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Early_To_Risa@sh.itjust.works

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Anon tries to understand credit scores (sh.itjust.works)

submitted 1 day ago by Early_To_Risa@sh.itjust.works to c/greentext@sh.itjust.works

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[–] damnedfurry@lemmy.world 4 points 20 hours ago* (last edited 13 hours ago) (2 children)

Credit scores are used to tell companies how much they can earn on lending you money.

This is demonstrably bullshit.

Someone who maxes out a credit card, and then only pays minimum payments, and always makes them late, is, via interest accruing and late payment fees, making the lender basically the maximum amount of profit possible. And yet doing this will result in a garbage credit score, because using every penny of your credit limit is very detrimental to your credit score, and not making payments on time is extremely detrimental to your credit score.

Meanwhile, take me, someone who never pays a cent of interest, because he pays off his card every statement cycle (and on time, naturally), and because of card rewards, I’m the one profiting, the lender is literally the one paying me, and ‘yet’, my credit score is in the 800s.

So how do you reconcile that with the assertion quoted above? It’s very hard to understand how anyone can arrive at the conclusion you did, while also knowing, at least (as I assume you do), that late payments simultaneously hurt your credit score and increase profit for the lender, just as one example.

Paying back quickly reduces the amount they can earn, lowering your credit score.

Straight-up ~~lie~~ false.

The way I understand it, to raise your credit score you need to slowly pay back your loans, so you pay back maximum interest.

You don't understand it.

[–] uberfreeza@lemmy.world 2 points 16 hours ago

There's also an element of whether or not the lendee can reliably make payments. Always having late fees doesn't show that you're able to reliably make companies money. And when you're making payments on time without fees, they still get money from the fees they charge the business. So using and paying back is still good for them. It's still all about the money, because it always is in the US.

[–] stoy@lemmy.zip 1 points 17 hours ago* (last edited 5 hours ago)

Paying back quickly reduces the amount they can earn, lowering your credit score.

Straight-up lie.

No, it doesn't fit the definition of a lie, I didn't know any better, so it was ignorance, not a lie, it would be nice if you could edit and correct this line.

The way I understand it, to raise your credit score you need to slowly pay back your loans, so you pay back maximum interest.

You don’t understand it.

I wholeheartedly agree with you there.

Overall you do seem to know the subject better than me, so I will mostly defere to your judgement (apart from the thing about me lying).

EDIT: Thanks for the edit! (: