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Those are not the only rules though... you can have low credit for not taking out enough loans and not having debt. You get dinged for opening and closing credi

Those are not the only rules though... you can have low credit for not taking out enough loans and not having debt. You get dinged for opening and closing credit card accounts too quickly, even if you've never missed a payment. Your score goes down if you simply inquire about loans a bit too often... All of these are "rules" made up unilaterally by the credit bureaus.

BuyMyBitcoins 4y ago
I have a few credit cards that I no longer use. If I cancel them my score would go down because the average age/length credit history would go down. Not by that much, but it is surprising that leaving these cards open is incentivized whereas the more secure and less risky thing to do would be to close those accounts.
- mattnewton 4y ago
  It make a a bit more sense when you think about it - Risk isn’t really the main thing incentivized here, making interest payments is haha. Risky lenders don’t make payments, but neither do people who never take on debt
  - medvezhenok 4y ago
    Credit scores actually are designed to measure risk, not interest payments. Otherwise high credit utilization would be a positive:) There are certainly edge cases where the score has low predictive value, but overall the correlation between credit score and risk is quite large.
- medvezhenok 4y ago
  The closed card drops off your account history after ~10 years, so your score shouldn't immediately go down. Technically, I'm not sure that the credit scores can differentiate between you closing a card and the bank closing your card (the latter might be some sort of signal of potential change in creditworthiness) In general, credit scores are optimized for the average consumer - and so behaviors around the edges don't always make sense in terms of your score going up or down. If you think about the system that was replaced by credit cards (i.e. keeping a tab open with many different stores), you'd be hard pressed to say that the amount of credit extended is lower now (overall), than under the old system. Whether that's a good thing or not is a different question.
  - sokoloff 4y ago
    In general, your score would immediately go down as your credit utilization would go up (outstanding balance over total available credit).
    - coredog64 4y ago
      0/infinity is still zero
      - sixstringtheory 4y ago
        …depending on the languages used in their backend and the quality of their development efforts…
      - sokoloff 4y ago
        The balances are instantaneous balances, not ones that are being financed. So, if you use and pay off your card every month (as makes sense to me for points/cash back, ease of chargeback, and convenience), then your numerator won't be zero on most days. (For me, it's not $0 on any days, because of the timing of statements.)
        medvezhenok 4y ago
        You could theoretically pay off the card before the statement posts to keep the balance at zero. Usually not worth it, but if you want to boost your credit score before getting a mortgage, that trick usually works.
    - b112 4y ago
      In Canada, Equifax et al tend to reduce score at each over 80% revolving credit account utilization.
deleted 4y ago
[deleted]
seanmcdirmid 4y ago
Those are minor and often temporary dings compared to not paying back loans on time or at all. For example, if you don’t have a loan history, your score isn’t low enough that you can’t get an apartment or get a car loan. Then by doing those things you can build credit. The other things, open and closing accounts too quickly, or making lots of loan inquiries over a short period of time, lead to temporary dings that recover in a few months (they just throttle your credit). The rules are not explicit enough I agree, but it’s not like most of them couldn’t be covered in a high school financial literacy class. Almost everyone significantly disenfranchised by bad credit are actually for things that would obviously lead to bad credit (to their fault or not; i.e. identity theft could be involved).
- jorf 4y ago
  > if you don’t have a loan history, your score isn’t low enough that you can’t get an apartment This is not true. Many places will deny an applicant for zero loan history, effectively forcing people to get a credit card in order to obtain housing.
  - kube-system 4y ago
    Technically, people with no credit history aren't denied for having low score -- they're denied for not having a score at all.
  - seanmcdirmid 4y ago
    That never happened to me when I came back from China (unable to get a credit card for 9 years because I didn’t have a Chinese ID card, so no credit history within the 10 year window they keep track), nor did it happen to my wife, who obviously didn’t have any history as a new immigrant. We didn’t have problem getting a rental with proof of job/income. And without the job/proof of income, even with 10 credit cards, many of these places won’t rent to you regardless of your credit rating given eviction laws. I get it, there must be some place that denies rental based on lack of credit history, but I would guess it is so rare that you’d have to stretch really hard to find an example.
  - SilasX 4y ago

BuyMyBitcoins 4y ago

I have a few credit cards that I no longer use. If I cancel them my score would go down because the average age/length credit history would go down. Not by that much, but it is surprising that leaving these cards open is incentivized whereas the more secure and less risky thing to do would be to close those accounts.

mattnewton 4y ago
It make a a bit more sense when you think about it - Risk isn’t really the main thing incentivized here, making interest payments is haha. Risky lenders don’t make payments, but neither do people who never take on debt
- medvezhenok 4y ago
  Credit scores actually are designed to measure risk, not interest payments. Otherwise high credit utilization would be a positive:) There are certainly edge cases where the score has low predictive value, but overall the correlation between credit score and risk is quite large.
medvezhenok 4y ago
The closed card drops off your account history after ~10 years, so your score shouldn't immediately go down. Technically, I'm not sure that the credit scores can differentiate between you closing a card and the bank closing your card (the latter might be some sort of signal of potential change in creditworthiness) In general, credit scores are optimized for the average consumer - and so behaviors around the edges don't always make sense in terms of your score going up or down. If you think about the system that was replaced by credit cards (i.e. keeping a tab open with many different stores), you'd be hard pressed to say that the amount of credit extended is lower now (overall), than under the old system. Whether that's a good thing or not is a different question.
- sokoloff 4y ago
  In general, your score would immediately go down as your credit utilization would go up (outstanding balance over total available credit).
  - coredog64 4y ago
    0/infinity is still zero
    - sixstringtheory 4y ago
      …depending on the languages used in their backend and the quality of their development efforts…
    - sokoloff 4y ago
      The balances are instantaneous balances, not ones that are being financed. So, if you use and pay off your card every month (as makes sense to me for points/cash back, ease of chargeback, and convenience), then your numerator won't be zero on most days. (For me, it's not $0 on any days, because of the timing of statements.)
      - medvezhenok 4y ago
        You could theoretically pay off the card before the statement posts to keep the balance at zero. Usually not worth it, but if you want to boost your credit score before getting a mortgage, that trick usually works.
  - b112 4y ago
    In Canada, Equifax et al tend to reduce score at each over 80% revolving credit account utilization.

deleted 4y ago

[deleted]

seanmcdirmid 4y ago

Those are minor and often temporary dings compared to not paying back loans on time or at all. For example, if you don’t have a loan history, your score isn’t low enough that you can’t get an apartment or get a car loan. Then by doing those things you can build credit. The other things, open and closing accounts too quickly, or making lots of loan inquiries over a short period of time, lead to temporary dings that recover in a few months (they just throttle your credit). The rules are not explicit enough I agree, but it’s not like most of them couldn’t be covered in a high school financial literacy class. Almost everyone significantly disenfranchised by bad credit are actually for things that would obviously lead to bad credit (to their fault or not; i.e. identity theft could be involved).

jorf 4y ago
> if you don’t have a loan history, your score isn’t low enough that you can’t get an apartment This is not true. Many places will deny an applicant for zero loan history, effectively forcing people to get a credit card in order to obtain housing.
- kube-system 4y ago
  Technically, people with no credit history aren't denied for having low score -- they're denied for not having a score at all.
- seanmcdirmid 4y ago
  That never happened to me when I came back from China (unable to get a credit card for 9 years because I didn’t have a Chinese ID card, so no credit history within the 10 year window they keep track), nor did it happen to my wife, who obviously didn’t have any history as a new immigrant. We didn’t have problem getting a rental with proof of job/income. And without the job/proof of income, even with 10 credit cards, many of these places won’t rent to you regardless of your credit rating given eviction laws. I get it, there must be some place that denies rental based on lack of credit history, but I would guess it is so rare that you’d have to stretch really hard to find an example.
- SilasX 4y ago