5 ms·

There's no such thing as a credit score (at least not in the US sense). The big problem with the US system is that it gets you needlessly hooked on the whole i

There's no such thing as a credit score (at least not in the US sense). The big problem with the US system is that it gets you needlessly hooked on the whole idea of credit. As per this very example, you need to do things like get credit cards just to pay them off on time, or else you're screwed when it comes to things like getting a mortgage. In most of Europe the key factor for that sort of loan is simply whether you have a steady income that's high enough to make the payments, factoring in outstanding debts. A credit check will show up things like whether you've a history of missing payments on any existing credit, and that can certainly be taken into account, and most lenders have their own version of a 'credit score' they'll apply based on all that info — but it's not a centralised thing, and it's generally more concerned with raising past problems as a red flag, rather than with past good behaviour. If you've a history of living within your means that should be a good thing, not a bad thing.

kr1shna 15y ago
Are you saying the UK doesn't have a credit score system or that it's not used in the same way as it is in the US? Because I'm constantly getting emails from Experian asking me to do a free credit check, etc. etc.
- salvadors 15y ago
  There is no central credit score — each lender (or credit agency) creates its own sets of rules as to whether you're good or bad, all with different criteria. Some of those may package it up as a "score", but that's essentially meaningless. Checking that your credit reports from the major agencies (Experian and Equifax are used by about 90% of lenders IIRC) are accurate is worth doing from time to time, especially if they're offering it for free (although as the maximum they're allowed to charge, by law, is £2, be careful that the "free" version isn't a way of sucking you in to something else) http://www.moneysavingexpert.com/loans/credit-rating-credit-score http://www.moneysavingexpert.com/loans/credit-rating-credit-... sets it out quite well.
esrauch 15y ago
> If you've a history of living within your means that should be a good thing, not a bad thing. How is always paying off a credit card not living within your means though? Maybe this is some US-centric brainwashing, but it seems to me that someone who has never had a credit card is less trustworthy than someone who had it and didn't overspend; it proves that the person had the opportunity to do something really dumb and didn't. The person who never had the credit card might have done something dumb if they were ever given the chance. It's interesting that your credit checks are so decentralized, but it seems unlikely to me that would cause them to consider no history to be the same as known good history. That said, I'm not even sure how much impact properly paying credit cards has versus not having one, but even with a minor difference there is practically no advantages to using a debit card instead of a credit card that you always pay off in full from your checking account. Even excluding credit, certainly you must get additional fraud guarantees and possibly rewards programs with credit cards in the UK?
- salvadors 15y ago
  But if you're always living within your means, why would you ever want to have a credit card at all? Things like reward programs certainly aren't universal (or even common, I believe, though they do exist), and pretty clearly only exist to try to get people to use the card in the first place, on the basis that it's to the credit card company's advantage, in that enough people won't pay off in time to justify the rewards. (I should also note that it's more common in UK/EU for credit cards to also have a monthly or annual fee.) I'm not sure what additional fraud guarantees exist. I had fraud on my debit card once, and it was resolved much easier and quicker than the time I had fraud on my credit card. The UK does have a slightly odd additional consumer protection law in that if you buy anything over £100 on a credit card, and the goods turn out to be faulty, you can claim the cost back from the credit card company, rather than the retailer. That's certainly vaguely useful, but I've never heard of anyone choosing to have a credit card just for that reason. I think there's potentially a different worldview at play in the "had a chance to do something dumb and't didn't" approach. To massively overgeneralise, I'd say the European way is to simply not put that temptation in front of people, whereas the US way is to deliberately encourage it, so as to massively profit from it (with the UK constantly torn between the two!) :) So I'd say pretty much the opposite of your final conclusion: There are so few advantages to using a credit card rather than a debit card that why would you bother with the hassle/risk?

kr1shna 15y ago

Are you saying the UK doesn't have a credit score system or that it's not used in the same way as it is in the US? Because I'm constantly getting emails from Experian asking me to do a free credit check, etc. etc.

salvadors 15y ago
There is no central credit score — each lender (or credit agency) creates its own sets of rules as to whether you're good or bad, all with different criteria. Some of those may package it up as a "score", but that's essentially meaningless. Checking that your credit reports from the major agencies (Experian and Equifax are used by about 90% of lenders IIRC) are accurate is worth doing from time to time, especially if they're offering it for free (although as the maximum they're allowed to charge, by law, is £2, be careful that the "free" version isn't a way of sucking you in to something else) http://www.moneysavingexpert.com/loans/credit-rating-credit-score http://www.moneysavingexpert.com/loans/credit-rating-credit-... sets it out quite well.

esrauch 15y ago

> If you've a history of living within your means that should be a good thing, not a bad thing. How is always paying off a credit card not living within your means though? Maybe this is some US-centric brainwashing, but it seems to me that someone who has never had a credit card is less trustworthy than someone who had it and didn't overspend; it proves that the person had the opportunity to do something really dumb and didn't. The person who never had the credit card might have done something dumb if they were ever given the chance. It's interesting that your credit checks are so decentralized, but it seems unlikely to me that would cause them to consider no history to be the same as known good history. That said, I'm not even sure how much impact properly paying credit cards has versus not having one, but even with a minor difference there is practically no advantages to using a debit card instead of a credit card that you always pay off in full from your checking account. Even excluding credit, certainly you must get additional fraud guarantees and possibly rewards programs with credit cards in the UK?

salvadors 15y ago
But if you're always living within your means, why would you ever want to have a credit card at all? Things like reward programs certainly aren't universal (or even common, I believe, though they do exist), and pretty clearly only exist to try to get people to use the card in the first place, on the basis that it's to the credit card company's advantage, in that enough people won't pay off in time to justify the rewards. (I should also note that it's more common in UK/EU for credit cards to also have a monthly or annual fee.) I'm not sure what additional fraud guarantees exist. I had fraud on my debit card once, and it was resolved much easier and quicker than the time I had fraud on my credit card. The UK does have a slightly odd additional consumer protection law in that if you buy anything over £100 on a credit card, and the goods turn out to be faulty, you can claim the cost back from the credit card company, rather than the retailer. That's certainly vaguely useful, but I've never heard of anyone choosing to have a credit card just for that reason. I think there's potentially a different worldview at play in the "had a chance to do something dumb and't didn't" approach. To massively overgeneralise, I'd say the European way is to simply not put that temptation in front of people, whereas the US way is to deliberately encourage it, so as to massively profit from it (with the UK constantly torn between the two!) :) So I'd say pretty much the opposite of your final conclusion: There are so few advantages to using a credit card rather than a debit card that why would you bother with the hassle/risk?