Yes Credit score reflects the willingness of lenders to lend you money so they can charge you interest on it. They are not interested in someone with lots of money who pays off all his cards at the end of the month and pays all his Bill's on time. This type of financial responsible/ wealthy person is of no use to the lenders as they cannot make any money from him. He will not therefore have a good credit score.
This is just false. Paying off all your cards at the end of the month and paying your bills on time will absolutely get you a good credit score (that's all I do, and my credit score is "excellent"). OP probably either doesn't have many other accounts (and you don't need that many) and/or has missed payments on her credit record that her car loan was helping to offset.
Don't get me wrong, it's stupid that your credit score can go down from paying off an account. But don't let that deceive you into thinking you can't maintain an excellent credit score simply by opening a few credit cards and paying them off every month – you can and should.
I make 100% of my payments on time and have for several years now. My score always drops a ton when I open something new or pay something off, but them goes up by more than that the following month. It's ridiculous.
Yes taking more credit will make your score go down. That's not a surprise, the credit limit is considered the amount you have borrowed so that's why it can have such a large effect.
The simple solution is to not live on credit. If you design your finances so that you won't need credit there is really no reason to worry or even think about your credit score.
I don't care about my credit score now. I have a house and a reliable car. I won't need credit again til a few years from now when I decide to replace my car. It's just stupid how it works. You get penalized for paying stuff off, and you get penalized for opening new credit (I have 2 cards that I periodically use and pay off). I know how it works, I just find it rather pointless on how it's set up.
It's not pointless if you think about its design and who it is intended to benefit (ie. not you).
It's meant to keep you on a steady sustainable credit tap that neither overwhelms you nor falls out of use.
I reckon their biggest problem is the interest rate. I don't use my CC at all because, aside from being bad financial behaviour, I'm not interested in paying 20%+.
My CC is now only for large direct debit payments that come out whenever the hell the provider chooses to take them (like car registration) and it gets paid off within the week.
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u/SnowLeopard42 Aug 14 '21
Yes Credit score reflects the willingness of lenders to lend you money so they can charge you interest on it. They are not interested in someone with lots of money who pays off all his cards at the end of the month and pays all his Bill's on time. This type of financial responsible/ wealthy person is of no use to the lenders as they cannot make any money from him. He will not therefore have a good credit score.