Credit scores

saddletramp

saddletramp

Line Up and Wait
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saddletramp
I am amazed how incredibly stupid the credit scoring system is.

I've owned two houses for the last four years. A few weeks back I sold the one I lived in for 16 years & have been using as a rental the last four years.

I was surprised when the mortgage got paid off my credit score went down. I'm still in the low 800s but really.

Presently, I have zero debts & hope to never need credit again other than the two credit cards I carry & pay off every month.

The financial world is really screwed up in this country.
 
So you come in my grocery store every day, don't buy any thing and wanted to be rated as a top,customer?
 
saddletramp said:
Presently, I have zero debts & hope to never need credit again
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Your life is in a sweet spot. Why would you care about your credit rating?

Well, okay, I'm just like you, and I check mine too. But I don't know why.
 
8XX credit is not exactly the credit world doing you wrong. Above 800, and the score gets pretty fickle I've learned. I don't want to insult your intelligence/experience, but anytime you pay off a loan in full (mortgage, car, etc), you can expect a fluctuation down which I agree doesn't make sense, but on the other hand, it is like 6 points or so. You'll be fine.
 
I coined a phrase a while back to use when teaching folks about credit...

"To earn an 800+ credit score, you've probably made more than a $10,000 credit mistake."

Remember, the people who brought you credit scores, are the same people who nearly crashed the entire world's economy -- by loaning hundreds of thousands of dollars each, to unqualified buyers with no evidence of income and no down payment.

That's how utterly stupid the system is.

As a proponent of debt-free living, I've not quite learned to completely ignore my credit score, but I'm close.

You really don't need what they're selling. Getting broke people to pay more attention to a "score" than to paying off the debt, has to be one of the marketing coups of the century.

"Oh goodie. My score that measures how easily I can be ripped off is, went up! I like paying an extra $10,000 on cars. It's awesome! And a couple hundred thousand more on housing! Yay!"

LOL. Don't worry about it. Your initial assessment "how incredibly stupid the credit scoring system is"... nailed it!
 
As denverpilot said, the system is stupid. I charge a ridiculous amount of business expenses and pay them off every month for my own business. The numbers are way above my personal income but my credit rating keeps getting lower. I own my house, cars, airplane, etc. no debt. Screw them all. I don't need their crap.
 
I've been watching my scores on Credit Karma. It's amusing to say the least.

As for the OP, closing an account that was 16 years old probably reduced the average age of your accounts, which is why your score dropped a bit. But really, as someone else pointed out, who cares since you're in the 800s. It just doesn't matter as long as you're above the 750 range. And if you don't intend on getting any new credit, it doesn't matter even if your score is 200.
 
I noticed that too. My score was hanging around the 790s, when we bought a boat, it went up 10 points. Small variations aren't important, but even if you're never going to finance anything, insurance companies look at these when determining your insurability, so your credit score is still important even if you never take out another loan.
 
Getonit said:
As denverpilot said, the system is stupid. I charge a ridiculous amount of business expenses and pay them off every month for my own business. The numbers are way above my personal income but my credit rating keeps getting lower. I own my house, cars, airplane, etc. no debt. Screw them all. I don't need their crap.
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I think you will find that even thought you are personally responsible for the debt of your business credit card the business card does not count toward your credit score.. Check it out..
 
I've got a USAA credit card (the only one I've ver had) and the USAA app on my phone. Part of the app is the credit score. I've noticed my score will be in the 815 range if I've got a balance on the card and drop to 790s when I pay it off (each month).

I wouldn't call the system stupid. It's optimized for a different result than we're after. As @denverpilot has said. The thing I worry about is it gets used for all sorts of things OTHER than granting credit. Employers check it to see if you're "responsible". It's part of a check for a security clearance. It can affect your insurance rates. (I suppose, since the insurance company is hoping you'll pay the premiums that may be defensible, maybe.)

John
 
More Credit available/given to you and the less you're actually using it + the age of the accounts = The Highest Score.
Thats why keeping those old cards with high limits and zero balances open will always improve your score. I got ****ed off at United/Chase because they denied my free bags on my last trip. I told them to close the account (30K Limit).. week later my score dropped 30 points.
 
James331 said:
Didn't you know, spending money you might not have = financial responsibility
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That is similar to the logic that people use when the banks turn them down for a loan (ie, They only loan people money that don't need it).

The truth is they only loan money to people that they believe with a high degree of certainty, that they will pay it back.

You credit score is based on "current" evidence that you are willing and able to repay your loans. If you have no debt to repay, where is that evidence? "Credit history" you say"? That is reflected in that 800+ rating the OP has.
 
I guess I'm one of the dumbasses, my credit card company gave me free credit monitoring because my cards seem to get compromised every few months. Part of the service is credit score reports. My avg goes from a high of 847 to a low of 836. I really don't care, and don't have any debt to speak of, other than a car loan. The last three cars I bought, they gave me $1,500 to finance after I had negotiated the deal. Two of those were for 0.9% and one was 0 %. And no, I didn't overpay by $10,000 for my cars.

They, whoever they are, they say that insurances are less expensive if you have good credit scores. Who knows.
 
PaulS said:
I guess I'm one of the dumbasses, my credit card company gave me free credit monitoring because my cards seem to get compromised every few months. Part of the service is credit score reports. My avg goes from a high of 847 to a low of 836. I really don't care, and don't have any debt to speak of, other than a car loan. The last three cars I bought, they gave me $1,500 to finance after I had negotiated the deal. Two of those were for 0.9% and one was 0 %. And no, I didn't overpay by $10,000 for my cars.

They, whoever they are, they say that insurances are less expensive if you have good credit scores. Who knows.
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Thats where the real stupidity comes into play - Why should my credit score impact my insurance?

Personal Experience - When I bought my first house, I was young with not stellar credit (low 600's). No issue securing a mortgage or even getting a premium rate with no PMI. I received a home owners insurance quote prior to closing that was attractive (I think around $700 at the time) so I accepted it. After closing, the agent notified me the policy was going up to $1100 due to my credit score. If the policy was paid in installments, I could almost make a connection to why they would care about my credit score, but even that is a reach. This policy was prepaid, in full, through escrow! Needless to say the first renewal came around and they got dropped.
 
You guys need to understand something - the WHOLE WORLD only works by keeping the little guy in debt ! If ALL the worker bees didn't owe a cent a lot of them might not go to work anymore ! No debt - no more financial industry.

Seriously, marketing/advertising is all about convincing you that you won't be happy unless you have the latest greatest XYZ . Can't afford it ? Sure you can with EASY monthly payments !

Looking back on my own life I see that I spent my thirties and forties acquiring STUFF that I thought would make me happier. With the exception of my airplanes most of that stuff did not make me any happier. Now just into my fifties I'm selling off a lot of it and deciding what is the fewest bits of STUFF I really need.
 
You reduced your average account age. That's all.
 
JOhnH said:
That is similar to the logic that people use when the banks turn them down for a loan (ie, They only loan people money that don't need it).

The truth is they only loan money to people that they believe with a high degree of certainty, that they will pay it back.

You credit score is based on "current" evidence that you are willing and able to repay your loans. If you have no debt to repay, where is that evidence? "Credit history" you say"? That is reflected in that 800+ rating the OP has.
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Yeah not really, some folks don't use their credit but have the money to buy things cash, yet according to the credit industry those people won't pay the money back lol
 
James331 said:
Yeah not really, some folks don't use their credit but have the money to buy things cash, yet according to the credit industry those people won't pay the money back lol
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No, that's not what the credit industry is saying. They are saying they do not have evidence that you are currently willing and able to make your payments.
 
I recall being in college and selling my credit soul for a hat (sign up, get a low limit card, received hat). Anyone else fall for that sucker play when you were young and credit dumb?
 
JOhnH said:
No, that's not what the credit industry is saying. They are saying they do not have evidence that you are currently willing and able to make your payments.
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My bank account says I'm able, the history of me doing what ever I do to be able to have said money say I'm willing to do what needed.
 
ifly4fun said:
Thats where the real stupidity comes into play - Why should my credit score impact my insurance?

Personal Experience - When I bought my first house, I was young with not stellar credit (low 600's). No issue securing a mortgage or even getting a premium rate with no PMI. I received a home owners insurance quote prior to closing that was attractive (I think around $700 at the time) so I accepted it. After closing, the agent notified me the policy was going up to $1100 due to my credit score. If the policy was paid in installments, I could almost make a connection to why they would care about my credit score, but even that is a reach. This policy was prepaid, in full, through escrow! Needless to say the first renewal came around and they got dropped.
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That seems odd. For every house I ever bought using a mortgage, I had to prove that insurance was bound before closing could proceed. Sounds like your agent played a little bait&switch game, not anything inherent in the insurance sales process.
 
Anymouse said:
I suppose that if you have a low credit score, you might be more inclined to make a fraudulent claim.
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Or the tornadoes always make a beeline for the trailer park. :)

(I can make that joke. My entire family lived in mobile homes until the 80s.)
 
Mine was like 840 I recently canceled a credit card that had fees and opened one that did not have fees and better rewards and it dropped to 820 something.

I use credit for everything I can and pay them off every month.

It makes little sense.
 
alright - y'all made me curious so checked credit karma ... 828 .... good? bad? indifferent (yeah, I am)...
 
gkainz said:
alright - y'all made me curious so checked credit karma ... 828 .... good? bad? indifferent (yeah, I am)...
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If you used Credit Karma it told you where that score falls in the range. Basically, anything about 750 is considered excellent and above 800 puts you in about the top 15%.

We all use credit, or at least our creditworthiness is used by others (yeah, there are always exceptions like hermits who choose to live in a lean-to in the woods). Indifference is usually tied to two different things. One is not actively needing credit. No reason to check or care unless you are financing something, a house, a new car, an airplane. The other is having good credit. Good credit simply means paying bills on time. We know whether we are doing that or not. If we do, no need to check except as a curiosity.

The stupidity of the system? Maybe. The original idea behind credit scoring is qualifying for credit. If you don't use it or stop using it, it reduces your score because one of the indicators is gone. But it's minor.
 
midlifeflyer said:
If you used Credit Karma it told you where that score falls in the range. Basically, anything about 750 is considered excellent and above 800 puts you in about the top 15%.

We all use credit, or at least our creditworthiness is used by others (yeah, there are always exceptions like hermits who choose to live in a lean-to in the woods). Indifference is usually tied to two different things. One is not actively needing credit. No reason to check or care unless you are financing something, a house, a new car, an airplane. The other is having good credit. Good credit simply means paying bills on time. We know whether we are doing that or not. If we do, no need to check except as a curiosity.
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Thanks, Mark. Yeah, I did ... and it did... I guess it was a sanity check among my peers ... pilot-peers? Anyway, I guess I typically land in the latter category you describe and then checked as a curiosity. Last mortgage we got they did mention a "good credit score" but I guess I never gave it much thought.
 
Credit scores are simply another tool the banking industry has to maintain their ability to lord over you and determine your financial fate. I refuse to play their game. Pay my debts in full every month. When I can't do that I'll max put my card and die. Eff the greedy bastards.
 
weilke said:
That seems odd. For every house I ever bought using a mortgage, I had to prove that insurance was bound before closing could proceed. Sounds like your agent played a little bait&switch game, not anything inherent in the insurance sales process.
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It may have been the first years renewal and they didn't pull my credit the first time. It was 12 years ago, so all I remember is her saying it was going up due to credit.
 
ifly4fun said:
It may have been the first years renewal and they didn't pull my credit the first time. It was 12 years ago, so all I remember is her saying it was going up due to credit.
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That would make more sense, but at that point you should be able to shop the insurance. Insurers use 'credit score' as a general purpose good conduct medal to judge your ability to hold up your side of a deal after you signed it.
 
James331 said:
My bank account says I'm able, the history of me doing what ever I do to be able to have said money say I'm willing to do what needed.
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Unfortunately there is a quite large set of people who can afford to make payments, who just don't. I don't care if you have $10m in the bank if you're not actually going to make your payments to me.

And then there are other people who can barely afford the payment, but who would rather eat just bread and water than to miss a payment.
 
Worse, in some states the insurance companies can use credit scoring to set rates. No accidents or claims for 30+ years and a credit score in excess of 820 and you may still nt get the best rate. Apparently the score they use is a bit different than the one used for granting credit.
 
Credit scores are ridiculous. We really need to go back to the old way of getting a loan from local banks where they know the local economic situation and (in my area anyway) likely know you or your family.

Then again back then people really only took out a mortgage and maybe a business loan and made every effort to pay it back ASAP. Today it seems like people consider being in debt a normal situation.
 
JCranford said:
Im shooting for an 'indeterminate' credit score. Debt free and ZERO credit cards.
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That's great right up to the point when you need water or electrical turned on.
 
wsuffa said:
Worse, in some states the insurance companies can use credit scoring to set rates. No accidents or claims for 30+ years and a credit score in excess of 820 and you may still nt get the best rate. Apparently the score they use is a bit different than the one used for granting credit.
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They have the industry wide 'CLUE' database that tracks all kinds of things including denied claims and claims filed by others on properties you own.

Within the last 10 years I have had 1 car and three roofs hailed on. By now my insurance company must think that I attract hail.
 
midlifeflyer said:
The stupidity of the system? Maybe. The original idea behind credit scoring is qualifying for credit. If you don't use it or stop using it, it reduces your score because one of the indicators is gone. But it's minor.
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It doesn't just lower, it goes away. As someone else pointed out, usually the score becomes "indeterminate" once you stop using credit and could buy the fancy car some guy just drove up in, with $100 bills from your wallet.

People even pay cash for houses in America. Happens every day. Quite an amazing place we live in.

Opportunity abounds. Including he ability to create "scores" that rate how good you'll be at paying for someone else's nice vacation to Fiji for ten years of your life's work. :)
 
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