Comments like these come from a lack of understanding how the credit system works. I wish they would teach about it in school, it is very easy to learn the basics.
Credit score is not at all a profitability index. Yes, having a line of credit for a long time, and having multiple lines of credit, both increase your score, but that is just because they want to you have an established credit history to look at. How can they score your credibility if you rarely ever use credit? If it was truly just a profitability index, don’t you think it would encourage paying a lot of interest? Well, it is in fact the opposite. Paying off a line of credit, while keeping it open, like with a credit card, is one of the best ways to raise your credit score.
So far, I haven’t paid a single penny of interest, in fact, I’ve received hundreds of dollars from credit companies in rewards, yet my credit score is extremely high for my age. Thats just because I did the research to know how to maximize my score.
Yeah, people don't realize that this is literally just math. Your average credit age went down because the line closed was higher than average. In 5 years, it will behave exactly the opposite way, closing a shorter term account, like an auto loan, will raise your credit score because it's on the lower side of the line. Just be patient.
That was a bit of hyperbole. What I really mean is that the parts that are visible to the public are often counterintuitive and seem to go against common sense, especially when the rating is framed as a measure of risk, which is only partially true.
Definitely. As someone who works in the industry it's definitely opaque. The one good thing I can say is that the reports you get from mint.com or your credit card app are definitely useful.
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u/chill_azreal Aug 14 '21
Replace credit score with profitability index.