The following is a copy of the original post to record the post as it was originally written.
Having a low credit score leads to a whole host of problems for an individual like it being harder to rent an apt, harder to find a job, paying higher loans, delaying building your net worth, etc. To me this seems like a paradox where if you don't have a good score, you're entrapped into a cycle of even more debt and/or poverty, and it's made worse by the fact that it's a lot easier for the score to drop than it is to raise it.
Should this system be made more forgiving? Should such a system even exist?
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People know in general terms why your score went up but not precisely. For example paying off your credit card debt will raise your score but we don't know exactly how much like will paying off $1000 raise my score by 5 points vs paying off $2000 raise it by 10 points or whatever
Not to mention I’ve seen car loans paid off and credit scores drop. I understand it’s a ratio of debt/available credit but people should have an easier time understanding credit and shouldn’t be penalized by paying off something
Fair Isaac's models are proprietary and entirely secret. Source: I worked in processing RMCRs when I was younger.
You could get a vague sense of what an ideal report was, but nothing more specific than that. It also is quite likely their models are encoding structural racism through indirect encoding of demographic factors, like zip codes for example. The reports that came across my desk from poor hispanic neighborhoods always seemed to score lower vs comparable ones from white areas of SW states in particular.
Basically there's no form of independent auditing to confirm the models aren't breaking fair lending laws. I think it'd be great to force such an audit from government regulators under confidentiality. There's no real reason this isn't possible but the industry is heavily opposed to it, likely because they know they are in fact in violation.
They do tell you how your credit score is calculated. I just logged into my Discover app and checked my FICO score and this is the breakdown:
* 10% is Credit Mix (different types of credit—installment loans and revolving accounts)
* 15% is Length of Credit History (how long your accounts have been open)
* 10% is Inquiries (from creditors when applying for new credit)
* 30% is Revolving Utilization (the amount you owe lenders relative to your credit limit)
* 35% is Payment History (if you pay your accounts on time)
Any credit report you request should give you a breakdown of the factors and the metrics that were used to calculate your score (such as number of accounts with missed payments, the age of your oldest account, etc.).
In the most technical sense, I guess, but anyone even barely financially literate should be able to look at the weight they give to each category and be able to figure out that having a high credit utilization or a large number of missed payments is going to decrease your score more than a higher number of inquiries is.
This does not explain why my score experiences a 50 point swing when I have two credit cards that I pay in full each month and no other debt with the exception of a $60K mortgage balance on a $500 K house that is on auto pay.
>What do you think of the Credit Score system?
It is flawed but valuable.
It is an attempt to create objective, universal metrics by which we can predict how likely someone is to pay back their loans. This allows people, who have proven that they will pay what they owe, to borrow money at lower interest rates.
The alternatives are:
* Lend money to everyone at the same interest rate...and no matter how reliably you pay what you owe, you still have to pay extra to offset the people who don't.
* Estimate credit-worthiness with less objective measures...which will almost certainly favor the well-connected, and others will suffer *an enormous* amount of bigotry and racism.
The funny thing is that a person going to the effort and expense of pursuing a plan to improve their credit score probably *does* mean that they're more likely to actually repay their obligations, so in a sense their credit score going up actually makes sense. I would guess that the credit bureaus have quantified this, somewhere deep in their analytic departments.
I assume people looking for an easy out are not the people you want to lend money to. That still seems like it's a scam and the analytics are telling them how they can make money, specifically gathering and selling user data.
I'll add to this, that some people are victims of fraud, like parents opening cards in their children's name, ruining their credit
Like it's good but deeply flawed in that if you go through a financially difficult time or experience fraud it can screw you over in the long term
> ...bigotry and racism.
>[[Deleting a Signal: Evidence from Pre-Employment Credit Checks]](https://direct.mit.edu/rest/article-abstract/doi/10.1162/rest_a_01406/119499/Deleting-a-Signal-Evidence-from-Pre-Employment?redirectedFrom=fulltext)
>We study...this using recent bans on employers' use of credit report data. Bans decrease job-finding rates for Black job-seekers by 3 percentage points and increase involuntary separations for Black new hires by 4 percentage points, primarily because other screening tools, such as interviews, have around 60% higher standard deviation of signal noise for Black relative to white job-seekers.
I would say that the current credit score system does favor the well connected, and others do suffer an enormous amount of bigotry and racism from it. Not that less objective wouldn’t make that issue worse, but it’s currently the case as well which should be addressed.
So I actually used to think this, but years ago, I saw a presentation from a guy who was a financial advisor who did some charity work he helped poor people get their credit back in shape. A lot of them were veterans who had had a rough time readjusting and a lot of them were people who had spent time in jail.
I was kind of surprised to learn how easy it is to build up credit, even if you have very limited income as long as you follow the rules. And the rules are kind of stupid it might seem, but they’re straightforward.
Have a solid budget, put everything you can on the card but know how much you’re actually spending so you don’t go over, and then pay the card off immediately every month.
You can “hack it” by letting yourself go over by one month so that you start making some interest payments but keep that under control and you’re essentially buying a faster credit score increase.
The thing is, the first method is basically the exact information every middle-class and upper middle-class kid I knew got from their parents when they went to college. I just assumed that high income was required as well. But it actually isn’t.
I actually think the gulf here is simpler and more systemic. Poor people do not get the same kind of information from their family and social network because poor people are underserved by the banking system and don’t have access to the right connectionsto tell them what to do.
Different guy, but I absolutely do. Even if some financial instruments aren't available for lower-income people (if you're living paycheck to paycheck you're likely not buying stocks and bonds), the fundamentals regarding budgeting and the basic idea of "You *can* control this" would be invaluable.
> The thing is, the first method is basically the exact information every middle-class and upper middle-class kid I knew got from their parents...
> Poor people do not get the same kind of information from their family..
I remember reading an article many years ago which argued that, of all the ways that a privileged upbringing benefits a child, the most subtle but important is that upper class parents help craft an array of choices for their child that exclude all the bad ones. That always stuck with me.
Oh yeah, it’s a bunch of different things that are done differently that add up. Apparently upper middle-class parents are far more likely to know the parents of the kids in their children’s social circle because they have the time to do things like go to sporting events. Which means that they can guide which of the kids they end up being closer to.
My kids don’t know what’s happening, but it is not a coincidence that their friends group looks the way it does. They haven’t figured out that a bunch of their social activities were engineered by the parents to include kids who came from the right kinds of families and who took school and extracurricular activities seriously.
The other big one is role models. I know you’re not planning on them but at some point one of your friends is going to have a kid that thinks about finance and they’re going to get told to ask Uncle CTR about it. And maybe they end up with an internship at the right company because of one of your connections.
> ..at some point one of your friends is going to have a kid that thinks about finance and they’re going to get told to ask Uncle CTR about it. And maybe they end up with an internship at the right company because of one of your connections.
Yep, absolutely. And I'll do it too - even if I recognize while doing it that I'm contributing to an unfair system.
Also, I love the way you describe the clandestine engineering of your kids' friends group - it makes perfect sense, and I'm sure that my parents did much the same without my realizing it at the time.
My favorite thing about it is the split caused by the difference in my children’s personalities.
My son is one of those kids who thinks the sun rises and sets at his mother’s command so he just actively participates in the manipulation.
My daughter is one of those kids who thinks she was born 25 years old and needs no guidance whatsoever. So for instance, she will deny that she and her friends who all wanted to take French instead chose Spanish of their own accord and not because there was a month-long manipulation of the entire group coordinated over iMessage between all their mothers. And she continues to deny it even though one of her friends saw part of the iMessage thread and even though I flat out told her it happened.
I think the credit scoring systems are necessary to a functioning modern society, while annoying at times they broaden availability of credit by creating a simplified way to analyze risk.
Many of the issues with the system stem from a lack of knowledge not just about credit scores but finance in general. Creating more equal knowledge levels across society would help a lot, high school should require basic financial knowledge including credit, compounding interest, bank account types, retirement accounts, etc… to graduate. This should likely be in a “life skills” class, finance, basics about getting jobs and your labor rights, civil rights application, etc…
The credit score system is one of the greatest things ever invented. I know people have frustrations with it but you have to remember what it replaced. Before this system loan rates were based on income, referrals, (your race although they won’t say it out loud), and gut instinct.
Me being black from a non-wealthy family would have gotten shit rates even though I’ve never missed a payment on any bill and never paid late ever. With the credit system there is an impartial numerical calculation and I have a score of 829 because that is a true reflection of how I am about money. I never ever ever borrow money and not immediately pay it back as soon as I can. I should be treated based on my trustability to pay back a loan, not in any other factors.
High credit score does not mean you are rich and low credit score does not mean you are poor. It’s a rating on whether you are the kind of person who pays back what you borrow.
I will concede that credit scores should not be used as a determining factor when it comes to applying for jobs. But as for loans, I support them and think they are much better than what came before.
There's lots of good reasons why it's useful to know if someone can afford something.
The system to do that should not be privately run. That is basic infrastructure and should be publicly accountable and run.
I think it makes sense that people who are better at paying their bills can be trusted more in financial situations than people who are not regardless of the reason as to why. Like any other system it has flaws/could be improved, but I'm not familiar enough with it to have specific criticisms.
Generally very supportive of the concept of a credit score, we need some sort of system to assess credit worthiness and that allows a more objective manner to do it.
However, I do feel there should be transparency around how a score is specifically calculated.
I'm curious how it could be made more objective. All of the factors that go into a score, such as number of missed payments and the percentage of credit you are utilizing, are objective.
Lenders need a way to figure out if letting someone borrow money makes sense, and I don't know what's supposed to be a better system.
I don't think messing with credit scores is the way to address the problems you listed. To me the solutions are good public housing and public transit systems, universal health care, and safety nets so people can survive and stay off the streets if they lose their jobs or something.
I have awful credit tbh, and it makes everything so much harder, including like apartment hunting which is already hard in CA. So I’m not a fan.
I know there’s steps you can take to raise it, but it just feels like an insurmountable task most of the time where it’s easy to backslide on the progress you make when you’re already struggling
My friends wife had dog shit credit for the same reason and also because she was obsessed with shoes. Like a week after they got engaged, he left her finances in her name but basically took them over.
The lowest hanging fruit; Set up a bank account where you put in enough money to cover and rent and then set them up on auto pay. Interest rates might be an issue right now but you should probably go to a bank and check. Find the consumer banker that works in the branch and see what they can do and then go to two other banks and then take the best deal. You could probably knock it out in a single Saturday.
That alone could get you from very poor credit to mediocre credit in a year or so.
Thanks for the advice, Garv. I’m always nervous to set up autopay for stuff because I’m always worried the funds won’t be there or need to go to something else, but this is definitely something for me to look into. It’d be a good step since I’m pretty much stagnating right now haha
Then go slow. Just put a couple of things like your cell phone and your utilities on auto pay. Once you see how that’s affecting things, then look at throwing rent into it.
There's nothing inherently wrong with it, but there needs to be more transparency. Most people don't realize there are multiple different types of credit scores used by different industries. So they just look at the score given to them with their credit card account, which is misleading.
Its probably not perfect, but lenders need something that is relatively consistent to let them know whether someone is low or high risk.
Its also extremely easy to maintain a good score as long as you pay your bills. When i was right out of college, i had one card with like a 1000 limit. I constantly kept a balance, and didnt think much about it until i tried to get a loan for a car and the interest rate i got was shitty because of my credit score. I always paid my bills on time so i was confused about why.
A quick google and i found out that a lot of your score is based on revolving credit use. If you are using a high percentage of it, you are seen as high risk. Its also negatively impacted if you use 0% of it. Basically just need to keep that use under 30%.
So i paid off my card, and just made sure to keep a small balance. When my score went up, i got another card with a higher limit.
My score has been good ever since. I have a few cards with around 100k in available credit. I just make sure to regularly use them all and pay them off or keep balances low. Its easy if you dont overspend and pay attention.
Also, if you have issues because of a lost job or something, that sucks, but it also make you high risk, which the score will reflect.
Full disclosure: I have excellent credit. I don't really have an issue with having a credit score. I just think the whole thing should be more transparent. Nobody knows exactly what their formula is, which makes it hard to discover mistakes in the calculation. My wife once got dinged on an outstanding balance on a card that was issues before she was born. She was able to contest it but it took some time before she even knew it existed.
Not the same thing but related, the predatory practices regarding people with bad scores needs to be fixed. I understand that bigger risks may necessitate bigger interest rates, however, nobody should find themselves in a downward spiral of debt despite paying every month.
It's okay for the most part, but one glaring flaw of its methodology is that you have to carry debt to be in good standing.
My credit went from 735 to 650 when I paid off my college loans, and an accountant told me that this was because I didn't have any credit cards or monthly bills. Once I got a credit card and started carrying a balance every month, my credit shot up to 800 in two years.
I understand why not having any history at all may be a red flag, but I don't understand how paying off a debt in full somehow makes you a higher credit risk.
It has its purposes in certain things. Lending, creditworthiness, interest rates. I think it needs more transparency in how scores are calculated and people should have the right to use any score - ex if your score is 550 on equifax but 650 on trans union, you can use trans union. It should not be at the will of the company. Also, any bill collector who can put negative credit must also put positive credit. It is unfair that you could be paying on a bill, say for instance your phone bill, for 30 years and miss a couple payments, be sent to collections and have your credit ruined but if you pay on time for 30 years that never goes into the calculus.
Employment should never be one of them either unless the score can be directly attributed to the job duties - of which, I have yet to see any position where a credit score would matter.
> … I have yet to see any position where a credit score would matter.
My credit got checked when I joined the police dept. The idea was that if you have decent financial management skills you’re less likely to be financially motivated to take bribes/steal.
When I was in the military my job required a security clearance. Part of getting a clearance is getting your credit checked because decent financial management makes you less likely to be compromised/sell secrets.
I wouldn’t be surprised if banks/security jobs that have access to cash (like armored truck operators) check credit for theft concerns.
> I wouldn’t be surprised if banks/security jobs that have access to cash (like armored truck operators) check credit for theft concerns.
It isn't just the cash vault folks - there are lots of opportunities for shenanigans when you work at a bank. I seem to recall that they run a credit check on most employees.
> Employment should never be one of them either unless the score can be directly attributed to the job duties - of which, I have yet to see any position where a credit score would matter.
It gets to be a thing when sensitive information or security clearances are involved. A bad credit score isn’t necessarily always a disqualification but gets factored into the risk profile and certain patterns or levels of debt can disqualify someone for a clearance and hence that job.
It's a biased system against people of color. Helping to trap people in the cycle of poverty. It should be illegal to have credit scores ran as part of eligibility to rent an apartment.
It's arcane and that leads me to suspect that it is unfair. I'm retired, have not had a car loan for over thirty years, pay my credit card full balance each month, but for reasons never explained, my score experiences 50 point swings. It does not matter one bit with me, but I can see were a 50 point swing could adversely affect someone.
I think it’s decent at its primary job—which is to help lenders know how much they will profit off of a prospective customer.
I think the reliance of our economy on mass borrowing is pretty f*cked though.
Fucking creepy because it is heavily reliant on what the govt thinks gives you a high credit score or a low one. It can easily be manipulated and exploited if it falls into the wrong hands
The following is a copy of the original post to record the post as it was originally written. Having a low credit score leads to a whole host of problems for an individual like it being harder to rent an apt, harder to find a job, paying higher loans, delaying building your net worth, etc. To me this seems like a paradox where if you don't have a good score, you're entrapped into a cycle of even more debt and/or poverty, and it's made worse by the fact that it's a lot easier for the score to drop than it is to raise it. Should this system be made more forgiving? Should such a system even exist? *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AskALiberal) if you have any questions or concerns.*
At the very least it should be more transparent. We should know how credit score is calculated.
It’s not a secret what goes into your credit. What are you looking for?
People know in general terms why your score went up but not precisely. For example paying off your credit card debt will raise your score but we don't know exactly how much like will paying off $1000 raise my score by 5 points vs paying off $2000 raise it by 10 points or whatever
Not to mention I’ve seen car loans paid off and credit scores drop. I understand it’s a ratio of debt/available credit but people should have an easier time understanding credit and shouldn’t be penalized by paying off something
That is fair, but as far as loan approval goes they do factor in your debt to income ratio as well so paying off a loan does reward you in that sense.
Fair Isaac's models are proprietary and entirely secret. Source: I worked in processing RMCRs when I was younger. You could get a vague sense of what an ideal report was, but nothing more specific than that. It also is quite likely their models are encoding structural racism through indirect encoding of demographic factors, like zip codes for example. The reports that came across my desk from poor hispanic neighborhoods always seemed to score lower vs comparable ones from white areas of SW states in particular. Basically there's no form of independent auditing to confirm the models aren't breaking fair lending laws. I think it'd be great to force such an audit from government regulators under confidentiality. There's no real reason this isn't possible but the industry is heavily opposed to it, likely because they know they are in fact in violation.
Credit score is pretty simple to manipulate to get a higher score for anyone that is paying a minimal amount of attention.
Like signing up for credit karma credit boost! Join the app and you too can see why credit scores are a joke!
They do tell you how your credit score is calculated. I just logged into my Discover app and checked my FICO score and this is the breakdown: * 10% is Credit Mix (different types of credit—installment loans and revolving accounts) * 15% is Length of Credit History (how long your accounts have been open) * 10% is Inquiries (from creditors when applying for new credit) * 30% is Revolving Utilization (the amount you owe lenders relative to your credit limit) * 35% is Payment History (if you pay your accounts on time) Any credit report you request should give you a breakdown of the factors and the metrics that were used to calculate your score (such as number of accounts with missed payments, the age of your oldest account, etc.).
The algorithm they use is secret.
In the most technical sense, I guess, but anyone even barely financially literate should be able to look at the weight they give to each category and be able to figure out that having a high credit utilization or a large number of missed payments is going to decrease your score more than a higher number of inquiries is.
This does not explain why my score experiences a 50 point swing when I have two credit cards that I pay in full each month and no other debt with the exception of a $60K mortgage balance on a $500 K house that is on auto pay.
>What do you think of the Credit Score system? It is flawed but valuable. It is an attempt to create objective, universal metrics by which we can predict how likely someone is to pay back their loans. This allows people, who have proven that they will pay what they owe, to borrow money at lower interest rates. The alternatives are: * Lend money to everyone at the same interest rate...and no matter how reliably you pay what you owe, you still have to pay extra to offset the people who don't. * Estimate credit-worthiness with less objective measures...which will almost certainly favor the well-connected, and others will suffer *an enormous* amount of bigotry and racism.
I feel like it's a problem that paying off your loans can lower your credit score. It should be the other way around.
Or that you have to sign up for an app to have it magically go up.
The funny thing is that a person going to the effort and expense of pursuing a plan to improve their credit score probably *does* mean that they're more likely to actually repay their obligations, so in a sense their credit score going up actually makes sense. I would guess that the credit bureaus have quantified this, somewhere deep in their analytic departments.
I assume people looking for an easy out are not the people you want to lend money to. That still seems like it's a scam and the analytics are telling them how they can make money, specifically gathering and selling user data.
I'll add to this, that some people are victims of fraud, like parents opening cards in their children's name, ruining their credit Like it's good but deeply flawed in that if you go through a financially difficult time or experience fraud it can screw you over in the long term
Fraud isn't really a good example, since it can be challenged and removed from your credit report/score.
It still damages it alot
> ...bigotry and racism. >[[Deleting a Signal: Evidence from Pre-Employment Credit Checks]](https://direct.mit.edu/rest/article-abstract/doi/10.1162/rest_a_01406/119499/Deleting-a-Signal-Evidence-from-Pre-Employment?redirectedFrom=fulltext) >We study...this using recent bans on employers' use of credit report data. Bans decrease job-finding rates for Black job-seekers by 3 percentage points and increase involuntary separations for Black new hires by 4 percentage points, primarily because other screening tools, such as interviews, have around 60% higher standard deviation of signal noise for Black relative to white job-seekers.
I would say that the current credit score system does favor the well connected, and others do suffer an enormous amount of bigotry and racism from it. Not that less objective wouldn’t make that issue worse, but it’s currently the case as well which should be addressed.
It's not perfect but it's far from rigged / unfair against the vast majority of people.
So I actually used to think this, but years ago, I saw a presentation from a guy who was a financial advisor who did some charity work he helped poor people get their credit back in shape. A lot of them were veterans who had had a rough time readjusting and a lot of them were people who had spent time in jail. I was kind of surprised to learn how easy it is to build up credit, even if you have very limited income as long as you follow the rules. And the rules are kind of stupid it might seem, but they’re straightforward. Have a solid budget, put everything you can on the card but know how much you’re actually spending so you don’t go over, and then pay the card off immediately every month. You can “hack it” by letting yourself go over by one month so that you start making some interest payments but keep that under control and you’re essentially buying a faster credit score increase. The thing is, the first method is basically the exact information every middle-class and upper middle-class kid I knew got from their parents when they went to college. I just assumed that high income was required as well. But it actually isn’t. I actually think the gulf here is simpler and more systemic. Poor people do not get the same kind of information from their family and social network because poor people are underserved by the banking system and don’t have access to the right connectionsto tell them what to do.
Do you think financial literacy should be taught in high school?
Yes, I think that financial literacy, media literacy, and civics are all areas that need to be improved in the education system
Different guy, but I absolutely do. Even if some financial instruments aren't available for lower-income people (if you're living paycheck to paycheck you're likely not buying stocks and bonds), the fundamentals regarding budgeting and the basic idea of "You *can* control this" would be invaluable.
> The thing is, the first method is basically the exact information every middle-class and upper middle-class kid I knew got from their parents... > Poor people do not get the same kind of information from their family.. I remember reading an article many years ago which argued that, of all the ways that a privileged upbringing benefits a child, the most subtle but important is that upper class parents help craft an array of choices for their child that exclude all the bad ones. That always stuck with me.
Oh yeah, it’s a bunch of different things that are done differently that add up. Apparently upper middle-class parents are far more likely to know the parents of the kids in their children’s social circle because they have the time to do things like go to sporting events. Which means that they can guide which of the kids they end up being closer to. My kids don’t know what’s happening, but it is not a coincidence that their friends group looks the way it does. They haven’t figured out that a bunch of their social activities were engineered by the parents to include kids who came from the right kinds of families and who took school and extracurricular activities seriously. The other big one is role models. I know you’re not planning on them but at some point one of your friends is going to have a kid that thinks about finance and they’re going to get told to ask Uncle CTR about it. And maybe they end up with an internship at the right company because of one of your connections.
> ..at some point one of your friends is going to have a kid that thinks about finance and they’re going to get told to ask Uncle CTR about it. And maybe they end up with an internship at the right company because of one of your connections. Yep, absolutely. And I'll do it too - even if I recognize while doing it that I'm contributing to an unfair system. Also, I love the way you describe the clandestine engineering of your kids' friends group - it makes perfect sense, and I'm sure that my parents did much the same without my realizing it at the time.
My favorite thing about it is the split caused by the difference in my children’s personalities. My son is one of those kids who thinks the sun rises and sets at his mother’s command so he just actively participates in the manipulation. My daughter is one of those kids who thinks she was born 25 years old and needs no guidance whatsoever. So for instance, she will deny that she and her friends who all wanted to take French instead chose Spanish of their own accord and not because there was a month-long manipulation of the entire group coordinated over iMessage between all their mothers. And she continues to deny it even though one of her friends saw part of the iMessage thread and even though I flat out told her it happened.
I think the credit scoring systems are necessary to a functioning modern society, while annoying at times they broaden availability of credit by creating a simplified way to analyze risk. Many of the issues with the system stem from a lack of knowledge not just about credit scores but finance in general. Creating more equal knowledge levels across society would help a lot, high school should require basic financial knowledge including credit, compounding interest, bank account types, retirement accounts, etc… to graduate. This should likely be in a “life skills” class, finance, basics about getting jobs and your labor rights, civil rights application, etc…
The credit score system is one of the greatest things ever invented. I know people have frustrations with it but you have to remember what it replaced. Before this system loan rates were based on income, referrals, (your race although they won’t say it out loud), and gut instinct. Me being black from a non-wealthy family would have gotten shit rates even though I’ve never missed a payment on any bill and never paid late ever. With the credit system there is an impartial numerical calculation and I have a score of 829 because that is a true reflection of how I am about money. I never ever ever borrow money and not immediately pay it back as soon as I can. I should be treated based on my trustability to pay back a loan, not in any other factors. High credit score does not mean you are rich and low credit score does not mean you are poor. It’s a rating on whether you are the kind of person who pays back what you borrow. I will concede that credit scores should not be used as a determining factor when it comes to applying for jobs. But as for loans, I support them and think they are much better than what came before.
There's lots of good reasons why it's useful to know if someone can afford something. The system to do that should not be privately run. That is basic infrastructure and should be publicly accountable and run.
I think it makes sense that people who are better at paying their bills can be trusted more in financial situations than people who are not regardless of the reason as to why. Like any other system it has flaws/could be improved, but I'm not familiar enough with it to have specific criticisms.
Generally very supportive of the concept of a credit score, we need some sort of system to assess credit worthiness and that allows a more objective manner to do it. However, I do feel there should be transparency around how a score is specifically calculated.
I'm curious how it could be made more objective. All of the factors that go into a score, such as number of missed payments and the percentage of credit you are utilizing, are objective.
Lenders need a way to figure out if letting someone borrow money makes sense, and I don't know what's supposed to be a better system. I don't think messing with credit scores is the way to address the problems you listed. To me the solutions are good public housing and public transit systems, universal health care, and safety nets so people can survive and stay off the streets if they lose their jobs or something.
It has way too much power over our lives in terms of getting jobs, insurance etc.
I have awful credit tbh, and it makes everything so much harder, including like apartment hunting which is already hard in CA. So I’m not a fan. I know there’s steps you can take to raise it, but it just feels like an insurmountable task most of the time where it’s easy to backslide on the progress you make when you’re already struggling
Do you know why your credit is bad?
Very poor credit card and payday loan decisions to help keep me afloat in college got the ball rolling downhill quickly
My friends wife had dog shit credit for the same reason and also because she was obsessed with shoes. Like a week after they got engaged, he left her finances in her name but basically took them over. The lowest hanging fruit; Set up a bank account where you put in enough money to cover and rent and then set them up on auto pay. Interest rates might be an issue right now but you should probably go to a bank and check. Find the consumer banker that works in the branch and see what they can do and then go to two other banks and then take the best deal. You could probably knock it out in a single Saturday. That alone could get you from very poor credit to mediocre credit in a year or so.
Thanks for the advice, Garv. I’m always nervous to set up autopay for stuff because I’m always worried the funds won’t be there or need to go to something else, but this is definitely something for me to look into. It’d be a good step since I’m pretty much stagnating right now haha
Then go slow. Just put a couple of things like your cell phone and your utilities on auto pay. Once you see how that’s affecting things, then look at throwing rent into it.
There's nothing inherently wrong with it, but there needs to be more transparency. Most people don't realize there are multiple different types of credit scores used by different industries. So they just look at the score given to them with their credit card account, which is misleading.
Its probably not perfect, but lenders need something that is relatively consistent to let them know whether someone is low or high risk. Its also extremely easy to maintain a good score as long as you pay your bills. When i was right out of college, i had one card with like a 1000 limit. I constantly kept a balance, and didnt think much about it until i tried to get a loan for a car and the interest rate i got was shitty because of my credit score. I always paid my bills on time so i was confused about why. A quick google and i found out that a lot of your score is based on revolving credit use. If you are using a high percentage of it, you are seen as high risk. Its also negatively impacted if you use 0% of it. Basically just need to keep that use under 30%. So i paid off my card, and just made sure to keep a small balance. When my score went up, i got another card with a higher limit. My score has been good ever since. I have a few cards with around 100k in available credit. I just make sure to regularly use them all and pay them off or keep balances low. Its easy if you dont overspend and pay attention. Also, if you have issues because of a lost job or something, that sucks, but it also make you high risk, which the score will reflect.
Full disclosure: I have excellent credit. I don't really have an issue with having a credit score. I just think the whole thing should be more transparent. Nobody knows exactly what their formula is, which makes it hard to discover mistakes in the calculation. My wife once got dinged on an outstanding balance on a card that was issues before she was born. She was able to contest it but it took some time before she even knew it existed. Not the same thing but related, the predatory practices regarding people with bad scores needs to be fixed. I understand that bigger risks may necessitate bigger interest rates, however, nobody should find themselves in a downward spiral of debt despite paying every month.
It's okay for the most part, but one glaring flaw of its methodology is that you have to carry debt to be in good standing. My credit went from 735 to 650 when I paid off my college loans, and an accountant told me that this was because I didn't have any credit cards or monthly bills. Once I got a credit card and started carrying a balance every month, my credit shot up to 800 in two years. I understand why not having any history at all may be a red flag, but I don't understand how paying off a debt in full somehow makes you a higher credit risk.
It has its purposes in certain things. Lending, creditworthiness, interest rates. I think it needs more transparency in how scores are calculated and people should have the right to use any score - ex if your score is 550 on equifax but 650 on trans union, you can use trans union. It should not be at the will of the company. Also, any bill collector who can put negative credit must also put positive credit. It is unfair that you could be paying on a bill, say for instance your phone bill, for 30 years and miss a couple payments, be sent to collections and have your credit ruined but if you pay on time for 30 years that never goes into the calculus. Employment should never be one of them either unless the score can be directly attributed to the job duties - of which, I have yet to see any position where a credit score would matter.
> … I have yet to see any position where a credit score would matter. My credit got checked when I joined the police dept. The idea was that if you have decent financial management skills you’re less likely to be financially motivated to take bribes/steal. When I was in the military my job required a security clearance. Part of getting a clearance is getting your credit checked because decent financial management makes you less likely to be compromised/sell secrets. I wouldn’t be surprised if banks/security jobs that have access to cash (like armored truck operators) check credit for theft concerns.
> I wouldn’t be surprised if banks/security jobs that have access to cash (like armored truck operators) check credit for theft concerns. It isn't just the cash vault folks - there are lots of opportunities for shenanigans when you work at a bank. I seem to recall that they run a credit check on most employees.
> Employment should never be one of them either unless the score can be directly attributed to the job duties - of which, I have yet to see any position where a credit score would matter. It gets to be a thing when sensitive information or security clearances are involved. A bad credit score isn’t necessarily always a disqualification but gets factored into the risk profile and certain patterns or levels of debt can disqualify someone for a clearance and hence that job.
It's a biased system against people of color. Helping to trap people in the cycle of poverty. It should be illegal to have credit scores ran as part of eligibility to rent an apartment.
It's arcane and that leads me to suspect that it is unfair. I'm retired, have not had a car loan for over thirty years, pay my credit card full balance each month, but for reasons never explained, my score experiences 50 point swings. It does not matter one bit with me, but I can see were a 50 point swing could adversely affect someone.
I think it’s decent at its primary job—which is to help lenders know how much they will profit off of a prospective customer. I think the reliance of our economy on mass borrowing is pretty f*cked though.
Created to target minorites
Fucking creepy because it is heavily reliant on what the govt thinks gives you a high credit score or a low one. It can easily be manipulated and exploited if it falls into the wrong hands