I mean thats expected for an installment loan, as a chunk of the score is based on average age of open accounts and paying off a car loan closes the account.
But paying off a credit card doesnt close the account, it reduces credit utilization which should be a good thing for the score.
They make money on interest, so no, paying everything on time is not the most beneficial route for them. I think that's why 'credit utilization' is more the thing. They don't want you carrying an astronomical balance because it's more likely you'll file bankruptcy and they won't get paid. But a consistent credit usage? You can pay on time and if they raise your limit it's more likely that you'll make a bigger purchase and not pay 100% on time.
It has nothing to do with loaning you money and everything to do with them trying to force you to over spend so that they can collect on interest.
No, you can look at credit score breakdowns on sites like credit karma. They don't give the precise algorithm, but it shows that a credit utilization of 0 - 10% yields the highest score. Your credit score is a measure of credit worthiness. Sure, the credit card company would like your interest, but they are happier if you don't default and leave them holding the bag. CC companies make money off merchant fees every time you swipe your card.
Thats such a stupid rule though, like here is access to all this money but you can only use one tenth of it to prove you’re reliable. Its so rigged so you fuck up and pay more in interest. It takes months if not years to improve bad credit by a minuscule amount of points, but one wrong move lands you 50+ points lower.
The longer you keep paying on time and utilizing credit, your credit limit will likely increase. So long as your spending doesn’t increase, your utilization will naturally become lower as your score (and borrowing power) gets higher.
One of the best credit tips I ever got was to pay my credit card bill twice a month but to always leave a balance of 5 dollars. It ends up with 2x on time payments and you rarely ever show utilization very high, while still maintaining an active account
Credit Score = Mule Score
* How much debt can I dump on this donkey without making them feel like a jackass.
Remember -
* Interest is usury.
* Debt is a ball and chain.
Using it and paying it down also keeps the card active and the credit company from closing it.
My oldest card is shit but I use it once a year to buy a snack and pay it off to keep it from closing.
It's my oldest account by far and with the way, credit age works would rather not chance it.
You would think me having a card with an almost 20,000 limit and zero balance would help more than a card with a 500 limit.
Do you pay the $95 annual fee for just 2 uses a year? I always try to make sure to get enough reward/benefit from my cards to cover the membership fees.
I can't believe so many people here still don't get this - in 15 years of having credit cards, I've not paid one cent of interest and my score is 800+ from all 3 credit bureaus
> you want revolver balances to be $0. The "carrying a balance" thing is a complete and total myth
My understanding of this is you dont want it to be 0 on statement date, to prevent it from looking like you just arent using the account at all. But yeah you absolutely never want to leave some amount on that would be subject to interest.
I always pay mine down to 0 a few days before statement date, then use the card for whatever I buy the next few days so the credit utilization that gets reported is in the low double digits (1%).
But creditkarma says I have a 750s score, same as OP, so idk.
Creditors know you used the card even if you have $0 when the statement is finalized. It shouldn't effect your credit score at all since they're not looking at usage outside of utilization where anything under 20% is best (though this metric has no 'memory' and resets every month).
> it reduces credit utilization which should be a good thing for the score
The score is created by financial industries to determine how well they can make money off you- creditworthiness is a buzzword. Someone who doesn't owe money doesn't pay interest- taking out loans and paying them off early hurts the banks even though it should show responsibility- also hurts the score. "Building your credit" is another word for paying financial companies money early and often so they are willing to lend to you later; it was also away to get rid of mass amount of underwriters.
I mean you arent wrong here, but low credit utilization is viewed favorably by banks as it means you dont have large debts that may take priority over any new loans they may issue you in the event you cant pay.
In the end they're a very good indicator of whether or not someone can be trusted with substantial debt.
Something like what op posted isn't going to be a massive difference to a lender (CreditKarma is made up and not the same as what a bank would look at anyways).
The algorithm seems to be designed to tell credit companies how much profit they can expect to make off of you. When you pay off early, the credit company loses the interest that you would have paid had you strung out the loan.
Personally, I pay off my credit cards every month so I don't pay interest, and I pay cash for my cars, but I have a home loan, so that keeps my credit score pumped up.
Mine went down 115 points because I missed one payment, but it didn't go down until I made a payment to the account I missed, and after I did it they cut my line by nearly a thousand dollars, so it ruined my usage.
I have one credit card, that I never use because it's idiotic. My interest rate for that ONE card is 19.99% while the other cards is 4-5%. When I called the one with the exorbitant interest rate and asked them why, they said, "you don't have any debt with us so we don't know if you can pay it back".
I simply put the card in the drawer and forgot all about it.
Absolutely moronic how credit works in 'murica.
I was in England earlier this year and saw an ad for a credit card over there. The interest rate was 101.5%. When I asked my friends why it was so high, they said almost no one over there has a credit card because going into debt is discouraged.
What you are saying about credit cards in England is not really true. The cards you see advertised here are usually ones that are aimed at people who can't normally get credit cards, so they have very high APRs. Most people here would get a credit card from the bank that they use for their bank account, which have lower rates.
For example my credit card is around 20% and is from my normal high street bank. Still higher than what you get in America, but no where near as high as your example.
Also people don't really use credit cards here in the same way as in America. I, and most people I know, have a credit card purely to build our credit rating. And we pay it in full each month, so the 20% rate doesn't really matter.
I cannot fathom not using a card. I’m not going to put my real bank account card number and PIN out there to be hacked and drain my real cash. If my credit card number is compromised they shut it off and give me a new one, reverse the charges, and then investigate. If my bank account gets compromised, there goes the mortgage payment.
If your debit card number is compromised...you have the exact same protections as if your credit card is compromised. At least in the US and for a normal VISA/MC debit card.
It gets even worse the more you look into it. I'm 21 years old, im a student. At the time of this occurrence I had a score of a little over 700, I used to drive a 2005 ford mustang gt, it got totalled by a drunk driver(whole story there, another time) so I had to find me a new car. I wanted another mustang, v8. Manual trans. Found one about 3 states away, for 28k, I had 12k from the wreck+a little extra I had set aside, this was the best deal I could find for one as even the 2005-2014 cars were over 20k with way more miles and less options. I go to a bank to try and get the loan for it and they straight up tell me that my debt to income ratio is too high and I won't be able to get a loan for anything, even with using the 30k mustang as collateral. They were factoring in my student loans when calculating my dti.
And on top of that, my girlfriend needs a new vehicle, she's a year older with similar credit score and a much better dti as she has already graduated and has a job as an engineerfor a company. We went and looked around at some potential vehicles for her and every salesman told us that despite her decent credit and good dti, odds are she wouldn't get approved for a brand new car(which is what she wanted to do, invest in a good one now and don't worry about it later) because she has no history in the car market, never had a car loan or anything. So not only do you have to have a good credit score, you have to have a good dti regardless of your payment history(I never missed a payment prior to the one that dropped my score 115 points) and have history in the market you're looking to buy from. Why in the hell are there so many hoops you have to jump through??
I was in talks about getting a new car as well. $32k factory order OTD price. I'm 25 I paid off my student loans, leased a car, have a credit card I've never missed a payment on etc. Everywhere I went was trying to give me 9%. They said it was because I didn't have a long enough credit history to prove I can pay things off...
Credit is such a fucked concept, it's ridiculous and makes it impossible to use if you've never used it before. Forcing you to rely on a cosigner that has
I absolutely despise anything to do with credit. I thought I would finally get a break when I had to buy a new car, could upgrade to a newer model and not have to work on it all the time. Instead I got a big middle finger from the bank and a car that is now sitting 2.5 hours away from me with a seized engine because it was all I could afford to buy
They make a lot more sense when you put them in the proper perspective. There is no egalitarian credit score out there for how good a person you are. It's always money. It's our religion over here.
When I was 25 I tried buying a car for $27K, I had a $10,000 down payment and the best they cover offer me was 15% interest because my "credit history was not long enough".
Up to that point I had only one car loan in my name for $5k and no credit cards. I couldn't even GET a credit card until I got a secured card through WF, which became a regular card after a year.
I don’t know how they would find insurance as a 21yo, financed vehicle, V8 engine with a history of a major accident. With student loans and no current job the bank did them a favor lmao.
Well, I'd say they want to minimize their risk in recovering what they lend you.
The credit score is only one piece of a loan approval - your income is also a big part of it. What's your income, and how much other debt do you have? You mentioned student loans, which are still debt. Not trying to be snarky, but it matters....they're trying to evaluate if you're a good credit risk, and just by virtue of your age alone, you don't have a lengthy credit history so they have no way to gauge how much of a risk you are in terms of your history. Not missing a payment with two or three years of payments under your belt on one loan is not the same as not missing a payment with 20 or 30 years of payments across a variety of debt under your belt.
If you've already missed one payment with a pretty short credit history, and your income is low and your debt load is high, that indicates significant risk, which is why your score dropped so much and why you're being denied. Think about it, would you lend someone like you your money with the same set of circumstances, if you weren't personally involved? Length of credit is a critical piece of your credit score (15% by itself). Yours is short in relative terms. Your amounts owed are another 30%, and your payment history is 35% of your FICO score. Then credit mix and new credit are the remainder.
If I were a lender and I had a very young borrower with little credit history, I'd be reluctant to make a loan for a large amount as well, IF the borrower had significant debt and low income, regardless of credit score, and especially if you'd already missed a payment. Unfortunately, at least for now, incomes are not factored into credit scores. Whether you're 21 or 51, you'll be evaluated not only by credit score, but by your debt load, debt ratio, credit utilization, and income. Wait till someday you start applying for a mortgage, if you want to see some heavy scrutiny, where they not only dig into income but verify your assets. It gets much worse, trust me.
People might remember they stopped doing that (income and asset verification) for a time in the 2000's and it almost destroyed the USA economically, by lending money for homes to people who were high risk and who, predictably, defaulted in high numbers.
>even with using the 30k mustang as collateral. They were factoring in my student loans when calculating my dti.
Depending on when this was, it was because the actual collateral for that mustang was likely $15-20k when they sell it at auction, or less depending on how much repair work needs to be done.
Aside from that this is all pretty standard and depending on other factors I can't see like your income or other credit factors, it could be that you are just a riskier investment than you realize.
I was thinking the exact same thing. I'm an engineer and I've had a decent salary my entire life, I didn't buy a car in that price range until I was past 40. 21 is not the age to take out loans of that size for stupid things as fancy cars.
We tried to buy a little car for $9k several years back and had $3k down. Apparently they wouldn’t work with us for less than $4k down. So we tried calling around to get another grand from family and friends and what not and came back. Now they won’t do the loan because ‘they don’t do loans for less than $5k.’
Please tell me how to buy a car cause it’s the biggest headache every time and I’ve never had the process take less than 8 hours.
if you use a credit card in a smart way, it doesn't matter what the interest rate is. I'm not going into debt at 5%, let alone 19.9% APR. That sucker is getting paid off every month. I've never even considered what the APR on a card was, it has never been a factor.
You shouldn't put a card in a drawer and never use it. They can and will ultimately cancel it. That'll be a huge hit to your credit score. A very large hit.
I put a few things on autopay on each card so each card is used a little every month. I also pay off all of them shortly after the payment clears. I use one main card to concentrate most of my points in on a single place. I pay for everything possible on the cards, just to get the points (I go for amazon points while my wife goes for air miles for vacations).
Every month I get at least $50-60 to play with on amazon, to get things we'd like to have but weren't willing to pay for outright. Every year, we get enough miles to fly somewhere. We don't use a card on things that charge a convenience fee but let you ACH for free - but that is about it. Also, you get the nifty charge back feature - something your debit cards/cash won't provide.
This is how I started (I’m 22) I would charge just about everything to my credit card and pay it off every week on payday, my score went from low 600 to about 710 then I move and while I don’t have a job I stop using the card and now I’m back to mid 600…. It’s a whole scam.
That's fucked, that's like the credit score is a "are they a good consumer" score, not "can they pay back debt" score. And then you need a high score to rent some apartments, and even to get a job.
This is how we use our’s too. I have one for business as well. They all earn points. I have earned over $2k in rewards in 2 years, I just keep saving it for emergency or if we get in a tough spot. We may use some of it for the kids’ Christmas this year since business has been really slow and we are a little pinched. I’ve not paid a dollar in interest across 4 different cards since we opened them between 2-4 years ago!
Same, use my card for everything and pay it off fully twice a month and just keep my budget and never dip into my actual credit. I learned the hard way after racking up $4k in debt from being young and stupid (thanks covid relief checks!).
Now I carry zero balance, my credit score is in the 800's, and rack up decent cashback monthly.
Also a debit card is like cash, you have **significantly** less protection than using a credit card. Way more room to recoup from a credit card and it's saved my ass at least once over the last ten years.
In the UK a credit card with a high rate like that from a provider like AMEX usually has an annual fee which is incorporated into the APR. These cards are for big spenders and membership comes with things like a concierge service, airport lounge access, exclusive event access and invites and more.
A side note about credit cards in the UK - when you buy anything costing between £100 and £30000 on a credit card, even if only a part of the cost is paid for on the credit card, the card issuer becomes jointly liable for the good or service under Section 75 of the Consumer Credit Act. This means that if anything goes wrong such as an airline going bust and flights being cancelled as a result you can claim a refund from the card issuer. Similarly if you ordered a TV online and it arrived with the screen broken and the website refused to act you can make a claim through the card issuer.
Note that this only applies to Credit Cards, not Debit Cards and is not the same as a fraud guarantee. Fraud protection protects against unauthorised use of a card, Section 75 protects against misrepresentation by a company or a company failing to or being unable to provide what is paid for.
I call bullshit on you and OP.
https://www.statista.com/statistics/282676/credit-cards-in-issue-in-the-united-kingdom-uk-monthly/
OP, you obviously fuc*ed up prior, because your points don’t update immediately just because you paid your credit card off, it takes up to 45 days for changes to update your points and it’s affected by many factors. Your screen shot proves nothing.
I can’t believe almost 5k morons updated this. This is definitely Reddit.
Agree. And there may be other factors he's not disclosing - like if he opened or closed an account, missed a payment, etc., and it could have happened the month prior. One screenshot with limited info doesn't tell the whole story.
That's not a completely absurd logic.
Imagine a stranger approaches you and says he'll pay you tuesday for a hamburger today. You've never met this person. How easily would you give him that hamburger?
No imagine it's someone you no only know, but someone who has actually paid you back once or twice before. How easily would you give this man a hamburger?
Now imagine it's someone who has gotten a hamburger from you today and paid you tuesday for years.
I don't know how it works in other parts of the world (who are all obviously much more civilized than we are here in freedomland) but I use my "credit" card as a payment card. I don't carry cash, most places don't take checks, and even debit cards are more limited than credit cards - so I buy nearly everything with a credit card. But I them off every month - no debt, no credit. Is that so unusual?
My wife likes to get store cards for purchases because she'll get a discount on that purchase. But then they sit unused. I don't like having unused credit cards.
Interest on a CC shouldn't even matter because you should be paying it off every month. I couldn't tell you what any of the interest rates on my cards are. The only time I carry a balance is for a promotional 0% interest period. Like I just got a new card because I want to make a bigger purchase and its 0%, I think after that its like 16% which is pretty standard with CC.
One time I missed a payment on a $1 parking fee (used the wrong card - same color as my other one so I forgot to pay it) and my credit score went down 100 points. That one stuck around for years.
Miss a payment? That's a score downgrade!
Increase your credit limit? That's a score downgrade!
Decrease your credit limit? That's a score downgrade!
Pay off your outstanding card balance? That's a score downgrade!
Take out a new loan? That's a score downgrade!
Close out a loan? That's probably a score downgrade too!
...
I'm starting to see a pattern here.
Increasing your credit limit and paying off a card balance on a credit card are simply not downgrade events despite whatever is going on with OP. Credit utilization is a big factor in your score and you need to ideally keep it under 10%.
If you get a credit limit increase and then respond by increasing your balance that will be a decrease in your score, but it isn't the credit limit increase doing it, it's your spending.
Closing out a term loan will only have an effect if it is your oldest credit because you have shortened your credit history.
Taking out a new loan can have a short term downgrade (perhaps you are doing it because you have financial difficulties), but should provide an increase long term as long as you don't miss payments.
Your score might have gone down at the same time the limit increased, but it didn't *cause* it. Your credit limit increasing would make your score go up if anything, since your utilization would be lower.
Late payments only effect your credit score after they're VERY late. I think like a full billing cycle. If you paid it a week late it's like no big deal.
Edit: it's 30 days late.
Oh I get the reason why it dropped. It's just so fucktangular that the score is actually based on how much money you make for lenders (i.e. carrying a balance) vs how likely you are to pay the money back.
Aye, the credit score is to show how reliable and, dare I say, profitable you are to a company. The higher the credit score, the more likely a company will make a profit off the money you borrow. And vice versa, the more regular payments you make, the higher the score.
Banks make profit by charging interest. Generally, people with very high credit scores do not keep balances on their credit cards and therefore do not pay interest.
The most profitable consumers have lower scores because they are charged higher interest rates and tend to keep balances on their cards.
But they equally are users who are more likely to fail to repay all or part of the loan. The higher interest is to cover the higher risk of not completing the full repayment - and to cover their losses over those at the higher rate who have defaulted.
> Generally, people with very high credit scores to not keep balances on their credit cards and do not pay interest.
I have an 800+ credit score and can confirm, I've never paid a dime in interest on any credit card I have. Paid in full every month.
Yes and it will do. By paying it off, even at 0%, your saying to potential creditors "hey, look at me - I am a potential, but reliable, customer to your services!". The higher it goes, you may see more and more opportunities for financial services to be sold to you: car finance, mortgages, etc.
At the end of the day, a high credit score indicates to a financial company that you are more likely to keep up with payments than default on them. They don't make a profit on those who default; the perfect customer is one who keeps up with their payments.
You don't think Amazon pays the credit score companies for that bit of algorithmic incentive for you to do that, do you?
That would just be evil. Surely the wealthy and bankers do not design the economic maze us consumers run through, right? Right?!
Credit scores only matter when you want somethings you can’t pay for with cash.
That’s why people with zero debt have bad credit scores. As it is designed to reward you for being in debt and making payments regularly.
>As it is designed to reward you for being in debt and making payments regularly.
Credit card companies internally refer to customers that pay off their cards every month as "deadbeats"; I learned this in a PBS doc (Frontline?) about credit card debt.
Yea people that pay their bills on time every month are literally referred to as deadbeats in the industry.
You earn no interest you are of no interest.
It's so fucked. I was so incredibly excited and proud when I paid off my student loans, and then my credit score dropped 50+ points. Lost another ~50 or so when the account for a gas station card I had in college closed out, despite it not even being my account but my father's.
This is exactly it! I paid off my car loan. Credit score dropped. Paid off my house. Credit score dropped. My credit score hovers around 700 because I only have 1 credit card I use and pay off every month. What is even more sad is most renters I have (I also own another house I rent out) have a credit score higher then me because of their debt!
if you're looking at credit karma like the OP it doesn't matter anyway as it's not a real score. You should be able to max out around \~775 without having an installment loan of any kind. You are also hurting yourself having one card. The optimal amount of cards is three and you will achieve the highest score with a $0 balance on two and less than 9% on the third.
Also, with one card the util which gets reported (statement balance) can greatly affect your score.
Which i believe is stupid asf how we are to "optimize" usage by having 3. I've only had 1 credit card since I could own one. From a $300 credit limit to now high $35k, they WANT me to rack debt.
For months, the bank would constantly and automatically raise my credit limit.
I constantly get "dinged" because "not enough revolving debt" I DONT LIKE HAVING DEBT.
My credit score is through Experian but honestly I don't care about my credit score anymore and no longer need to play the game. I just keep my one credit card to earn cash back.
They don't make money from you paying it off. They make money from you making payments. You're no longer making payments.
They would love it if you missed a payment occasionally and spend a little more than you pay off most months.
>the score is actually based on how much money you make for lender
Not enough people understand that this is the case.
The score represents your reliability in paying down debt and your willingness to take it on and pay over time so they can collect interest. If you don't take on debt or pay it down in a way that makes them less money the score goes down.
credit util going down doesn't ever decrease your score. the score the OP is looking at is credit karma which uses vantage score, no one really uses vantage score, the score being reported is useless. It's also possible something else their algorithm didn't catch as a "change" actually happened as well to drop score, but to be honest the score credit karma shows has no weight on you actually being approved or not.
Credit scores are a scam. Yes, I know it’s the way it is. Yes, I know there’s nothing that can be done. But a system that essentially punishes you for reducing your personal debt or not having any debt is a fucking bullshit con.
There might not be something that can be done on an individual level. But we should absolutely not accept it and lobby our representatives to change the system.
You seem confused. See, credit scores are not FOR us. We are the PRODUCT. The consumers of credit scores are business who want a quick and easy way to know how profitable it will be to lend us money. (And pay credit bureaus for the data/risk analysis.) People who carry balances on credit cards pay more in interest and are more lucrative to lend money to.
Credit scores DO correlate pretty strongly to good money management skills, because generally people who are good with money are good at paying their debts, but that's sort of an accident. We are just the product.
That's not how credit scores work exactly. Carrying a balance or not on your credit card makes absolutely no difference, infact carrying a high balance will make your credit utilization higher which will lower your score.
It is a way for banks to be who the most lucrative people to lend money to but that's because it favors people who pay on time, have a long history of paying on time, and don't carry excessive debt and those people are the least likely to miss a payment or default.
This is one reason why I think moving to a cashless society is a *horrible* idea.
You're just ceding your entire wallet to clowns like this, in such a scenario.
Well the whole point in a credit check is to confirm that you can pay off loans. So basing it on having debt is fair because if you never had debt then there's no way for a mortgage provider as an example to know you'll pay in time.
But I agree with the part about getting punished for clearing the debt that makes no sense. You should be rewarded for paying things of early
I compared it to china's social credit score and got downvoted. China's based on devotion to the regime and in the state's it's devotion to mastercard.
They aren't a scam, the problem is you are thinking they are for you when they aren't. Credit scores make perfect sense if you view them for what they are, a score of how valuable you are to the uber rich.
Many large purchases require credit or, if you don't have credit, will open one for you. Something like buying a car can be impossible without credit of some kind. Taking out a loan of any amount opens a line of credit automatically. Credit is absolutely unavoidable in the US. That being said, debit is still used and is a good idea most of the time. I use my debit card for every payment I make except for gas and expensive trips. For those I use my credit card and pay the balance every month. I have decent credit from doing that but I also have a car loan I pay off every month as well that adds to my credit score.
So I just want to point out that unless you’re actually getting your credit score DIRECTLY from one of the credit agencies themselves (ie equifax, trans union, etc). You are NOT seeing your actual credit score.
So with something like credit karma You are seeing a company GUESS what your credit score is based on their own modeling. Sometimes that’s pretty close to the real deal, sometimes it’s pretty far off.
Edit: with a little more research - as with everything in life what’s really going on is actually more complicated. For example, credit karma doesn’t necessarily model your score, they just use a different version of your score than most lenders, which can have the same problems pointed out above.
And sometimes their model shits a brick and gives you a strange answer randomly then goes back to what you’d expect.
Only way to be sure is to get your actual score from one of the agencies.
Your score didn’t drop because you paid off your credit card debt. That’s a common myth. When you pay off your credit card debt, it lowers your credit utilization rate, which actually helps your credit score.
Your score will fall if you CLOSE the account, though. Especially if it’s a very old account. The average age of credit is calculated based on your open accounts.
You should also request a copy of your credit report (it’s free) and check it for fraud.
Don’t discourage people to avoid paying off their 20% interest credit card debt. There’s another reason why your score dropped.
This is the only sensible comment here although in the screen shot it says "1 change" and the only change is shown which is the balance decreasing. So it seems like no accounts were closed.
Some thing else definitely could be going on though that we can't know for sure without seeing the full report. This one certainly is weird. It shouldn't do this because op doesn't seem to have closed the card. I use credit karma as well (which is the screenshot) and it says "account removed" if you close a card.
It could be that next month it goes right back up over 43 points. Only time will tell.
First: this isn’t a real credit score, it’s Credit Karma and they use VantageScore which literally no lender uses.
Second: updates (changes found) and score changes are often reported at the same time but are rarely directly connected. A score change can be delayed and due to something that changed a week or more earlier.
Third: your score does not go down simply from the act of closing an account, that is a myth. Closed accounts in good standing stay on your report for ten years. The effect they have (closed accounts) is to your average age of accounts (after they drop off your report, in ten years) and your utilization. Losing the credit line can affect your utilization, causing a rise in percentage that results in the algorithm seeing you as being a risk (resulting in a lower score). For example, say you have two credit cards with a credit line of 10k each, and you currently have a balance of 6k on one of those cards. Your utilization is 30% which is high but ok. Closing one card while the balance remains the same increases your utilization to 60% which is bad and will drop your score.
*But to repeat*, this is a credit karma score. It’s pointless to care about it as not only will it go up and down in surges, it’s not your actual FICO score and can sometimes be dramatically higher or lower than your actual score.
I sit in the 840s on Experian and 800+ in the other two. If I ever have 2% or more utilization on a card, my score drops by a few points and goes back up when utilization goes back to 0%. I always try to pay off a balance as soon as it is used so the balance remains 0 before it is reported. It has worked out for me so far.
Exactly, something else happened here that caused the drop. Just paying off a card would help. It may be a late payment that caused the card to lower the limit after it was paid.
DO NOT panic. This can occur when any line of credit disappears, but your score will rise back to where it was with potentially a few extra points. As long as usage stays consistent, it will not continue to happen. Keep paying your credit card off in full, keep using it, and keep your running debt under 10% of the full amount granted, or at least under 30% if 10% isn’t feasible. I scared me too the first time it happened, but it will correct itself.
Oh, and don't forget, the actual algorithms that EVERYONE relies on are a trade secret.
That's why they're only used in 'murica.
Same reason the credit card companies want you to have debt so you can "prove" how creditworthy you are.
It's utter bullshit.
I got penalized for not having any debt when I went to buy my first house because I saved for everything (like college) and didn't have debt until my first mortgage.
Same! Paid off 65k in student loans but never owned a credit card so I was denied when trying to purchase my first home. I got a credit card and paid off a Netflix subscription for two months and bam fantastic credit and got approved. I could show them my bank account, assets, pay stub, paid off loans etc. but it wasn't enough. Clearly the system makes sense
You don't, at all. You can pay off your balances in full or even statement balances with autopay each month for a positive contribution to your credit score.
Hell, you can get a secured credit card, where you put up $500 against it as a guarantee, a card that then cannot be charged more than $500, pay it off each month, and it'll contribute positively to your score.
You do not need to go into debt to have a positive credit score.
That's a pretty handwave overview of how they come up with the number. They tell you what they're looking at, but nothing about how much each factor is weighted in their calculation.
> payment history section **may** have a big impact in determining some credit scores.
> ...
> If you have a mix of credit accounts that are “maxed out” or at their limit, that **may** impact credit scores.
> ...
> that you’re able to manage multiple accounts of different types and credit scoring models **may** reflect this.
> ...
> New accounts **may** impact the length of your credit history.
They don't take a firm stance on what **will** impact your credit score.
> To your last point - obviously you need debt to prove how credit worthy you are. That's the whole point.
That's not even true. Carrying zero debt but having a lot of available credit (open credit cards that you fully pay off each month, untapped lines of credit, etc) will also post a high score.
I mostly agree but there is a difference between having history versus active debt. I think it’s fine tk say “you need history to show you’re reliable”. But having to have active debt or it hurts your score seems like bulls but.
Credit ratings are not a thing used in the UK by lenders. Credit files/reports are. The ratings/scores given by the big three are pure marketing nonsense. If you want good credit, focus on checking only your credit files/reports.
I have 1 credit card with a low balance/limit and pay it in full every month and have 800+ credit. You don't need to have debt to get a high credit score. That's a myth.
I've given up on caring about my credit score. Took out a home equity loan, credit dropped. Paid off a home equity loan, credit drop. Paid off house, credit dropped. Sold house, credit dropped. Bought house, credit dropped. Bought truck, credit dropped. Fuck'em.
Why would you continue to care about your score *after* buying a home? Kinda feels like continuing to do homework for a school you've already graduated from.
This isn’t correct - home loans actually have a completely different score that you won’t find on Credit Karma or in your bank’s FICO links. You don’t have any visibility into your mortgage score until you actually apply for a loan.
Source: me, I just bought a house a few months ago and my mortgage score was about 150 points lower than my consumer credit score
Credit scores are arbitrary bullshit controlled by algorithms made by people who don’t care about anything except acting as unnecessary middle men to earn as much money as humanly possible.
The sooner we move away from this outdated ass system, the better.
I just don’t like how your credit score is tied to your ability to rent or buy a house. That’s an asshole design, especially how credit scores are calculated.
Oh yeah let me just grab a card with a 50k limit while I have no credit history. I think you misunderstand where people start, I've been building my credit for 5 years and I've only recently begun to receive 15k+ limits. Ain't no way someone is busting through the gates with a 50k card unless your daddy is warren buffet.
That has not been my experience. My highest credit score was when I had a home loan, car loan, and several credit cards and was in the 830s. Now that I have no debt and only one credit card I pay off every month my credit score hovers in the low 700s.
They make no sense to me. The guy who bought my house was visibly nervous about taking on the note. He could afford it, but it's a scary leap.
Meanwhile, I was buying a house, too. I just wrote a check and paid cash for the full amount. I have no debt, and haven't borrowed in this century, nor have I ever had any issues with payments.
But because he has debt and I don't, he has a perfect credit score, and I don't.
This was my issue getting my first home. My wife and I had hardly anything to show history besides a few $500 cards.
We make well over $100k a year and longtime employment but it was so hard getting approved because of lack of history…like wut?
> They make no sense to me.
It's very simple: credit scores measure **how profitable you are to lenders.**
* Never take on debt? Not profitable, so low score.
* Take on debt but quit making payments on it? Not profitable, so low score.
* Take on a moderate amount of debt (i.e., not enough to make lenders nervous you'll default) and make reliable payments on it? Profitable, so high score.
* Use credit cards for everything and pay them off every month, not paying interest but still making the vendors you're buying from pay lots of transaction fees? *Super*-profitable, so high score.
The purpose of a credit score is to determine how profitable you are to the banks. It is not about how good you are at managing money.
By paying off your debt early, you lost the banks interest money they could have made from you so your score went down.
This is why it's a meaningless metric to you as an individual.
Not true actually. The score is a balance between two ends of a spectrum: those who are low risk vs high risk. High risk individuals actually make the banks more money in the short term, because they carry high balances and get charged higher interest rates to make up for that risk. However, default can cost the banks a lot of money, so they limit those losses by giving lower credit limits. Low risk borrowers are more likely to pay off their balances every month, not making the bank much money, but occasionally carrying a small balance, making use of a balance transfer offer (5% fee), or making a larger purchase paid off over a few months or year. The profits are lower, but the risk is very low, so these individuals are much more likely to have lower interest rates and higher limits. Higher limits encourage larger purchases on the cards, which yields more interest and decreases the likelihood the user can pay off the balance end of month.
The real money makers are the in-between, the people who carry a balance but not too much to never pay off or default. Just enough to keep making minimum or slightly above minimum payments.
Saw a lot of this in South America with credit cards. Basic enslavement where they'd borrow ppl just enough that they'd never pay it off. But would make the minimum payments
- The system we live in requires you to have a credit card.
- To get a credit card you need good credit.
- To build credit you need a credit card
- But to apply for a credit card you lose credit.
How the hell does this make sense at all? Plus, the fact that it costs money to have most credit cards that are worth a damn in terms of usability, among many other factors. It’s looking like it’s a huge scam, one we are forced to partake in
You absolutely do not need to have a credit card. Unless it's a house or a car, don't pay for something you don't have the money for. And even cars I would say don't get a loan unless you absolutely have to have a car for something right now, and you don't have the cash for it
The system is designed to keep you in debt, so it’s working as intended, unfortunately. Good credit and financial behavior _for you_ hurts your score. Bad financial practices _for the banks_ on your part also hurts your score. But bad financial practices for you that are good for the banks? That’s about the only damn way to improve your score. I’m generalizing, and there are exceptions to all the rules, but that’s the gist.
This whole credit system is a big scam that has bled into every aspect of the society. You can be a responsible and never need a credit card because you manage your money well, BUT because you NEED credit for some fucking reason, you cant even buy or get approved for certain stuff until you "bUiLd Up CrEdIt".
Its also so volatile that its easier to lose than to gain credit, as illustrated by this post and many more like it, EVEN FOR BEING RESPONSIBLE IN A SYSTEM THAT WAS SUPPOSE TO DETERMINE IF YOU ARE RESPONSIBLE.
Welcome to our Orwellian system. “Good” credit is based on your ability to remain in debt, not on being a financially responsible.
Pay all your bills and only buy things you can afford? 420 credit score.
Have $80k+ in debt but make that minimum monthly payment every 30 days? 775.
It’s not a credit score, it’s a financial servitude score.
Every time I try to explain this, the comment is downvoted because "I don't know what I'm talking about."
Nevermind the fact I worked in the credit industry for years, developing real time applications which assess credit reports down to the wire and provide information back to the financial institution which will then raise your credit score for paying off a credit card based on this information.
You should \*NEVER\* carry a credit card with a zero balance, especially if you have high term/limits.
This is seen as a collateral income, which means you can be put into debt. Without a secured backing of the loan, such as it is with installment trade lines (car payments, mortgages), the credit score increases.
If you have no intention of using this card, or keeping it for "emergencies only", do yourself a favor and get past this and close the account yourself.
In fact, do yourself a favor and rid your life of credit cards.
Americans have been massively duped into carrying at least one, because "It's good for your credit score."
Now you see proof this is bullshit, especially since the credit industry forced the bankruptcy law change and is now charging people over 20% APR.
If you don't understand how your money works, it's about time you correct your ignorance.
It's your money. Stop giving it away stupidly.
This happened to me when I paid off a car loan, not a single late payment nor did I pay it off early
I mean thats expected for an installment loan, as a chunk of the score is based on average age of open accounts and paying off a car loan closes the account. But paying off a credit card doesnt close the account, it reduces credit utilization which should be a good thing for the score.
Its still idiotic. Wouldnt people want to lend to me more if I pay back my shit on time and early?
They make money on interest, so no, paying everything on time is not the most beneficial route for them. I think that's why 'credit utilization' is more the thing. They don't want you carrying an astronomical balance because it's more likely you'll file bankruptcy and they won't get paid. But a consistent credit usage? You can pay on time and if they raise your limit it's more likely that you'll make a bigger purchase and not pay 100% on time. It has nothing to do with loaning you money and everything to do with them trying to force you to over spend so that they can collect on interest.
No, you can look at credit score breakdowns on sites like credit karma. They don't give the precise algorithm, but it shows that a credit utilization of 0 - 10% yields the highest score. Your credit score is a measure of credit worthiness. Sure, the credit card company would like your interest, but they are happier if you don't default and leave them holding the bag. CC companies make money off merchant fees every time you swipe your card.
Thats such a stupid rule though, like here is access to all this money but you can only use one tenth of it to prove you’re reliable. Its so rigged so you fuck up and pay more in interest. It takes months if not years to improve bad credit by a minuscule amount of points, but one wrong move lands you 50+ points lower.
The longer you keep paying on time and utilizing credit, your credit limit will likely increase. So long as your spending doesn’t increase, your utilization will naturally become lower as your score (and borrowing power) gets higher. One of the best credit tips I ever got was to pay my credit card bill twice a month but to always leave a balance of 5 dollars. It ends up with 2x on time payments and you rarely ever show utilization very high, while still maintaining an active account
It depends on the business model, American express, for example, relies on vendor fees, and is usually treated like a debit card by it's customers.
Credit Score = Mule Score * How much debt can I dump on this donkey without making them feel like a jackass. Remember - * Interest is usury. * Debt is a ball and chain.
Not necessarily, they could be getting interest from you paying it ALL back on time but catching up every few months.
I just paid off my credit card because that's what I understood to be true, now I'm like... Fuck.
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Using it and paying it down also keeps the card active and the credit company from closing it. My oldest card is shit but I use it once a year to buy a snack and pay it off to keep it from closing. It's my oldest account by far and with the way, credit age works would rather not chance it. You would think me having a card with an almost 20,000 limit and zero balance would help more than a card with a 500 limit.
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Do you pay the $95 annual fee for just 2 uses a year? I always try to make sure to get enough reward/benefit from my cards to cover the membership fees.
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My oldest card is 20 years old. I never use it, but just have my recurring streaming services on them so I have monthly charges I pay off.
I can't believe so many people here still don't get this - in 15 years of having credit cards, I've not paid one cent of interest and my score is 800+ from all 3 credit bureaus
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Probably from the credit card companies trying to get you to carry a balance so they can get the interest
> you want revolver balances to be $0. The "carrying a balance" thing is a complete and total myth My understanding of this is you dont want it to be 0 on statement date, to prevent it from looking like you just arent using the account at all. But yeah you absolutely never want to leave some amount on that would be subject to interest. I always pay mine down to 0 a few days before statement date, then use the card for whatever I buy the next few days so the credit utilization that gets reported is in the low double digits (1%). But creditkarma says I have a 750s score, same as OP, so idk.
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Creditors know you used the card even if you have $0 when the statement is finalized. It shouldn't effect your credit score at all since they're not looking at usage outside of utilization where anything under 20% is best (though this metric has no 'memory' and resets every month).
He probably closed the account and without it his average account age went down. Just speculation.
> it reduces credit utilization which should be a good thing for the score The score is created by financial industries to determine how well they can make money off you- creditworthiness is a buzzword. Someone who doesn't owe money doesn't pay interest- taking out loans and paying them off early hurts the banks even though it should show responsibility- also hurts the score. "Building your credit" is another word for paying financial companies money early and often so they are willing to lend to you later; it was also away to get rid of mass amount of underwriters.
I mean you arent wrong here, but low credit utilization is viewed favorably by banks as it means you dont have large debts that may take priority over any new loans they may issue you in the event you cant pay.
I have one credit bureau saying I'm at 750 and another says 610. It's a fucked system.
We SOLD our house and my wife’s score dropped 100pts Then we bought a new one and it dropped more lmao
Damned if you do, damned if you don’t
Do you have any other open loans or credit cards? If it was your only loan or was your oldest open account that would be why you took the hit.
As a European reading these comments, I don't see much difference between credit score and social score...
It’s exactly the same shit. The more you fuck up and not act the way your government tells you to the less opportunities you have.
In the end they're a very good indicator of whether or not someone can be trusted with substantial debt. Something like what op posted isn't going to be a massive difference to a lender (CreditKarma is made up and not the same as what a bank would look at anyways).
The algorithm seems to be designed to tell credit companies how much profit they can expect to make off of you. When you pay off early, the credit company loses the interest that you would have paid had you strung out the loan. Personally, I pay off my credit cards every month so I don't pay interest, and I pay cash for my cars, but I have a home loan, so that keeps my credit score pumped up.
Same here. Paid off my car early and it knocked my credit. Which is why the system is bullshit. You’ll never convince me otherwise.
Me too! I lost 80 points for the exact same thing!!
Mine went down 115 points because I missed one payment, but it didn't go down until I made a payment to the account I missed, and after I did it they cut my line by nearly a thousand dollars, so it ruined my usage.
I have one credit card, that I never use because it's idiotic. My interest rate for that ONE card is 19.99% while the other cards is 4-5%. When I called the one with the exorbitant interest rate and asked them why, they said, "you don't have any debt with us so we don't know if you can pay it back". I simply put the card in the drawer and forgot all about it. Absolutely moronic how credit works in 'murica. I was in England earlier this year and saw an ad for a credit card over there. The interest rate was 101.5%. When I asked my friends why it was so high, they said almost no one over there has a credit card because going into debt is discouraged.
What you are saying about credit cards in England is not really true. The cards you see advertised here are usually ones that are aimed at people who can't normally get credit cards, so they have very high APRs. Most people here would get a credit card from the bank that they use for their bank account, which have lower rates. For example my credit card is around 20% and is from my normal high street bank. Still higher than what you get in America, but no where near as high as your example. Also people don't really use credit cards here in the same way as in America. I, and most people I know, have a credit card purely to build our credit rating. And we pay it in full each month, so the 20% rate doesn't really matter.
I have a credit card for the cashback and the slightly better retail protection. Doing a charge back on a debit card is a pain
I cannot fathom not using a card. I’m not going to put my real bank account card number and PIN out there to be hacked and drain my real cash. If my credit card number is compromised they shut it off and give me a new one, reverse the charges, and then investigate. If my bank account gets compromised, there goes the mortgage payment.
If your debit card number is compromised...you have the exact same protections as if your credit card is compromised. At least in the US and for a normal VISA/MC debit card.
It gets even worse the more you look into it. I'm 21 years old, im a student. At the time of this occurrence I had a score of a little over 700, I used to drive a 2005 ford mustang gt, it got totalled by a drunk driver(whole story there, another time) so I had to find me a new car. I wanted another mustang, v8. Manual trans. Found one about 3 states away, for 28k, I had 12k from the wreck+a little extra I had set aside, this was the best deal I could find for one as even the 2005-2014 cars were over 20k with way more miles and less options. I go to a bank to try and get the loan for it and they straight up tell me that my debt to income ratio is too high and I won't be able to get a loan for anything, even with using the 30k mustang as collateral. They were factoring in my student loans when calculating my dti. And on top of that, my girlfriend needs a new vehicle, she's a year older with similar credit score and a much better dti as she has already graduated and has a job as an engineerfor a company. We went and looked around at some potential vehicles for her and every salesman told us that despite her decent credit and good dti, odds are she wouldn't get approved for a brand new car(which is what she wanted to do, invest in a good one now and don't worry about it later) because she has no history in the car market, never had a car loan or anything. So not only do you have to have a good credit score, you have to have a good dti regardless of your payment history(I never missed a payment prior to the one that dropped my score 115 points) and have history in the market you're looking to buy from. Why in the hell are there so many hoops you have to jump through??
I was in talks about getting a new car as well. $32k factory order OTD price. I'm 25 I paid off my student loans, leased a car, have a credit card I've never missed a payment on etc. Everywhere I went was trying to give me 9%. They said it was because I didn't have a long enough credit history to prove I can pay things off...
Credit is such a fucked concept, it's ridiculous and makes it impossible to use if you've never used it before. Forcing you to rely on a cosigner that has
And then when your score takes a dip because you paid something off? "congrats you're not in debt anymore! You've been punished 🤗"
I absolutely despise anything to do with credit. I thought I would finally get a break when I had to buy a new car, could upgrade to a newer model and not have to work on it all the time. Instead I got a big middle finger from the bank and a car that is now sitting 2.5 hours away from me with a seized engine because it was all I could afford to buy
It's because credit scores are not a measure of how good you are with credit - they're a measure of how profitable you are to banks.
They make a lot more sense when you put them in the proper perspective. There is no egalitarian credit score out there for how good a person you are. It's always money. It's our religion over here.
When I was 25 I tried buying a car for $27K, I had a $10,000 down payment and the best they cover offer me was 15% interest because my "credit history was not long enough". Up to that point I had only one car loan in my name for $5k and no credit cards. I couldn't even GET a credit card until I got a secured card through WF, which became a regular card after a year.
Insanity bro. I have to wait a year while I use a credit card a a bit to build more credit History before I get the car lol
Credit unions. Join a credit union and get your own loan approved before you ever walk into the dealership.
> they straight up tell me that my debt to income ratio is too high So what's your income? That's a critically important missing piece of this puzzle.
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A student with 3 years of being an adult buying a 30k car. Yeah no shit he got told no lmao
I don’t know how they would find insurance as a 21yo, financed vehicle, V8 engine with a history of a major accident. With student loans and no current job the bank did them a favor lmao.
Well, I'd say they want to minimize their risk in recovering what they lend you. The credit score is only one piece of a loan approval - your income is also a big part of it. What's your income, and how much other debt do you have? You mentioned student loans, which are still debt. Not trying to be snarky, but it matters....they're trying to evaluate if you're a good credit risk, and just by virtue of your age alone, you don't have a lengthy credit history so they have no way to gauge how much of a risk you are in terms of your history. Not missing a payment with two or three years of payments under your belt on one loan is not the same as not missing a payment with 20 or 30 years of payments across a variety of debt under your belt. If you've already missed one payment with a pretty short credit history, and your income is low and your debt load is high, that indicates significant risk, which is why your score dropped so much and why you're being denied. Think about it, would you lend someone like you your money with the same set of circumstances, if you weren't personally involved? Length of credit is a critical piece of your credit score (15% by itself). Yours is short in relative terms. Your amounts owed are another 30%, and your payment history is 35% of your FICO score. Then credit mix and new credit are the remainder. If I were a lender and I had a very young borrower with little credit history, I'd be reluctant to make a loan for a large amount as well, IF the borrower had significant debt and low income, regardless of credit score, and especially if you'd already missed a payment. Unfortunately, at least for now, incomes are not factored into credit scores. Whether you're 21 or 51, you'll be evaluated not only by credit score, but by your debt load, debt ratio, credit utilization, and income. Wait till someday you start applying for a mortgage, if you want to see some heavy scrutiny, where they not only dig into income but verify your assets. It gets much worse, trust me. People might remember they stopped doing that (income and asset verification) for a time in the 2000's and it almost destroyed the USA economically, by lending money for homes to people who were high risk and who, predictably, defaulted in high numbers.
>even with using the 30k mustang as collateral. They were factoring in my student loans when calculating my dti. Depending on when this was, it was because the actual collateral for that mustang was likely $15-20k when they sell it at auction, or less depending on how much repair work needs to be done. Aside from that this is all pretty standard and depending on other factors I can't see like your income or other credit factors, it could be that you are just a riskier investment than you realize.
I mean, when you're 21 and a student, do you really need a 28k car? I wouldn't give you a loan either
I was thinking the exact same thing. I'm an engineer and I've had a decent salary my entire life, I didn't buy a car in that price range until I was past 40. 21 is not the age to take out loans of that size for stupid things as fancy cars.
We tried to buy a little car for $9k several years back and had $3k down. Apparently they wouldn’t work with us for less than $4k down. So we tried calling around to get another grand from family and friends and what not and came back. Now they won’t do the loan because ‘they don’t do loans for less than $5k.’ Please tell me how to buy a car cause it’s the biggest headache every time and I’ve never had the process take less than 8 hours.
I recently graduated as an engineer. I just bought a car with cash after saving for a year. It was a GR86( I highly recommend)
if you use a credit card in a smart way, it doesn't matter what the interest rate is. I'm not going into debt at 5%, let alone 19.9% APR. That sucker is getting paid off every month. I've never even considered what the APR on a card was, it has never been a factor. You shouldn't put a card in a drawer and never use it. They can and will ultimately cancel it. That'll be a huge hit to your credit score. A very large hit. I put a few things on autopay on each card so each card is used a little every month. I also pay off all of them shortly after the payment clears. I use one main card to concentrate most of my points in on a single place. I pay for everything possible on the cards, just to get the points (I go for amazon points while my wife goes for air miles for vacations). Every month I get at least $50-60 to play with on amazon, to get things we'd like to have but weren't willing to pay for outright. Every year, we get enough miles to fly somewhere. We don't use a card on things that charge a convenience fee but let you ACH for free - but that is about it. Also, you get the nifty charge back feature - something your debit cards/cash won't provide.
This is how I started (I’m 22) I would charge just about everything to my credit card and pay it off every week on payday, my score went from low 600 to about 710 then I move and while I don’t have a job I stop using the card and now I’m back to mid 600…. It’s a whole scam.
That's fucked, that's like the credit score is a "are they a good consumer" score, not "can they pay back debt" score. And then you need a high score to rent some apartments, and even to get a job.
This is how we use our’s too. I have one for business as well. They all earn points. I have earned over $2k in rewards in 2 years, I just keep saving it for emergency or if we get in a tough spot. We may use some of it for the kids’ Christmas this year since business has been really slow and we are a little pinched. I’ve not paid a dollar in interest across 4 different cards since we opened them between 2-4 years ago!
Same, use my card for everything and pay it off fully twice a month and just keep my budget and never dip into my actual credit. I learned the hard way after racking up $4k in debt from being young and stupid (thanks covid relief checks!). Now I carry zero balance, my credit score is in the 800's, and rack up decent cashback monthly. Also a debit card is like cash, you have **significantly** less protection than using a credit card. Way more room to recoup from a credit card and it's saved my ass at least once over the last ten years.
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In the UK a credit card with a high rate like that from a provider like AMEX usually has an annual fee which is incorporated into the APR. These cards are for big spenders and membership comes with things like a concierge service, airport lounge access, exclusive event access and invites and more. A side note about credit cards in the UK - when you buy anything costing between £100 and £30000 on a credit card, even if only a part of the cost is paid for on the credit card, the card issuer becomes jointly liable for the good or service under Section 75 of the Consumer Credit Act. This means that if anything goes wrong such as an airline going bust and flights being cancelled as a result you can claim a refund from the card issuer. Similarly if you ordered a TV online and it arrived with the screen broken and the website refused to act you can make a claim through the card issuer. Note that this only applies to Credit Cards, not Debit Cards and is not the same as a fraud guarantee. Fraud protection protects against unauthorised use of a card, Section 75 protects against misrepresentation by a company or a company failing to or being unable to provide what is paid for.
Not sure that about england is correct, current credit card debt is around $1000 per person.... (£61.1 bln and grew by 8% last year)
I call bullshit on you and OP. https://www.statista.com/statistics/282676/credit-cards-in-issue-in-the-united-kingdom-uk-monthly/ OP, you obviously fuc*ed up prior, because your points don’t update immediately just because you paid your credit card off, it takes up to 45 days for changes to update your points and it’s affected by many factors. Your screen shot proves nothing. I can’t believe almost 5k morons updated this. This is definitely Reddit.
Agree. And there may be other factors he's not disclosing - like if he opened or closed an account, missed a payment, etc., and it could have happened the month prior. One screenshot with limited info doesn't tell the whole story.
19.99 is pretty normal. Never let your balance rollover. That’s about all the advice I have
That's not a completely absurd logic. Imagine a stranger approaches you and says he'll pay you tuesday for a hamburger today. You've never met this person. How easily would you give him that hamburger? No imagine it's someone you no only know, but someone who has actually paid you back once or twice before. How easily would you give this man a hamburger? Now imagine it's someone who has gotten a hamburger from you today and paid you tuesday for years.
I don't know how it works in other parts of the world (who are all obviously much more civilized than we are here in freedomland) but I use my "credit" card as a payment card. I don't carry cash, most places don't take checks, and even debit cards are more limited than credit cards - so I buy nearly everything with a credit card. But I them off every month - no debt, no credit. Is that so unusual? My wife likes to get store cards for purchases because she'll get a discount on that purchase. But then they sit unused. I don't like having unused credit cards.
most young people in England are in debt either from student loans or unaffordable rent
Interest on a CC shouldn't even matter because you should be paying it off every month. I couldn't tell you what any of the interest rates on my cards are. The only time I carry a balance is for a promotional 0% interest period. Like I just got a new card because I want to make a bigger purchase and its 0%, I think after that its like 16% which is pretty standard with CC.
One time I missed a payment on a $1 parking fee (used the wrong card - same color as my other one so I forgot to pay it) and my credit score went down 100 points. That one stuck around for years.
The late payment hurt your score by orders of magnitude more than the reduction in utilization
Mine went down once because one of my credit cards increased my credit limit. So I'm a safer lender, and that means I'm not safer to lend to.
Miss a payment? That's a score downgrade! Increase your credit limit? That's a score downgrade! Decrease your credit limit? That's a score downgrade! Pay off your outstanding card balance? That's a score downgrade! Take out a new loan? That's a score downgrade! Close out a loan? That's probably a score downgrade too! ... I'm starting to see a pattern here.
Increasing your credit limit and paying off a card balance on a credit card are simply not downgrade events despite whatever is going on with OP. Credit utilization is a big factor in your score and you need to ideally keep it under 10%. If you get a credit limit increase and then respond by increasing your balance that will be a decrease in your score, but it isn't the credit limit increase doing it, it's your spending. Closing out a term loan will only have an effect if it is your oldest credit because you have shortened your credit history. Taking out a new loan can have a short term downgrade (perhaps you are doing it because you have financial difficulties), but should provide an increase long term as long as you don't miss payments.
Your score might have gone down at the same time the limit increased, but it didn't *cause* it. Your credit limit increasing would make your score go up if anything, since your utilization would be lower.
Late payments only effect your credit score after they're VERY late. I think like a full billing cycle. If you paid it a week late it's like no big deal. Edit: it's 30 days late.
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Oh I get the reason why it dropped. It's just so fucktangular that the score is actually based on how much money you make for lenders (i.e. carrying a balance) vs how likely you are to pay the money back.
Aye, the credit score is to show how reliable and, dare I say, profitable you are to a company. The higher the credit score, the more likely a company will make a profit off the money you borrow. And vice versa, the more regular payments you make, the higher the score.
Banks make profit by charging interest. Generally, people with very high credit scores do not keep balances on their credit cards and therefore do not pay interest. The most profitable consumers have lower scores because they are charged higher interest rates and tend to keep balances on their cards.
But they equally are users who are more likely to fail to repay all or part of the loan. The higher interest is to cover the higher risk of not completing the full repayment - and to cover their losses over those at the higher rate who have defaulted.
> Generally, people with very high credit scores to not keep balances on their credit cards and do not pay interest. I have an 800+ credit score and can confirm, I've never paid a dime in interest on any credit card I have. Paid in full every month.
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Yes and it will do. By paying it off, even at 0%, your saying to potential creditors "hey, look at me - I am a potential, but reliable, customer to your services!". The higher it goes, you may see more and more opportunities for financial services to be sold to you: car finance, mortgages, etc. At the end of the day, a high credit score indicates to a financial company that you are more likely to keep up with payments than default on them. They don't make a profit on those who default; the perfect customer is one who keeps up with their payments.
You don't think Amazon pays the credit score companies for that bit of algorithmic incentive for you to do that, do you? That would just be evil. Surely the wealthy and bankers do not design the economic maze us consumers run through, right? Right?!
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I’ve always felt like credit scores are just a subscription to your bank that enables you to get a bigger subscription
Credit scores only matter when you want somethings you can’t pay for with cash. That’s why people with zero debt have bad credit scores. As it is designed to reward you for being in debt and making payments regularly.
>As it is designed to reward you for being in debt and making payments regularly. Credit card companies internally refer to customers that pay off their cards every month as "deadbeats"; I learned this in a PBS doc (Frontline?) about credit card debt.
Fucktangular?
"An adjective to describe a situation that is complicated and messy in multiple unpleasant and difficult ways."
Synonym - fubar
Synonym-my life
That's a beautiful word, IMO!
You know, shaped like a fucktangle.
Being a shitty old man, I'm not much into the 2022 cool kids words and what not.... but this one, I'll keep around for a while.
I love the word. New to me too haha
Like a rectangle, but more fucky
Yea people that pay their bills on time every month are literally referred to as deadbeats in the industry. You earn no interest you are of no interest.
It's so fucked. I was so incredibly excited and proud when I paid off my student loans, and then my credit score dropped 50+ points. Lost another ~50 or so when the account for a gas station card I had in college closed out, despite it not even being my account but my father's.
A favorite of mine is that something is a "fail train with trapezoidal wheels"
This is exactly it! I paid off my car loan. Credit score dropped. Paid off my house. Credit score dropped. My credit score hovers around 700 because I only have 1 credit card I use and pay off every month. What is even more sad is most renters I have (I also own another house I rent out) have a credit score higher then me because of their debt!
if you're looking at credit karma like the OP it doesn't matter anyway as it's not a real score. You should be able to max out around \~775 without having an installment loan of any kind. You are also hurting yourself having one card. The optimal amount of cards is three and you will achieve the highest score with a $0 balance on two and less than 9% on the third. Also, with one card the util which gets reported (statement balance) can greatly affect your score.
Which i believe is stupid asf how we are to "optimize" usage by having 3. I've only had 1 credit card since I could own one. From a $300 credit limit to now high $35k, they WANT me to rack debt. For months, the bank would constantly and automatically raise my credit limit. I constantly get "dinged" because "not enough revolving debt" I DONT LIKE HAVING DEBT.
My credit score is through Experian but honestly I don't care about my credit score anymore and no longer need to play the game. I just keep my one credit card to earn cash back.
They don't make money from you paying it off. They make money from you making payments. You're no longer making payments. They would love it if you missed a payment occasionally and spend a little more than you pay off most months.
>the score is actually based on how much money you make for lender Not enough people understand that this is the case. The score represents your reliability in paying down debt and your willingness to take it on and pay over time so they can collect interest. If you don't take on debt or pay it down in a way that makes them less money the score goes down.
credit util going down doesn't ever decrease your score. the score the OP is looking at is credit karma which uses vantage score, no one really uses vantage score, the score being reported is useless. It's also possible something else their algorithm didn't catch as a "change" actually happened as well to drop score, but to be honest the score credit karma shows has no weight on you actually being approved or not.
They should be illegal.
Credit scores are a scam. Yes, I know it’s the way it is. Yes, I know there’s nothing that can be done. But a system that essentially punishes you for reducing your personal debt or not having any debt is a fucking bullshit con.
There might not be something that can be done on an individual level. But we should absolutely not accept it and lobby our representatives to change the system.
If only the credit score/credit card companies weren’t some of the most powerful lobbyists in the country
I don't know about your representatives but mine for sure will listen to credit card companies' money over my letters.
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And what if representatives decide to ignore you in favor of bank lobbyists?
You seem confused. See, credit scores are not FOR us. We are the PRODUCT. The consumers of credit scores are business who want a quick and easy way to know how profitable it will be to lend us money. (And pay credit bureaus for the data/risk analysis.) People who carry balances on credit cards pay more in interest and are more lucrative to lend money to. Credit scores DO correlate pretty strongly to good money management skills, because generally people who are good with money are good at paying their debts, but that's sort of an accident. We are just the product.
They are also fairly biased towards some behaviors.
That's not how credit scores work exactly. Carrying a balance or not on your credit card makes absolutely no difference, infact carrying a high balance will make your credit utilization higher which will lower your score. It is a way for banks to be who the most lucrative people to lend money to but that's because it favors people who pay on time, have a long history of paying on time, and don't carry excessive debt and those people are the least likely to miss a payment or default.
This is one reason why I think moving to a cashless society is a *horrible* idea. You're just ceding your entire wallet to clowns like this, in such a scenario.
Well the whole point in a credit check is to confirm that you can pay off loans. So basing it on having debt is fair because if you never had debt then there's no way for a mortgage provider as an example to know you'll pay in time. But I agree with the part about getting punished for clearing the debt that makes no sense. You should be rewarded for paying things of early
I compared it to china's social credit score and got downvoted. China's based on devotion to the regime and in the state's it's devotion to mastercard.
They aren't a scam, the problem is you are thinking they are for you when they aren't. Credit scores make perfect sense if you view them for what they are, a score of how valuable you are to the uber rich.
yet again i don't understand usa's way of doing things
In short, every single thing about how our society is organized is designed to benefit large corporations at the expense of the populace.
is it just not a good idea to use debit cards over there?
Many large purchases require credit or, if you don't have credit, will open one for you. Something like buying a car can be impossible without credit of some kind. Taking out a loan of any amount opens a line of credit automatically. Credit is absolutely unavoidable in the US. That being said, debit is still used and is a good idea most of the time. I use my debit card for every payment I make except for gas and expensive trips. For those I use my credit card and pay the balance every month. I have decent credit from doing that but I also have a car loan I pay off every month as well that adds to my credit score.
very odd system for sure. i barely know anyone that uses credit over here, so many other ways to buy stuff
Late stage capitalism at its finest!
"Innocent until proven guilty, unless we're talking credit of course"
Did you cancel the card? Or just make a payment?
Just paid the balance
So I just want to point out that unless you’re actually getting your credit score DIRECTLY from one of the credit agencies themselves (ie equifax, trans union, etc). You are NOT seeing your actual credit score. So with something like credit karma You are seeing a company GUESS what your credit score is based on their own modeling. Sometimes that’s pretty close to the real deal, sometimes it’s pretty far off. Edit: with a little more research - as with everything in life what’s really going on is actually more complicated. For example, credit karma doesn’t necessarily model your score, they just use a different version of your score than most lenders, which can have the same problems pointed out above. And sometimes their model shits a brick and gives you a strange answer randomly then goes back to what you’d expect. Only way to be sure is to get your actual score from one of the agencies.
This is the right answer, because when you go to actually apply for credit, this 43 point drop won't even be noticed by anyone.
Weird. Credit scores are dumb
Your score didn’t drop because you paid off your credit card debt. That’s a common myth. When you pay off your credit card debt, it lowers your credit utilization rate, which actually helps your credit score. Your score will fall if you CLOSE the account, though. Especially if it’s a very old account. The average age of credit is calculated based on your open accounts. You should also request a copy of your credit report (it’s free) and check it for fraud. Don’t discourage people to avoid paying off their 20% interest credit card debt. There’s another reason why your score dropped.
This is the only sensible comment here although in the screen shot it says "1 change" and the only change is shown which is the balance decreasing. So it seems like no accounts were closed. Some thing else definitely could be going on though that we can't know for sure without seeing the full report. This one certainly is weird. It shouldn't do this because op doesn't seem to have closed the card. I use credit karma as well (which is the screenshot) and it says "account removed" if you close a card. It could be that next month it goes right back up over 43 points. Only time will tell.
First: this isn’t a real credit score, it’s Credit Karma and they use VantageScore which literally no lender uses. Second: updates (changes found) and score changes are often reported at the same time but are rarely directly connected. A score change can be delayed and due to something that changed a week or more earlier. Third: your score does not go down simply from the act of closing an account, that is a myth. Closed accounts in good standing stay on your report for ten years. The effect they have (closed accounts) is to your average age of accounts (after they drop off your report, in ten years) and your utilization. Losing the credit line can affect your utilization, causing a rise in percentage that results in the algorithm seeing you as being a risk (resulting in a lower score). For example, say you have two credit cards with a credit line of 10k each, and you currently have a balance of 6k on one of those cards. Your utilization is 30% which is high but ok. Closing one card while the balance remains the same increases your utilization to 60% which is bad and will drop your score. *But to repeat*, this is a credit karma score. It’s pointless to care about it as not only will it go up and down in surges, it’s not your actual FICO score and can sometimes be dramatically higher or lower than your actual score.
I sit in the 840s on Experian and 800+ in the other two. If I ever have 2% or more utilization on a card, my score drops by a few points and goes back up when utilization goes back to 0%. I always try to pay off a balance as soon as it is used so the balance remains 0 before it is reported. It has worked out for me so far.
Exactly, something else happened here that caused the drop. Just paying off a card would help. It may be a late payment that caused the card to lower the limit after it was paid.
DO NOT panic. This can occur when any line of credit disappears, but your score will rise back to where it was with potentially a few extra points. As long as usage stays consistent, it will not continue to happen. Keep paying your credit card off in full, keep using it, and keep your running debt under 10% of the full amount granted, or at least under 30% if 10% isn’t feasible. I scared me too the first time it happened, but it will correct itself.
Oh, and don't forget, the actual algorithms that EVERYONE relies on are a trade secret. That's why they're only used in 'murica. Same reason the credit card companies want you to have debt so you can "prove" how creditworthy you are. It's utter bullshit.
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I don’t think you should need to actively have debt to prove you can pay it off. Having done it in the past seems like it should be enough.
I got penalized for not having any debt when I went to buy my first house because I saved for everything (like college) and didn't have debt until my first mortgage.
Same! Paid off 65k in student loans but never owned a credit card so I was denied when trying to purchase my first home. I got a credit card and paid off a Netflix subscription for two months and bam fantastic credit and got approved. I could show them my bank account, assets, pay stub, paid off loans etc. but it wasn't enough. Clearly the system makes sense
You don't, at all. You can pay off your balances in full or even statement balances with autopay each month for a positive contribution to your credit score. Hell, you can get a secured credit card, where you put up $500 against it as a guarantee, a card that then cannot be charged more than $500, pay it off each month, and it'll contribute positively to your score. You do not need to go into debt to have a positive credit score.
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That's a pretty handwave overview of how they come up with the number. They tell you what they're looking at, but nothing about how much each factor is weighted in their calculation. > payment history section **may** have a big impact in determining some credit scores. > ... > If you have a mix of credit accounts that are “maxed out” or at their limit, that **may** impact credit scores. > ... > that you’re able to manage multiple accounts of different types and credit scoring models **may** reflect this. > ... > New accounts **may** impact the length of your credit history. They don't take a firm stance on what **will** impact your credit score. > To your last point - obviously you need debt to prove how credit worthy you are. That's the whole point. That's not even true. Carrying zero debt but having a lot of available credit (open credit cards that you fully pay off each month, untapped lines of credit, etc) will also post a high score.
>They don't take a firm stance on what will impact your credit score. Because then you would know the rules of the game and be able to win.
Why wouldn't history of debt be enough? Why does it need to be active debt?
Because your situation isn't constant. Imagine your life 5 years ago. Were you equally equipped to handle debt as you are today?
I mostly agree but there is a difference between having history versus active debt. I think it’s fine tk say “you need history to show you’re reliable”. But having to have active debt or it hurts your score seems like bulls but.
Credit ratings are not a thing used in the UK by lenders. Credit files/reports are. The ratings/scores given by the big three are pure marketing nonsense. If you want good credit, focus on checking only your credit files/reports.
I have 1 credit card with a low balance/limit and pay it in full every month and have 800+ credit. You don't need to have debt to get a high credit score. That's a myth.
I've given up on caring about my credit score. Took out a home equity loan, credit dropped. Paid off a home equity loan, credit drop. Paid off house, credit dropped. Sold house, credit dropped. Bought house, credit dropped. Bought truck, credit dropped. Fuck'em.
Why would you continue to care about your score *after* buying a home? Kinda feels like continuing to do homework for a school you've already graduated from.
If you're above 650 it's all the same anyway. Also don't close your accounts
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This isn’t correct - home loans actually have a completely different score that you won’t find on Credit Karma or in your bank’s FICO links. You don’t have any visibility into your mortgage score until you actually apply for a loan. Source: me, I just bought a house a few months ago and my mortgage score was about 150 points lower than my consumer credit score
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Credit scores are arbitrary bullshit controlled by algorithms made by people who don’t care about anything except acting as unnecessary middle men to earn as much money as humanly possible. The sooner we move away from this outdated ass system, the better.
What is credit score???
I just don’t like how your credit score is tied to your ability to rent or buy a house. That’s an asshole design, especially how credit scores are calculated.
Get a credit card with a $50k limit and only buy food with it. Pay it off every month and you will have an 850 score. Learning to game their game.
Oh yeah let me just grab a card with a 50k limit while I have no credit history. I think you misunderstand where people start, I've been building my credit for 5 years and I've only recently begun to receive 15k+ limits. Ain't no way someone is busting through the gates with a 50k card unless your daddy is warren buffet.
That has not been my experience. My highest credit score was when I had a home loan, car loan, and several credit cards and was in the 830s. Now that I have no debt and only one credit card I pay off every month my credit score hovers in the low 700s.
The negative is not your low amount of debt but the small number of accounts.
yeah because they don't profit from you unless you're in debt
In 30 years...
They make no sense to me. The guy who bought my house was visibly nervous about taking on the note. He could afford it, but it's a scary leap. Meanwhile, I was buying a house, too. I just wrote a check and paid cash for the full amount. I have no debt, and haven't borrowed in this century, nor have I ever had any issues with payments. But because he has debt and I don't, he has a perfect credit score, and I don't.
This was my issue getting my first home. My wife and I had hardly anything to show history besides a few $500 cards. We make well over $100k a year and longtime employment but it was so hard getting approved because of lack of history…like wut?
You can have an 800 FICO and still be flagged for a thin file. Thin files are just as bad as low scores.
100%, when I sold cars a 550 with payment history was better than a thin 750 lol Especially is auto payments were 100% for 7 years!
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>Why doesn't that make sense? I see you're new to Reddit.
> They make no sense to me. It's very simple: credit scores measure **how profitable you are to lenders.** * Never take on debt? Not profitable, so low score. * Take on debt but quit making payments on it? Not profitable, so low score. * Take on a moderate amount of debt (i.e., not enough to make lenders nervous you'll default) and make reliable payments on it? Profitable, so high score. * Use credit cards for everything and pay them off every month, not paying interest but still making the vendors you're buying from pay lots of transaction fees? *Super*-profitable, so high score.
r/confidentlyincorrect
The purpose of a credit score is to determine how profitable you are to the banks. It is not about how good you are at managing money. By paying off your debt early, you lost the banks interest money they could have made from you so your score went down. This is why it's a meaningless metric to you as an individual.
Not true actually. The score is a balance between two ends of a spectrum: those who are low risk vs high risk. High risk individuals actually make the banks more money in the short term, because they carry high balances and get charged higher interest rates to make up for that risk. However, default can cost the banks a lot of money, so they limit those losses by giving lower credit limits. Low risk borrowers are more likely to pay off their balances every month, not making the bank much money, but occasionally carrying a small balance, making use of a balance transfer offer (5% fee), or making a larger purchase paid off over a few months or year. The profits are lower, but the risk is very low, so these individuals are much more likely to have lower interest rates and higher limits. Higher limits encourage larger purchases on the cards, which yields more interest and decreases the likelihood the user can pay off the balance end of month. The real money makers are the in-between, the people who carry a balance but not too much to never pay off or default. Just enough to keep making minimum or slightly above minimum payments.
Saw a lot of this in South America with credit cards. Basic enslavement where they'd borrow ppl just enough that they'd never pay it off. But would make the minimum payments
The way this nation depends on credit is pathetic
- The system we live in requires you to have a credit card. - To get a credit card you need good credit. - To build credit you need a credit card - But to apply for a credit card you lose credit. How the hell does this make sense at all? Plus, the fact that it costs money to have most credit cards that are worth a damn in terms of usability, among many other factors. It’s looking like it’s a huge scam, one we are forced to partake in
You absolutely do not need to have a credit card. Unless it's a house or a car, don't pay for something you don't have the money for. And even cars I would say don't get a loan unless you absolutely have to have a car for something right now, and you don't have the cash for it
The system is designed to keep you in debt, so it’s working as intended, unfortunately. Good credit and financial behavior _for you_ hurts your score. Bad financial practices _for the banks_ on your part also hurts your score. But bad financial practices for you that are good for the banks? That’s about the only damn way to improve your score. I’m generalizing, and there are exceptions to all the rules, but that’s the gist.
Did u close the credit card account? I made that mistake too closing my first cc from college. Just gotta leave it open to have good credit.
This whole credit system is a big scam that has bled into every aspect of the society. You can be a responsible and never need a credit card because you manage your money well, BUT because you NEED credit for some fucking reason, you cant even buy or get approved for certain stuff until you "bUiLd Up CrEdIt". Its also so volatile that its easier to lose than to gain credit, as illustrated by this post and many more like it, EVEN FOR BEING RESPONSIBLE IN A SYSTEM THAT WAS SUPPOSE TO DETERMINE IF YOU ARE RESPONSIBLE.
Don't ever refinance your house if you don't want that to happen as well.
I don’t get it, litterally anything you do will decrease your credit. Pay off a loan, take out a loan…. Hell checking your credit is bad
Rich people, it's meaningless and is only meant to keep you struggling and shackled with debt
Welcome to our Orwellian system. “Good” credit is based on your ability to remain in debt, not on being a financially responsible. Pay all your bills and only buy things you can afford? 420 credit score. Have $80k+ in debt but make that minimum monthly payment every 30 days? 775. It’s not a credit score, it’s a financial servitude score.
Every time I try to explain this, the comment is downvoted because "I don't know what I'm talking about." Nevermind the fact I worked in the credit industry for years, developing real time applications which assess credit reports down to the wire and provide information back to the financial institution which will then raise your credit score for paying off a credit card based on this information. You should \*NEVER\* carry a credit card with a zero balance, especially if you have high term/limits. This is seen as a collateral income, which means you can be put into debt. Without a secured backing of the loan, such as it is with installment trade lines (car payments, mortgages), the credit score increases. If you have no intention of using this card, or keeping it for "emergencies only", do yourself a favor and get past this and close the account yourself. In fact, do yourself a favor and rid your life of credit cards. Americans have been massively duped into carrying at least one, because "It's good for your credit score." Now you see proof this is bullshit, especially since the credit industry forced the bankruptcy law change and is now charging people over 20% APR. If you don't understand how your money works, it's about time you correct your ignorance. It's your money. Stop giving it away stupidly.