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You are right, I should have said the current system punishes people who don't have debt, but it surely does. Even if you have a credit history, anytime your debt is totally paid off and you are debt free, your score will go down
Meh...
I have zero debt, and a score over 800 also.
I do not feel 'punished' at all!
How is that punishment affecting your life? From what is that 800 score holding you back?
FICO does not punish anyone. It is simple a measure of your credit-worthiness.
If you use credit properly, you get a certain score.
If you use credit improperly, you get a lower score.
No credit use? No score.
No way that can be seen as punishment.
But is it an effective or efficient measure of your credit worthiness?
If I had walked away from my debts 15 years ago (bankruptcy) I would have a decent FICO score today.
By NOT doing BK, old debts haunt my score indefinitely.
How does BK make a person more credit worthy than NOT BK?.
People who have never used any credit and pay cash for everything and who have never been late on a bill and never been taken to court and never had a financial judgement against them do not have a low credit score. Their credit report comes back as "not enough information to score".
I'm a landlord and I love to have tenants who have never borrowed money and never been late on a bill. Talk to any landlord and you are very likely to hear the same answer. We all like tenants who are completely debt free and have never paid late.
If you apply for a mortgage, the bank does not use your credit score, they use the entire credit report. If you have no score (not a low score, but no score) and you have plenty of money to qualify and that income is a reliable source of income, you are very likely to get your mortgage.
A low credit score can affect your insurance rate. Although in this area, you have the option of using your score or not. If you have a high credit score, it is worth it because the rates are lower. A low credit score will affect the interest you pay for any loan.
The only way to get a low credit score is to not pay your bills on time, or else you have been taken to court and had a financial judgement against you, which is most likely to be because you didn't pay your bills. If you have a history of not paying, why is it surprising that people are reluctant to loan you money?
People who have never used any credit and pay cash for everything and who have never been late on a bill and never been taken to court and never had a financial judgement against them do not have a low credit score. Their credit report comes back as "not enough information to score".
I'm a landlord and I love to have tenants who have never borrowed money and never been late on a bill. Talk to any landlord and you are very likely to hear the same answer. We all like tenants who are completely debt free and have never paid late.
If you apply for a mortgage, the bank does not use your credit score, they use the entire credit report. If you have no score (not a low score, but no score) and you have plenty of money to qualify and that income is a reliable source of income, you are very likely to get your mortgage.
A low credit score can affect your insurance rate. Although in this area, you have the option of using your score or not. If you have a high credit score, it is worth it because the rates are lower. A low credit score will affect the interest you pay for any loan.
The only way to get a low credit score is to not pay your bills on time, or else you have been taken to court and had a financial judgement against you, which is most likely to be because you didn't pay your bills. If you have a history of not paying, why is it surprising that people are reluctant to loan you money?
According to the FICO website, unless a debt scavenger is re-aging my 15-year-old debts, I have "not enough information to score."
How do 15-year-old debts, with NO intervening credit activity, indicate anything meaningful today?
Not really. One tradeline reporting a small balance is all it takes to show usage (there IS a small penalty for not using your credit, but it amounts to a few points and can be easily rectified using the above strategy) just pay it off before the due date to pay no interest of course.
I don't consider charges I have the money to pay off debt. It's merely a temporary holding place for charges that will be settled from my checking account when the time comes. In fact, I mentally subtract any balances on my credit cards from my checking account balance when calculating how much money I have.
FICO doesn't punish debt, it just reports it.
FICO does not punish anyone. It is simple a measure of your credit-worthiness.
If you use credit properly, you get a certain score.
If you use credit improperly, you get a lower score.
No credit use? No score.
No way that can be seen as punishment.
Which I clarified in the first sentence of the post that followed.
Of course risk is what they report on and its up to the lender then.
Does anyone seriously believe a person with a rising 650 is equal in risk to a person with a plunging 650?
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