3 ms·

Maybe I am crazy, but I have found that living within my means is an extremely effective method for keeping a high credit score.

Brian_K_White 2y ago
I have found that living within my means resulted in no credit score at all, which was treated as the worst possible credit score, when I finally started to investigate the possibility of buying a house. 45 years old at the time, $120k income, same job since '99, no debt at all, cars all paid cash etc, Didn't owe anyone a dollar, not late on any bills for decades, solid predictable longstanding income, only about 100k in the bank though not counting the 401k, ... no credit. Because I never even got a credit card let alone used one. All cash/debit whole life. So, F this line. It's only true if it also includes "...and intentionally aquire and actually use a couple of credit cards that you don't want and don't need, for no other reason than to go through the motions." And even then it still doesn't result in an exactly great credit score if you always pay in full and never carry a balance. Even after years. 10 so far for me since the above. It's ok, but not great. So yeah, F this line.
- HWR_14 2y ago
  Paying in full/not carrying a balance has no impact on credit score vs. making minimum payments.
  - meowster 2y ago
    Well, making minimum payments has a negative impact because then you're carrying a debt which eats into your debt vs ability to borrow ratio which does have a big impact. Paying off cards in full each month is the absolute best thing to do for your credit score (and saving money by not paying interest).
    - epgui 2y ago
      > making minimum payments has a negative impact because then you're carrying a debt I think it would depend on your credit utilization %. If your credit utilization is too low, it may hurt your score. Of course if your credit utilization % is too high then it's an (even worse) issue. But who really knows? It's not like we have the formula.
  - epgui 2y ago
    Paying in full does not adversely impact your credit score, but it is generally believed that not utilizing your available credit at all can adversely impact your score. Of course, who really knows? And the fact that we can't really know is the real problem IMO.
- Workaccount2 2y ago
  Unfortunately, it's dumb to not use a credit card nowadays. Every business marks up the cost of goods to cover CC fees, so you are just paying extra every time you pay cash (unless they offer a discount, some do). On the other side, you get benefits and money back for using your credit card. So people are in a situation where they really should use a card for everything. It also makes it easier to get good credit as long as your treat it like cash.
tamimio 2y ago
While I agree with you that living within your means is best, it definitely won’t help build your credit score. From my experience, if you don’t use a credit card, you won’t have a good score. If you use it and pay it off quickly, you’ll see barely any positive score gains. Then, I used a service to build my score, and it worked, but slowly over the months. However, what really increased my score substantially was actually being in debt. So, I kept the debt and paid the monthly amount on it. Surprisingly, even missing a payment still increased my score. The conclusion: they want you to be in perpetual debt aka debt slave to have good boy points.
- lotsofpulp 2y ago
  > The conclusion: they want you to be in perpetual debt aka debt slave to have good boy points. More data is needed before thinking you can determine the formula. More importantly, it is trivial to understand the reasoning behind assuming a higher probability of someone repaying debt if they have a history of successfully repaying debts. The same as anything else in life.
- aidenn0 2y ago
  As long as you pay it off close to the due-date, your report will show up as having a non-zero daily balance. I have never paid a credit card in any way other than "in full" and "before the due date" and have a score of around 800.
  - epgui 2y ago
    > I have never paid a credit card in any way other than "in full" and "before the due date" and have a score of around 800. There are a lot of very specific assumptions in there about the mechanism. How do you know which dates' balances are relevant to the calculation? If your credit score is 800, then you probably don't have a "credit utilization" of zero, as it's widely believed that the optimal % is more than zero (not "too low" but also not "too high", whatever that means).
    - Workaccount2 2y ago
epgui 2y ago
Yes, but living within your means does absolutely nothing to shed light on the black box that is credit scoring. It's an irrelevant comment. If you're trying to say that you should avoid credit altogether, that's a terrible idea... Unless you plan on not getting a mortgage and paying for your home in cash. In which case your personal financial situation might not be representative of the average / median Joe.
- Workaccount2 2y ago
  No. If you build a robust budget and spend within that, you will have an 800 score. Do that. Do it intentionally. Credit agencies evaluate risk, so even if you can stomach that $1200/mo car payment on your $50k/yr job. You are gonna take a hit for making a stupid financial decision, because even if you make those payments, you are almost certainly teetering on the edge to do it. (never mind that your score was probably already bad given the thought process to take on that loan). Banks don't want to loan to people who are lucky and always somehow pull it out. They want to loan to people who are smart and reliable. Credit agencies try to filter for that.
  - epgui 2y ago
    > If you build a robust budget and spend within that, you will have an 800 score. I don't think that's how credit scores work, at all.
- astrange 2y ago
  Credit scores aren't a black box. The components are in the credit report and are pretty straightforward. Also, it's not actually true that everyone uses credit scores. More recently companies use custom risk models because they see this as a competitive advantage. (Especially the afterpay companies like Klarna don't use them.)
  - epgui 2y ago
    > Credit scores aren't a black box. Please show me the calculation methodology of any major credit scoring agency. Rough guidelines aren't cutting it.
akira2501 2y ago
The idea that an irresponsible third party who has no obligation to deal with you can control so much of your life is dystopian. The fact that you've been very lucky and have never met or even read about someone who wasn't lucky is awesome for you, but it clearly doesn't erase the complications with the systems we currently have.
- golergka 2y ago
  Giving advice to people and organizations on how reliable you are to pay back money you owe is not having control over you.

Brian_K_White 2y ago

I have found that living within my means resulted in no credit score at all, which was treated as the worst possible credit score, when I finally started to investigate the possibility of buying a house. 45 years old at the time, $120k income, same job since '99, no debt at all, cars all paid cash etc, Didn't owe anyone a dollar, not late on any bills for decades, solid predictable longstanding income, only about 100k in the bank though not counting the 401k, ... no credit. Because I never even got a credit card let alone used one. All cash/debit whole life. So, F this line. It's only true if it also includes "...and intentionally aquire and actually use a couple of credit cards that you don't want and don't need, for no other reason than to go through the motions." And even then it still doesn't result in an exactly great credit score if you always pay in full and never carry a balance. Even after years. 10 so far for me since the above. It's ok, but not great. So yeah, F this line.

HWR_14 2y ago
Paying in full/not carrying a balance has no impact on credit score vs. making minimum payments.
- meowster 2y ago
  Well, making minimum payments has a negative impact because then you're carrying a debt which eats into your debt vs ability to borrow ratio which does have a big impact. Paying off cards in full each month is the absolute best thing to do for your credit score (and saving money by not paying interest).
  - epgui 2y ago
    > making minimum payments has a negative impact because then you're carrying a debt I think it would depend on your credit utilization %. If your credit utilization is too low, it may hurt your score. Of course if your credit utilization % is too high then it's an (even worse) issue. But who really knows? It's not like we have the formula.
- epgui 2y ago
  Paying in full does not adversely impact your credit score, but it is generally believed that not utilizing your available credit at all can adversely impact your score. Of course, who really knows? And the fact that we can't really know is the real problem IMO.
Workaccount2 2y ago
Unfortunately, it's dumb to not use a credit card nowadays. Every business marks up the cost of goods to cover CC fees, so you are just paying extra every time you pay cash (unless they offer a discount, some do). On the other side, you get benefits and money back for using your credit card. So people are in a situation where they really should use a card for everything. It also makes it easier to get good credit as long as your treat it like cash.

tamimio 2y ago

While I agree with you that living within your means is best, it definitely won’t help build your credit score. From my experience, if you don’t use a credit card, you won’t have a good score. If you use it and pay it off quickly, you’ll see barely any positive score gains. Then, I used a service to build my score, and it worked, but slowly over the months. However, what really increased my score substantially was actually being in debt. So, I kept the debt and paid the monthly amount on it. Surprisingly, even missing a payment still increased my score. The conclusion: they want you to be in perpetual debt aka debt slave to have good boy points.

lotsofpulp 2y ago
> The conclusion: they want you to be in perpetual debt aka debt slave to have good boy points. More data is needed before thinking you can determine the formula. More importantly, it is trivial to understand the reasoning behind assuming a higher probability of someone repaying debt if they have a history of successfully repaying debts. The same as anything else in life.
aidenn0 2y ago
As long as you pay it off close to the due-date, your report will show up as having a non-zero daily balance. I have never paid a credit card in any way other than "in full" and "before the due date" and have a score of around 800.
- epgui 2y ago
  > I have never paid a credit card in any way other than "in full" and "before the due date" and have a score of around 800. There are a lot of very specific assumptions in there about the mechanism. How do you know which dates' balances are relevant to the calculation? If your credit score is 800, then you probably don't have a "credit utilization" of zero, as it's widely believed that the optimal % is more than zero (not "too low" but also not "too high", whatever that means).
  - Workaccount2 2y ago

epgui 2y ago

Yes, but living within your means does absolutely nothing to shed light on the black box that is credit scoring. It's an irrelevant comment. If you're trying to say that you should avoid credit altogether, that's a terrible idea... Unless you plan on not getting a mortgage and paying for your home in cash. In which case your personal financial situation might not be representative of the average / median Joe.

Workaccount2 2y ago
No. If you build a robust budget and spend within that, you will have an 800 score. Do that. Do it intentionally. Credit agencies evaluate risk, so even if you can stomach that $1200/mo car payment on your $50k/yr job. You are gonna take a hit for making a stupid financial decision, because even if you make those payments, you are almost certainly teetering on the edge to do it. (never mind that your score was probably already bad given the thought process to take on that loan). Banks don't want to loan to people who are lucky and always somehow pull it out. They want to loan to people who are smart and reliable. Credit agencies try to filter for that.
- epgui 2y ago
  > If you build a robust budget and spend within that, you will have an 800 score. I don't think that's how credit scores work, at all.
astrange 2y ago
Credit scores aren't a black box. The components are in the credit report and are pretty straightforward. Also, it's not actually true that everyone uses credit scores. More recently companies use custom risk models because they see this as a competitive advantage. (Especially the afterpay companies like Klarna don't use them.)
- epgui 2y ago
  > Credit scores aren't a black box. Please show me the calculation methodology of any major credit scoring agency. Rough guidelines aren't cutting it.

akira2501 2y ago

The idea that an irresponsible third party who has no obligation to deal with you can control so much of your life is dystopian. The fact that you've been very lucky and have never met or even read about someone who wasn't lucky is awesome for you, but it clearly doesn't erase the complications with the systems we currently have.

golergka 2y ago
Giving advice to people and organizations on how reliable you are to pay back money you owe is not having control over you.