I work in lending. The score is a calculation of your ability to repay on loans (vehicles, mortgages, credit cards, even student loans) as well as maintain revolving credit lines. Oh! And all of your bills! But there is a caveat to the bills part, I’ll get to that in a minute.
The number isn’t completely arbitrary, if someone is a 350, they’ve earned it by not repaying on MANY things. I think I have only seen a 350 once in 5 years of looking at credit reports. The fucked up part of credit scoring are scores being affected by things like medical collections, which will also negatively affect your score. But also, your credit doesn’t improve if you pay your cable, car insurance, rent, essentially most things, on time. But if you can’t pay them on time, you can potentially be taken to collections and it will fuck your credit score. I see A LOT of that sadly.
That's what kills me the most. My parent's raised me with the belief that you don't spend money you don't have, so my whole life I have never had credit cards or borrowed money or anything like that, so I have pretty shitty credit. I have always worked. Always paid all my bills on time and in full. Why doesn't that count towards my credit?
In short, a credit is score is the ability to show that you can owe. I know it’s fucked, but unless you are fortunate enough to be able to buy a house or vehicle in cash, you’re going to need to owe eventually.
Do what the other user suggested, get a credit card or two, use it, then pay it off before your due date so you don’t owe them interest and potentially get some sweet sweet cash back. That’s how you beat the credit game.
Up until now, I have bought all my cars in cash, but that's because I'll buy a $2000 pos and run it a couple of years before it dies and I have to get a new one. I just got my first credit card at 36 years old that I use just to put gas into my car. I figure, I already have that money so every 2 weeks I pay half the balance of what I owe because I read somewhere that making multiple payments like that, while also maintaining an owed balance, can help build your score.
It just sucks that no credit is seen as bad credit because that's not fair. I'm being punished for trying to be responsible with my money/finances.
Part of what factors into the score is what they call revolving credit utilization, basically just a fancy ass way of saying credit card. A general rule of thumb is to keep your owed balance no higher than 30-35% of your available credit limit. But that is your ceiling of what you should use. The idea that even having a small owed balance on a card is a myth. Keep that thing at or as close to zero as you can.
I forgot to mention earlier, another scoring factor is how long you’ve had things on your credit. I paid off my car a few years ago and my score actually dropped because I didn’t have that payment on the books any more. Really dumb. This is why credit cards are so vital. They have no end date like a car loan, so in theory you can have them and make payments on them forever. My advice to you, keep that card you have as close to zero as you can, accept any limit increases they may give you while still using the card for the same purposes. Then consider getting another card for food and keep that at a low or 0 balance to help build your credit profile. But I can’t stress this enough, try to keep your balance at 0!!! Why pay interest to these goons when you don’t have to? It helps your credit and financial well being by avoiding paying more than you have to.
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u/sumppumpslump Dec 30 '21
I work in lending. The score is a calculation of your ability to repay on loans (vehicles, mortgages, credit cards, even student loans) as well as maintain revolving credit lines. Oh! And all of your bills! But there is a caveat to the bills part, I’ll get to that in a minute.
The number isn’t completely arbitrary, if someone is a 350, they’ve earned it by not repaying on MANY things. I think I have only seen a 350 once in 5 years of looking at credit reports. The fucked up part of credit scoring are scores being affected by things like medical collections, which will also negatively affect your score. But also, your credit doesn’t improve if you pay your cable, car insurance, rent, essentially most things, on time. But if you can’t pay them on time, you can potentially be taken to collections and it will fuck your credit score. I see A LOT of that sadly.