Armed Polite Society
Main Forums => The Roundtable => Topic started by: MillCreek on October 07, 2015, 02:52:26 PM
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http://www.businessinsider.com/lasting-relationships-and-credit-scores-2015-10?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29&utm_content=FeedBurner+user+view
Last time I looked, my score was 813.
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It actually makes a lot of sense.
The more you have your life squared away, the higher your credit score is likely to be.
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According to my one credit union, my score is 840 out of 850.
I'm not sure what they're measuring, because the scores I'm getting from CreditKarma are around 815-820.
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Credit union maybe giving you bonus points for being a member and want you to borrow from them.
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I am just now taking a Dave Ramsey course on personal finance. He is famous for calling the credit score an "I love debt" score. I think that the connection between the relationship and the credit score has a lot to do with going into more debt for the big house, etc.
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A high credit score means you are in debt but pay on time. The longer and deeper you are in debt the higher the score.
A dozen years or so ago I got big time anti-debt. I went to pay as I go and either saved up or did without. Then I payed off my house and went debt free for a while. That sort of thing does not make for a high credit score.
My wife though has an 18 year student loan history and 2 piddly store cards and her score is in the high 700s.
It's a trap!
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One thing about 'being in debt' to get a high credit score - you don't actually have to pay any interest.
Some cell phone companies report information on billing. Have a couple credit cards, charge a bit on them, pay them off in full every month, and you'll get a high credit score eventually.
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That's the way I'm taking it.
But paying off or not having a mortgage is still a negative on a credit score.
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That's the way I'm taking it.
But paying off or not having a mortgage is still a negative on a credit score.
It takes a while for a paid off mortgage to drop off your credit reports.
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Credit scores are a sham. It's more of a "this guy will borrow a lot, carry a balance, and probably pay us back!" Score than it is a "this guy has his financial *expletive deleted*it together!" score. That on top of a multitude of other factors reinforce my belief in it being a sham.
Sent from my iPhone. Freaking autocorrect.
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Credit scores are a sham. It's more of a "this guy will borrow a lot, carry a balance, and probably pay us back!" Score than it is a "this guy has his financial *expletive deleted*it together!" score.
It's not perfect, but it's explicitly a measurement of how likely 'this guy' is to pay back the lender. That's it's entire purpose! They don't care if he has his financial *expletive deleted*it together, they just want to know whether they're going to get paid. The only reason consumers care about their scores is that credit companies like people who are likely to pay them back, thus they offer better deals, which means that those with good scores can borrow money cheaper.
'Borrowing a lot' and 'carry a balance' actually hurts your score. Having accounts that show you've paid on time, every time, that helps. The longer the better. Having a high(but not too high!) ratio between available credit and the amount you're actually using is better than utilizing 'most' of your revolving credit. Indicates that you might be getting close to getting tapped out.
Have 2-4 credit cards, charge about a grand on them a month(I route my utility bills and such through them), then pay in full every month.
I'm NOT borrowing a lot. The only 'balance' I'm carrying is my home loan(at that interest rate, like hell I'm paying it early!). Over the last year, my FICO has varied between 813 and 841.
The only thing they ding me for? 'Time since most recent account opening is too short'. I got a credit card from amazon that I'm using the heck out of because it has a better rewards program than what Discover was offering.
BTW, the reason why insurance companies and such like high credit scores as well is that it tends to indicate a certain type of person - IE it's the easiest measurement they can use to tell that you're somebody who has his *expletive deleted*it together and isn't a risk taker.
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"The longer and deeper you are in debt the higher the score."
Uhm... No.
That's overly simplistic, and in a lot of ways, incorrect. It is far more complex than that. You can have relatively little debt and have an excellent score, or you can have a lot of debt and have an excellent credit score.
In my case, I have relatively little debt (especially compared to the amount of credit available to me) and my credit score is well over 800.
This chart shows the major components that factor into a credit score:
http://www.myfico.com/crediteducation/whatsinyourscore.aspx
That chart shows 5 major components that are figured in a credit score:
1. Payment history
2. Amounts owed
3. Length of credit history
4. Credit mix
5. New credit
Payment history has the biggest overall effect on your credit score. If you miss payments, are late, have charge offs or a bankruptcy, that's going to have a huge negative impact on your score.
The amount you own isn't just a total number, it also looks at overall credit utilization, that is the ratio of available credit to outstanding debt. If you have available credit of $5,000, but owe $4,900, your credit score is likely going to be a lot lower than if you only owed $490.
Length of credit history is primarily the length of time you've held accounts as well as the length of time you've actually been using credit. Higher credit scores coming from having a number of accounts you've had for multiple years. People who used to do the "open a credit card for 0% interest for 18 months, transfer my old balance, and close the old card" invariably were hurting their credit rating by doing that. Before I realized how important this was, I closed my Sears card which I had had since the middle 1980s. Fortunately I didn't close my credit union card, which I've had since 1988. I've also stopped hopping credit cards, and in the last 5 years have opened only one new credit account, last January to take advantage of Bridgestone's "use our money for free to fix your car!" My credit score dropped 2 points.
Credit mix is a lot more nebulous as to how it affects your credit rating, but the old saw of "mortgage is good debt, credit cards are bad debt" still has a lot of meaning for this factor, apparently.
New credit ties in with the length of credit history. A bunch of newly opened accounts with no payment history are going to pull your score down for awhile. It will recover as you use, and make payments on, those accounts.
Oh hell, I jut typed all of that out, and much of it is in this link: http://www.myfico.com/CreditEducation/ImproveYourScore.aspx
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Credit scores are a sham. It's more of a "this guy will borrow a lot, carry a balance, and probably pay us back!" Score than it is a "this guy has his financial *expletive deleted*it together!" score. That on top of a multitude of other factors reinforce my belief in it being a sham.
Sent from my iPhone. Freaking autocorrect.
WRONG.
Credit scores are based primarily on a person's past behavior -- having paid your bills on time in the past is a fairly good indicator of what you'll do in the future. People rarely so completely change their past behavior that it makes the concept a sham. Credit scoring has an excellent track record of predicting an individual's future activity. If it didn't, it wouldn't be used.
Can it blow up? Yes.
You might have a long history of excellent credit activity and suddenly develop an unhealthy affection for Filipino hookers and blow.
Far more likely, though, is something that happens that is outside of your control -- a job loss due to an economic downturn, a major illness, something like that.
But those sorts of things happened long before credit scores were even conceived.
Where the entire concept falls apart is when lending institutions ignore the warning signs of low credit scores and extend credit to marginal borrowers. That was a significant driving force in the financial crash of a few years ago.
Credit scores properly predicted that many of these people were poor risks -- the banks and other lenders rolled the bones anyway.
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I'm with Mike on this.It shows a track recird of being financially responsible.
I'n a meta way, credit scores display a history of stability and trustworthiness- sort of the things that are good in long term a relationship.
As with everything else ymmv, unexpected events can ruin both credit scores or relationships.
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My credit score over 800 is I think a product of several factors: the only debt I have is the mortgage, I have two credit cards that are paid off every month and I have been using credit (mortgage, one car loan and some credit cards) for over 30 years with no missed or late payments. When they ran my credit a few months ago when I bought the new house, the credit report said the negative factor impacting my score of 813 was that I did not have enough credit accounts.
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"When they ran my credit a few months ago when I bought the new house, the credit report said the negative factor impacting my score of 813 was that I did not have enough credit accounts. "
Yep. It sounds counterintitutive that that would be the case, but it is. I guess the logic is that it's easy to juggle one or two accounts, less so to juggle 8 or 10.
I'm in the sweet spot, I think.
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My credit score over 800 is I think a product of several factors: the only debt I have is the mortgage, I have two credit cards that are paid off every month and I have been using credit (mortgage, one car loan and some credit cards) for over 30 years with no missed or late payments. When they ran my credit a few months ago when I bought the new house, the credit report said the negative factor impacting my score of 813 was that I did not have enough credit accounts.
Mine was around 790-800 until I got divorced, bought a new house, and in the interim forgot that I set up billing for my ooma phone on my 'emergency credit card' which I only used for all my bills fir one month then forgot that ooma was still charging $4/month.... long stioy short, the emergency card was set up to be paperless, i forgot about it, and missed a $4 cc bill.
Its now 723 when I checked a couple weeks ago.
I own the issue, and it is definately an indicator that I didn't have everything squared away. :laugh:
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This is one of those issues that reminds me if this:
http://www.break.com/video/ugc/tosh-0-counting-money-1849260
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Some years back, for around a five year period, I had, between the house and rental properties, four different mortgages going. At that time, my score was in the same 830-840 range that Mike has. I haven't had a mortgage or any other kind of loan for over ten years now. I have an Amex card and two regular credit cards that I pay off monthly, and sometimes a Sears card (see below). I also pay all my bills on time, though there are a few times in my credit history where I was on vacation or work travel and forgot to pay a cell phone bill or whatever, but immediately paid it at the first late notice.
Coincidentally when this topic started, I got an email from American Express that said they now keep my FICO score on my online account, so I can look at it anytime. So I looked. Even with no mortgages or other large debts to pay, I'm still at 820, so history and size of the previous loans must be a major factor (among others) that keeps the score from going down (barring any screwups on my part).
The Sears card I've had three times now. Pretty much every time I bought major appliances at Sears, they had some deal where if I apply for a card, I get a significant discount on the purchase. Then I don't buy anything else for a couple of years and they cancel the card for non-use, then I get another one the next time I make a major purchase. I don't know how negatively that affects my overall score given it's not a "major" credit card.
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You can add a note to your credit files to that effect.
I almost screwed up recently over a doctor's bill I thought I had paid, but did not.
I don't check my mailbox regularly, so I missed the increasingly dire notices... Until I found the one saying I was being submitted to collection. I got it paid with a day or two to spare. Can't imagine what that would have done to my credit rating.
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The last two times I've bought a car the sales people have practically wept when I've shown up with preapproved loans as opposed to using the dealership's financing.
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The last two times I've bought a car the sales people have practically wept when I've shown up with preapproved loans as opposed to using the dealership's financing.
Yeah, they hate it when you write a check for the full price. They hate it even more when you ask them if you can put it on your credit card for the points (the answer is always 'no').
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Yeah, they hate it when you write a check for the full price. They hate it even more when you ask them if you can put it on your credit card for the points (the answer is always 'no').
I tried that once as well. :laugh:
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Yeah, they hate it when you write a check for the full price. They hate it even more when you ask them if you can put it on your credit card for the points (the answer is always 'no').
Crap! I was halfway thinking about doing that when I buy the new truck. That would really pump up my REI dividend check this year.
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Yeah, they hate it when you write a check for the full price. They hate it even more when you ask them if you can put it on your credit card for the points (the answer is always 'no').
Odd; a former coworker did just that. Of course, he was buying the nicest (around $80k, as I recall) work truck (basically their toughest hauler in its class with every high dollar option available) they had that had been sitting on the lot gathering dust as a too-expensive-for-fleet-use teaser model for a while, and he was a very blunt negotiator who had already walked off the competitor's lot because they refused to sell a comparable truck to him at all without running a credit check.
He had the bank transfer to pay off the card on its way by the time he got back to the office, too.
Another former coworker actually ended up with amazing credit and a ridiculous limit because he had one personal credit card that he used only for reimbursable expenses on business trips. He would out everybody's motel rooms on the card, car rentals, etc. then when the company cut him a reimbursement check he would endorse it over to the credit card company and mail it in that day. Ended up with over $500k of spending on the card one year, always paid in full within 30 days.
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I think a lot depends on your dealership and also your card issuer.
I know when I bought my current Outback a few years ago I put several thousand on my NFCU card, paid the balance with my preapproved loan, then went home and transferred the money from my savings to my credit card.
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If you think you can get a better deal by taking their financing, why not just take it and then pay off the loan in the first month? Surely the sales guys will come down a bit if you agree to really bad financing?
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If you think you can get a better deal by taking their financing, why not just take it and then pay off the loan in the first month? Surely the sales guys will come down a bit if you agree to really bad financing?
Though I've never financed, I've never been offered really bad financing by a car dealership (and I do realize they have some crappy financing). They always push it, but it's the "0%" financing, and it has always meant I then don't get rebates/incentives. I've considered it, doing calculations on what I could make investing $20-30K over three years. The numbers are usually a little higher than the upfront rebate, but I so hate having someone else "own" something of mine that I prefer to just get the rebate and have the title in my name from the get-go.
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I buy used, and NFCU's rates have always beaten the dealership rates.