose information they profit from, rather than creating opportunities.
creditors would do their due diligence and try to assert that you would be able to pay back your loans by doing many of the same things they do now.
In the Netherlands this would boil down to:
proof of employment (pay check and statement from your boss)
summary of outstanding debts
That’s it. The BKR system only tells you any outstanding debts (such as a car or phone to pay off) or if you stil owe significant money to debtors. It doesn’t tell you how long you’ve been a good citizen.
But the system of predetermining how deserving you are based on your race or other circumstances beyond your control centralized within a few firms making money off of that data? That’s new and that’s b*******.
I tried to open a bank account at a credit union while homeless. Had $42k on my direct express card, finally on SSI, lump sum was for the previous year while unable to work.
No debts, never used a credit card. Couldn’t open a bank account. Had to go thru a program that assigned me a fake credit card debt that I had to pay off for 6 months to get my credit score high enough.
Indeed. As evidenced by the fact that doing things that are money-smart (in general, stuff that amounts to avoiding debt) is actually harmful to a credit score. The powers that be want you to consume on borrowed funds.
Sorry but that credit union sucks and you needed to move on. Credit unions should never deny someone an checking or savings account if they do not have a history of abuse.
What they’re describing is a pretty common financial product. They process a small unsecured loan which is placed straight into a escrow account with autopay so as far as the credit calculation goes they have a loan for which they are making consistent payments on until it’s paid off. It’s basically a hack to get some positive line items on the credit report to to try drag the score up a little
FICO is kinda stupid in some ways but with responsibility it’s not hard to get a decent rate/favorable score. Yes at the top end is dumb you need to open more credit but in practice that’s not hard to do assuming you aren’t just forced by circumstances to just live off credit.
And yes, you can manipulate this system, and everybody tells you how to do it, but I don’t think it’s something that anybody should have to do in a world where loans can be determined case by case rather than predetermined based on circumstances outside of your control.
It takes one pretty big fucking mistake to crater years of effort. I understand it does happen, usually around homes and employment, to which I would agree we need protections. It’s not for small shit.
Missing a utilities payment by a month will do. Utility companies are often more limited than other services in how they can shut off your service (for good reasons), so they’re very unforgiving about hitting you in the credit score. It’ll stay on for 10 years, and will likely keep you below 700 for the duration even if you do everything else perfectly.
I’ve had several missed payments to utilities the most recent being 3 months late(dumb auto pay shit) and have zero marks and an 830.
My mother (dumb and irresponsible) had missed payments and none of those hit her scores either. I don’t believe this is wide spread from my personal experience and a quick Google doesn’t return anything promising so I’m not sure I can agree with that at all.
A single missed payment typically is a small ding and not effect your credit in a major way. Bankruptcy is going to in almost all cases multiple delinquency and debts. I don’t agree that bankruptcy will fuck your day up.
FICO and VantageScore aren’t even looked at when they do a full credit record pull when you apply for something. Reviewers look straight at your history directly and make decisions based on that. Scores are for laypeople to get a general idea of how their history might appear to a reviewer, but every lender has their own criteria.
I believe they do use FICO but not necessarily the score itself. FICO has numerous models that can be used depending in the type of loan:
There are different versions of the FICO Score. Over the years, FICO has released updated versions of its credit scoring models. FICO Score 8 is the most commonly used model, but there are more recent versions, including FICO Score 9 and UltraFICO. FICO also has several other credit score models designed for specific products, including scores specifically for credit card, auto and mortgage lending.
Add comment