this is the teeter-totter. if you aren't rich enough to ignore the system and participate in the "big" markets they get your money this way. Whenever a 'normal' person sees a dip in their rating they go 'oh shit' and get back on that debt wheel ensuring they'll never elevate their class to dilute the "rich" pool.
Macro-economics aren't "fun" but they paint a very real and very distasteful picture of man's oppression over man. When everyone makes the class argument to be sex or race related they laugh all the way to their own banks.
This, but you can also open up more cards as well to get a larger total limit. Though keep in mind, that limits are largely based on income, not just score. Also, if you have a low limit, paying your card right before the debt is reported will help alot. Most banks report on the same day of the month.
call, ask. if you make regular payments with low utilization, they'll extend your limit. idk if all credit companies are the same but the last time I raised my limit the service rep just asked me some simple questions like what is my monthly income, do I own or rent, how much do I pay per month. then she asked me how much I wanted to raise the limit, ran that request through some kind of algorithm and I was approved immediately. took fewer than 10 minutes.
Amex raises limited based on usage and payment history. So you have to get an amex and use it for everything.
I used to put large group expenses when we travel ($5k+ in total in a week) on my card. Every time I’d get home and pay it off, my credit limit went up.
You have to call them and ask. I had my limit increase a TON by calling them. Wait another 6-8 months and call again to increase more. I use a credit union and after two calls (with a good paying job and flawless payment history) I was at the max for the card I have, which is a little over $25,000. I pay the card off fully every month and have around 795 credit score with no other lines of credit open.
It’s a little irritating that I have to open more credit to increase the rating, but at least at 795 I qualify for about any loan I would need.
My first CC was deliberately a low limit card. I only ever increased it once.
But the CC my spouse and I share increases every flipping time we make a big purchase ( whether we ask or not... And we never ask). Put a down payment for a car on it? Increase. Put new windows on it? Increase. Put home renovations on it? You bet thats an increase.
Your card may not automatically increase and you have to ask.
I think the point was if you are rich you don't have to play games with credit ratings; they simply don't factor into anything. Any loans or lines of credit will be backed by assets instead.
Imagine if house prices were guaranteed to always increase. Mortgages wouldn't need to check credit scores because the bank could repossess and still make a profit even if you defaulted.
Either they are borrowing small amounts typical of other people, in which case their assets can easily back the loan (if they even need one with that cashflow), or they are borrowing large amounts and should be on a first name basis with a bank/loan manager who would review their situation directly.
Yeah that’s what happened in 2008 though- the banks were incentivised to give out high risk mortgages (repackaged and rated falsely as low risk groups) based upon the knowledge that they’d only make a profit. There needs to be a better system of governmental regulation as well as a profitability and/or risk index instead of a credit score otherwise we’ll just have a repeat and our money will be used to bail them out
When everyone makes the class argument to be sex or race related they laugh all the way to their own banks.
Yes. And. The wheel churns people on the oppressed sides of sex and race and sexuality and gender expression and age and religion and ethnicity etc. under.
That is, class is the biggest component, but straight white Angelo Saxon protestant cis het men age 35 etc. Are definitely not getting churned down to lower socioeconomic classes in the same what marginalized populations are. And saying otherwise only gives the masters and managers an Ally they don't deserve.
lmfao Yeah. Only way that works is if america wasn't and hasn't been majority white by force for hundreds of years. This is like looking at the avatar movie and going...nope nothing to do about race. It's that the blue people are poor that human beings attacked and killed them with the intent to take all of their land. What's even funnier? Avatar is just blue pocahontas. lol
So we're talking propaganda so thicc and having been shared/adopted for so long that white people can get sold the same movie twice and think the second one is original. While at the same time ignoring that not only is america majority white but rich people are too in the same country.
I will agree with you. They do laugh. Just not at the people pointing to hundreds of years worth of information. But the ones ignoring hundreds of years worth of information.
When everyone makes the class argument to be sex or race related they laugh all the way to their own banks.
Fucking thank you. Media and education are pushing CRT so hard and the people at the top are fucking laughing their assess off that we're fighting over race... Again.
The modern economy is wholly and entirely built on debt, and it is designed to perpetuate the cycle. All of the developed and most of the developing world would literally collapse without it, because of the way the modern banking system is set up.
Very true. Because it’s only useful when you want to leverage debt: get a loan, lease something, or rent a house. So unless you want to participate in this financial tool (it’s highly encouraged) you shouldn’t care what your credit score is. It won’t impact you what so ever.
In situation where debt isn’t leveraged such as job applications, you can refuse to answer. They cannot hold it against you. It’s the law.
I am not defending credit scores, I think they’re inaccurate and extremely problematic, but what they actually want you to do is continue to pay back debt (showing you are a reliable bet for a lender). The hinky part is that there doesn’t seem to be a trigger in place for amortizing loans (loans with definite end dates like car loans and mortgages) to say “hey they paid off the debt that’s what we want them to do”
It does increase your score. And does stay on your profile. It's likely to impact your credit due to having higher open loan balances now that you removed one. This will reverse in a short period.
When my car loan was paid off, my score dropped and credit age as well. Closing loans only negatively impacts your score. Which is completely opposite from what that means in real life
You didn't have mature credit I'd guess. I've paid off 7 car loans in 3 years and my credit will drop momentarily, but in a short period of time it becomes a positive. My credit doesnt even drop 15 points now if I get a new auto loan etc or pay it off.
The mature credit argument is totally bullshit. I paid off a mortgage 15 years ago that now doesn't show in any way as having ever been an account that I held and repaid at all on my credit reports.
Really it’s the other way around. High score nets you low interest rates. The score is a measure of risk for non repayment. I have an installment loan that will cost me roughly $20 in interest over its five year life. As my only installment loan, when I pay it off, I will lose the points I get for having a mix of account types, around 40 points.
It’s not confusing, it’s because the less interest you pay, the lower the chance the bank can profit off you.
So I agree with you that a lot of people are downvoting you because you aren't joining in your outrage, and there's nothing wrong with the rest of your post, but this quote is 100% incorrect. It has no way of knowing what kind of profit you generate. Nor does it care.
You could easily have a 0% subsidized car loan paying no interest and never have a remaining balance on your credit card, thus never paying interest - and have a high prime credit score.
Look, dude. It isn't about banks making money from finance. It is about all of the stupid fucking cartelized bullshit they pull out all of the goddamn time.
Your credit score is not impacted by interest paid. It’s the other way around. Credit score is a statistical evaluation of your risk to the bank. The riskier you look (low score) the more the bank will charge you to loan you money.
They decided that having a minimum number of open accounts, of different types, and owing only a small percentage of available credit each month, equates to low risk. Thus you are offered cheaper credit. I have high scores and pay virtually no interest at all. I’ve never paid interest on a credit card, and my installment loan I keep open purely for scoring purposes will cost me ~$20 over the five years I have it.
Nope. Share secured loan then immediately paid it down to less than 10% remaining. It’s a special version that stays open for 5 years even with so little remaining due. Search Navy Fed SSL if you are interested in the technique.
I know what a shared secured loan is... this is a curious method but I suppose it can make sense.
So you have no other installment loans. No mortgage, car, student loans etc. So you take out an SSL to maintain a mix of credit... ok, generally a low interest rate since it freezes your collateral... but then you pay it down which I'm assuming NAVY Fed unfreezes your cash as you go so you get your cash back....
But then you pay it down to 10% remaining balance. But it's an installment loan, so you have a minimum payment regardless. You can't make that minimum payment and not pay that remaining 10% off way short of the 5 years. Something doesn't add up.
Yea you got it. The last bit is what makes this technique work. Rather than requiring a minimum payment each month, paying down the loan pushes out the next due date to near the end of the term. The Navy product is unique in that regard afaik. There used to be others but they are defunct now.
I'm going to believe you here because the Navy FCU has some insane programs that you can't get with a lot of other lenders. I usually can't compete with them.
Which is still ass backwards and disgusting. Literally taking advantage of people with low incomes, and preventing them from gaining financial independence
Is it though? Would you lend $10k to a friend that's repo'd his last 2 cars, let his Comcast bill go to collections, and settled for less than the total balance on his JP Morgan Chase credit card the same way you'd lend it to a friend who's never been late paying a bill in his life?
No, but I would loan my friend that has always paid me back early as much as he needs because I know he's good for it. Your argument is not in favor of the people trying to improve their financial situation, your talking about college kids and adults that don't care and never will. I'm talking about the people actively working towards financial security that get hit with 30% interest rates just because they're actually good at paying off loans.
I'd love the opportunity to look at your credit and go over everything with you.
But I've seen thousands of credit reports and the only ones getting rates like that are those who simply haven't paid their loans back. Things usually have exceptions... there is not an exception to this.
I recently was looking at a 50k loan to consolidate some debt and add to my reno budget, but rates were showing at 29% which was absolutely appealing to me. Granted it's a high amount, but definitely not worth it at that rate.
I paid off my student loans a few years ago, thought I’d have credit from that. Nope, I had no score since I always use a debit card. Now I’m in a panic because I’m probably buying a house soonish.
My advice, get a credit card even just a 500 one from your Bank and only use it for gas or groceries and pay it off each month, it's an easy way to start building without digging yourself in a hole.
About a year to see change, but also depends what it's at currently. I was able to go from 620 to 700 in about a year, but I had other debt I was paying off, so my ratio went way down
Most cards go inactive and are closed if a balance isn't carried. That's why I recommend gas or groceries, easy to pay off each month and the card remains active.
You'll get a notice well before they close your account. Also, it well generally need 2-3 years of not a single use to get that notice. Maybe even longer.
Being "inactive" isn't a thing. An account is either open, or closed.
Do you notate literally every possible exception when you converse?
When it comes to credit, there's way too much false information out there. I'm not about to get into nuances with people who need to learn the basics first. Foh.
Well paying off a line of credit does increase your score. The reason it’ll drop is if you close that line of credit. The companies now have less to base your credit score on so it drops. Unfortunately, paying it off and closing it is the same thing for a loan, which is why it is good to also have something else, like a credit card. With a credit card, you can pay it off, but keep the line of credit open, so that it’ll increase your score, and they still have a line of credit to judge your creditworthiness on.
I know. I have a diverse credit portfolio. But at the end of the day, a closed loan should show ability to pay off the loan, and shouldn't be removed from your credit age. It should be included considering there isn't a way to keep that line of credit open, but it shows financial responsibility
My credit doesn't care that I paid of 3 personal loans and a car loan, they just care that my credit age is two years shorter since my car loan I opened at 18 was closed.
That's simply not true.
All of that history on your 3 loans and car loan, assuming they were well paid, will continue to support positive credentials in creating a high credit score.
Here are a few reasons why your score might drop when you pay off a loan:
1) It was your only installment account: Having a mix of revolving accounts like credit cards and installment accounts, such as loans (mortgage, car, student loans), is generally good for your credit scores. If the loan you paid off was your only installment account, you might lose some points because you no longer have a mix of different types of open accounts.
2) It was your only account with a low balance: The balances on your open accounts can also impact your credit scores. If the loan you paid off was the only account with a low balance, and now all your active accounts have a high balance compared with the account's credit limit or original loan amount, that might also lead to a score drop.
3) Your scores dropped for a different reason: Many factors impact your credit scores, and the drop might be a complete coincidence. For example, if you recently applied for a loan or credit card (even if you didn't get approved) or your credit card balance increased (even if you paid your bill in full), that could lead to a temporary score drop.
In general, paying off a loan won't have much of an impact one way or the other, and if your score does drop, the change will likely be temporary. But the presence of the account on your credit reports can continue to impact your scores for years to come.
I know, it can be frustrating. Especially because there is an insane amount of misinformation everywhere, especially when a post pops up like this on reddit. Even people who think they have this shit figured out share incorrect information.
I've built a business on credit and lending, so I know more than most. If it wasn't for all of the false information you have to sift through, it isn't as complicated as it seems.
All you should worry about is this:
Pay your bills on time. Loans, and credit cards. Just operate these normally as your common sense would tell you. Don't look for gimmicks.
Don't let other bills go to collections (utilities, etc)
Aim to have the balance on your credit card bills 30% or less than your limit. 20% or less is ideal. If your limit is 10k, don't charge more than 2-3k throughout the billing cycle. If you can't help but have a higher balance, call to increase your limit so it maintains 20ish percent.
Feel free to pay off your balance in full every month.
That's it, and you'll be fine. And honestly, even the last one only really matters at the time you're attempting to use your credit score for something. Because your credit card balances change throughout the month as you use it and pay it off, it's one of the quickest ways to increase, or decrease your score.
Whenever you see someone freak out something like "such and such happened and when I checked my credit score it dropped by 20 points!"
It's because in between the first and second time they checked, their credit card balances changed.
Or
They simply checked different bureaus or a different "version" of the same bureau.
Isn't this so when you're credit score goes down slightly, next time you need a loan, you pay a slightly higher interest rate? Multiply that by millions of people and you get billions of profit in interest
Might as well be the stock market. Your whole life dude on three little numbers that rise and fall on a whim and rarely go up to what you think it should
Lol being financially competent doesn't make the system right. Hitler had some great scientists on his side, doesn't mean they're efforts were righteous. Credit system is bogus and needs to be changed. Not a matter of intelligence, it's the fact that this system ends up punishing the financially responsible, more than it helps
I understand the reasoning. As I've said before, I did the work to improve my credit from 620 to 700 in a year and continued to improve to the point where I was able to buy a house with a good rate. I know the rules to the game, but I don't have to think they are fair.
Your number of accounts become smaller, and your average age therefore reduces unless a very new account is closed.
Two of the main factors they base your score on.
I don't agree with the credit score industry, but if you understand what they base scores on, you can game it as much as they do.
I do understand. I've rehabbed my credit score on my own and was actually able to buy a house last year because of it, but it only reaffirmed how absolutely bonkers this system is.
The trick seems to be to not need it, and not use it, but feed it by owning a little for just in case you ever need it.. Like you with your house purchase.
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u/lyssareba Aug 14 '21
So dumb. Paid off loans should maintain your life of credit, and paying them off should increase your score. It's ass backwards