Equifax refused to restore his credit score or explain why it dropped to zero, until Go Public started asking questions.
Only then did the company point to its little-known policy: If a credit file sits inactive, the consumer may be labelled “unscoreable” and their score reset to zero. Tregear says the last time he checked, before it disappeared, his score was around a more respectable 700.
Go Public has since found a major flaw in consumer protection rules — that there are no laws or oversight on how credit scores are calculated, leaving credit bureaus to do what they want.
Consumer advocate Geoff White says that gives credit bureaus too much power, with no transparency.
It is kinda funny how often people will give shit to China for it’s social credit score but we’re not too fucking far off from it here in the west. When you can’t even get housing because of a credit score… it’s kind of a fuckin’ problem.
Except ours is based on our ability to repay debt. Which is fucked.
Not saying China’s is any better, but at least you’re rated on your actions and words. Not some capitalist view of a person’s worth.
Both are fucked.
Anyway, credit scores should be abolished.
TL;DR: how could you ever trust anyone to define a social credit score based on actions/words? And how can you offer debt without having something like a (better implemented) credit score?
I think I understand where you are coming from, assigning people a “worth” based on something financial is messed up. Ideally there would be some way to instead reward people for good things like being polite to people, and not littering. And possibly to penalize people for engaging in bad behaviour.
But even if I trusted the current government to implement this with the right goals, I would never trust future governments not to abuse this system. I don’t think I’d really trust any sort of group to do this right. I’m already disappointed enough with our current democracy (in Canada) for not getting rid of first-pass-the-post, and I’m skeptical that much will change with interprovincial trade barriers (why not sooner?).
But the idea of a better implemented credit score to track only severe abuse of debt doesn’t seem entirely unreasonable to me. Obviously the current system is messed up and has major problems, but I feel like it could plausibly be fixed and done in a reasonable way. I think debt to buy a house (and maybe sometimes a car) is generally a good option to have. And I don’t know how you could offer this without tracking people who don’t pay. (Though maybe I’m wrong, maybe just going based off of income history is enough.)
But yes, the current system is ridiculous. People should be rewarded for never needing debt, not disqualified from getting future debt without notice. And it should be much easier to track and fix problems on our credit score. And things like cell phone bills don’t seem worth being affiliated with credit bureaus. I think most people would be better suited to prepaid plans if they were options. And I feel like financing phones is a really bad thing, people don’t realize how expensive they are. I’d rather if all my utility bills just collected some deposit instead of potentially being able to ruin my credit if a bill gets lost in the mail after I moved out. (But this could be too expensive for a lot of people, so again the credit score seems to have a purpose).
Amen!
It’s funny because wealthy people don’t have this problem. They want a loan for several millions? No problem! If they can’t pay back the loan, it’s not their problem though. It’s the bank’s problem. But hey, let’s deny a loan for a lower-middle class worker for a $15k used car to get to work, or deny them the ability to have shelter because they fell on hard times once in their life ages ago.
You know what I mean? Sure there should be a way to find out of a person is trustworthy to pay back a loan, but at the same time we shouldn’t be living in such an unfair system.
How so? It seems to be exactly what lenders want to know before lending. Are you judging a system by its exceptions?
It’s moreso a rating of how much potential cash they can extract from you over a lifetime in the form of interest.
That’s why, if you always pay off your debt balance before interest accrues, it actually lowers your score.
It does not lower your credit score to pay debt off early, where did you get that idea from?
Over time if you show that you aren’t delinquent on payments your score goes up. That’s the vast majority of how a FICO score is calculated.
Other things that impact your credit score are the LENGTH of time you have established credit (aka don’t close your oldest credit card for most people, even if it sits unused), the total amount of available unused credit compared to your income (ie if you have a ton of high credit availability cards sitting there - you could run up hundreds of thousands of dollars of debt and disappear to a non extradition country being a risk), and lastly your overall utilization of your available credit (ie you want to be using 10-20% of both your available credit both on individual cards (“revolving credit”) and your overall total revolving credit across all your cards together).
The last one is a bit harder to explain, so here’s an example:
-you have three lines of revolving credit (credit cards)
-one card has a 1000 limit, one has a 5000 limit, and one has a 10,000 limit
-ideally you’re posting a balance of 200, 1000, and 1500. That’s between 10-20% on each card, and it’s between 10-20% of all cards in total.
Other things that impact your score (negatively) are bankruptcies, late bill payments, things in collections, and having a high debt to income ratio.
At no point will you be penalized for paying debt off early. The only thing that can possibly affect your score in that sense is if you ONLY have a loan, no revolving credit, and you pay it off - now you have no credit utilization at all, which potentially could ding you a bit, but not much. That’s also not very common - most people have several credit cards and few loans, if any.
Ah, that would happen to be my exact experience, oddly enough. I don’t have any credit cards and payed off my car loan early because the bank was playing games with automatic payments.
Dang, sorry to hear that. How much did your score dip? Anything around 25, maybe up to 50 points is probably not a critical issue. Dips like that, and especially ones that relate to credit checks (like when you’re shopping for a loan or a new card) go away in a couple months (I’m not sure about your case. Without active credit utilization you’re an “unknown” factor, which is risky to the lenders). I’m not even sure why your score dips when someone does a hard credit pull - overall my frustration with the system is the lack of transparency and the fact that there’s zero regulation or accountability for the credit bureaus.
Best practice is to open a no-fee card with points/cash back that aligns with your normal spending habits, use it for general purchases that you already make today, and pay the balance off in full every month after you get your statement.
As long as you don’t carry a balance it won’t cost you a penny in interest, and you’ll reap the card benefits and improve your score by establishing and maintaining a good credit history.
The thing is, MOST people carry a balance. That’s why credit companies are able to afford giving you 5% cash back, travel bonuses, etc etc - just the fact that those things exist, on top of all the overhead required to maintain/issue credit cards tells you just how many people are carrying a balance and giving interest to the companies.
If you have the discipline to not charge more than you earn and to not miss payments, you’ll get all the benefits without any of the costs. On top of having card bonuses (5% on groceries adds up!) you get several other benefits, some of which I will list here:
-your money is shielded in part by the credit company. When you charge a card, you’re not spending YOUR money (yet), you’re spending Capital ONE/Chase/whoever’s money. What that means is that if a business does wrong by you (sells a faulty product, doesn’t provide the service you paid for) you can issue a charge-back. That’s a pretty serious thing, if companies get a high number of charge backs they can lose their ability to receive credit payments. (Chargebacks can be useful but they’re not always the best option). Also, and maybe more importantly, your BANK account information is shielded from all the businesses that suck at keeping your information safe. Your credit card gets compromised, you see your statement and somebody’s buying gas and fast food with your credit card, the company will remove the charges and issue you a new card - if someone gets hold of your debit card or your bank login, it’s MUCH harder to get your money back, if not impossible.
-in case of an emergency you can carry a balance - it offers some cushion from financial ruin. The downside is that now you’re paying interest, but if it’s a choice between paying interest for a couple months vs not having a working vehicle, or not being able to pay for an emergency vet bill, the interest is worth it imo.
-cards have all kinds of benefits besides the flagship cash back/points. Extended warranties, concierge services - every card comes with a booklet of other benefits that most people don’t read, but you really should. I’ve used extended warranties several times alone when for example something breaks 26 months after I bought it, but the warranty expired at 24 months and the card extends the warranty a 3rd year.
If you do get a card you will probably have a fairly low balance at first. Couple thousand dollars, so it’s really easy to get over that 20% utilization fast if you’re not paying attention - which can hurt your score! Utilization doesn’t carry nearly as much weight as paying your bills on time and the length of your credit history, but it does matter. So be mindful of that. If it’s working out for you then six months later open another card that gives you different benefits (a card for utilities vs one for groceries, or one for travel, etc) and start breaking your bills up so you can maximize benefits. Some cards give you a cash bonus if you spend a certain amount within 90 days, so if you know you’re going to make a big purchase then you can open a card, put that big purchase on it, get the $200 back or whatever, and pay it off.
Unfortunately there’s no way to avoid the credit system in the USA, you’re SO disadvantaged if you try to do so. Housing, loans, job applications, security clearances (Federal work), all take it into account. Best thing you can do is to make the system work for your benefit.
I don’t pay anything in interest and I pay pretty much everything on credit, because I live within my means. My credit score is ace because I’ve been doing it for years.
If you have any questions let me know, happy to discuss.
You know what’s funny? Credit scores are a fairly new thing. If you wanted to rent an apartment, all you needed were good references. You couldn’t be denied based off some obscure score that a couple of companies have a monopoly over and can wreck your whole life if THEY mess up with no chance of recovering.
In a world where everything works on debt now, these companies have too much power over people.
That’s an interesting concept but standards are different, so what does a social score mean anyway? For example, I value high eq/empathy above all. Lacking that but being a billionaire won’t increase my score toward you even though you might be rated high because you own a house, car, business etc.
Well in case of China, it’s how good they view you as a citizen. And that’s based on their own evaluation templates. And it’s probably based on how early you get to your job and how well you perform for glorious China.
Isn’t this social credit thing mostly a hoax? They said they would do it but I’ve never met a Chinese person that confirmed they had this up and running
Edit: yeah mostly not a thing, Wiki got receipts https://en.m.wikipedia.org/wiki/Social_Credit_System
Must’ve been edited by members of the Chinese government. (/s) ;)
Don’t forget the even more nebulous and secretive insurance scores that are even tied in to data brokers!
On the other hand, the Chinese “social credit” is mostly western fabulation. And what little implementation of that actually does exists is actually mostly used to track and punish corporations and governmental bodies… So there’s that.
Ah, so eastern social credit is the public(ish) policing private business. And that is very bad – by which of course I mean it’s targeting the people who most manipulate western public opinion.
But our western financial credit is private business policing the general public. “This is normal.”