I’m Australian, and this post prompted me to research the US Social Credit system. The score can determine whether or not you’re accepted for home rentals, and even determine whether or not you qualify for medical treatments
You need to engage in having debt and credit in order to appease the score.
I bought an apartment recently, and I’ve never had a credit card or debt of any variety. When I was younger my bank would dip into negatives or reject a payment fairly regularly. In the US that could probably cost me a place to live.
And apparently the entire credit score is built up and perpetrated by these massive corporations? Like Credit Score is not even anything to do with the government, and yet it has such a pervasive effect on people’s lives and their behavior.
It’s straight up creepy. Dystopian vibes. How do Americans tolerate this?
To be fair, the fact that you haven’t heard of any Aussie credit is because companies keep it private to themselves. They definitely have financial information on you and utilize it to decide the interest rate on your loans.
Much less horrible than the US dystopia for sure tho
Yeah, I would consider that somewhat “acceptable” usage though. It’d be irresponsible to approve a large loan to someone who’s already extremely overindebted, for example.
Sweden’s system doesn’t have a specific number like the US, but mostly just shows economical health. How many active loans you have, income over the last few years, and if you’ve had loans go to the enforcement agency. But we have the same sickness as America: if you have had something go to the enforcement agency within the last 3+ years, it’ll be basically impossible for you to rent an apartment (as if it wasn’t difficult in the first place).
Most of these points are myths, but as long as it’s funny, right?
…or the OP believes the myths, isn’t trying to be funny, and is legitimately confused?
Be rich, have assets held in company stocks, get super low interest loans on your stocks, profit.
The exact same as the Chinese “social credit” system that people whine about, except this one is capitalism based, so it’s ok.
Mine doesn’t go down when I call the government a bunch of cunts.
And the Chinese one still goes down if you’re poor.
many different names for the same but different system that is all about control and sugation of the masses.
Chuck it onto the stinking pile of insurance and privatized healthcare.
How do you think “social credit” would be handled if the US were a socialist/communist country?
1:1 same as credit score - in the worst possible way
Is that relevant to anything? Credit score bad. Next.
Credit score bad. Next.
I started paying cash for everything about 30 years ago. Haven’t needed my credit score since so I froze my credit score access. There have been no downsides.
Credit score bad. Next.
Nah, it’s good for me to know the risk before I lend to someone. Only bad borrowers are against their reputation re repayment history not being public.
Without credit scores, nepotism and bigotry are what decides who gets loans, since lenders will have nothing but ‘vibes’ to go off of. No thanks.
Who are you lending to?
I’m sure I’ll get down voted to holy hell for saying this, but I’ve always appreciated that the rules are pretty transparent and it was easy for me to rack up a great credit score even before I had a decent income. To me it always felt like an open book test.
There are a lot of bad answers or misunderstandings about credit scores in this thread.
FICO Credit scores measure exactly one thing: How good are you at regularly paying on debt over time? Thats it.
There are some other companies that take your FICO score and make their own determinations from it, but those are not the intended purpose of a FICO score.
ANON is also saying “x raises” or “y lowers” but he’s missing one other part. Some of those raises and lowers are temporary meaning for a couple of months only, and those don’t have years long impacts.
Most of the big moving pieces are publicly published right on the FICO website too, so you don’t have to guess:
So lets look at ANONs complaints through the lens of what FICO scores address:
Using credit lowers your score
I’m assuming ANON means “using a portion of an already established credit line.” We can see in the chart that this would increase the red segment of the FICO score. FICO assumes the closer you get to your maximum credit availability, the more you’re being squeezed financially reducing your ability to pay on all of your debts. From a lender’s perspective, if your debts are piling up, then lending you more is a higher risk.
Not using credit lowers your score
If ANON means “using zero credit” then, yes, ANON wouldn’t have a recent history of paying on debt then the Payment History section of the graph would be thin or empty. From a lender’s perspective, if you haven’t paid on any debt in the last 6 months, how do they know you still have the ability to do so if you want credit right now?
Paying back late lowers your score
Absolutely! Its violating the very purpose FICO is made to measure: How good are you at regularly paying on debt over time?
Paying back early lowers your score
This one is a yes or no depending on what scenario ANON is talking about. Paying back a credit card early DOES NOT lower your score. In fact, it would likely RAISE your score. Paying back an installment loan, lets say for a car, early can lower your score, but not because its early, but because the load will disappear. Without a loan to pay on, you will have less recent history of paying on an installment loan for a car, and 6 months from now a lender may not know if you still have the ability to do so, so you score falls.
Even checking your score lowers your score.
ANON checking ANONs score DOES NOT lower your score. ANON allowing a lender to do a hard pull check does lower the score, but only a small amount 10-20 points and this is temporary about a month or two. Further, do several hard pulls at once, they don’t each lower by 10 or 20 points. If you do the pulls close together (within a week or two) it will be only the temporary lowering for a month or two. From a lender’s perspective if you’re reaching out for new lines of credit, it means you’re indicating you’re about to take on more debt which could affect your ability to pay on further new debts.
Taking out loans lowers your score
Temporarily, yes, but over time this can grow your score if its in a different loan type or length.
Paying back loans lowers your score
Yes and no, circumstances depending. If you pay back that one loan type lets say a car loan, and you have have no other installment loans, then you will have no more recent history of paying on any installment loans. However, if you have a mortgage which is another type of installment loan, you’ll take no hit for paying back the car loan as you will continue to have a recent payment history of paying on installment loans. You could take a hit because a nearly paid off loan looks good for the “Amounts owed” component of the score, but you could use a trick like getting a credit card of the same credit line (and not charge anything on it) to avoid that if you really need to.
Not taking out loans lowers your score
Not quite true. Having no recent payment history means a lower score, but it you already have some type of loan or credit you pay on every month, not taking out more loans will not hurt your score.
One final thought I really really want to dispel: YOUR FICO SCORE IS NOT INCREASED BY PAYING INTEREST ON CREDIT CARD DEBT!
Try everything you can to avoid carrying credit card debt into next month. Interest rates are crazy high and it does nothing to help you. If you put a purchase on a credit card, make sure to pay the full statement balance every month. If you do this, you’ll pay zero interest on any credit card purchases.
One weird thing you missed is the “length of credit” though. Let’s say you get your first credit card somewhere as a kid, and now you’re 40 and haven’t had anything else. Suddenly, that bank wants you to pay a monthly fee to keep your account open. If you get a new credit card somewhere else, and cancel your kid-card, your score is going to get hit quite a bit, no?
If you did it “correct”, you’d have 10+ different cards lying in a drawer at home to tons of different credit agencies.
It’s all an insane game that you have to play, despite the fact that it can usually be played “for free”.
My god, I want to write some things up but you NAILED it.
One thing I’ll back you on, one’s credit score can bounce in a month or three. No big deal. Learn how it works, work the system.
tldr, debt is a trap. only when you accept it’s a trap does it become a tool
if you want/need more $…learn the value of your labor.
For the vast majority of people the only debt they should ever get is a house.
The average person does not have to financial means to pay for a car or school without loans.
A car is absolutely doable without financing l. It’s a poverty trap to finance a car. What you can’t do is have a brand new car.
When I was car shopping at the end of 2024, I quickly realized the best bang for the buck was around $10-12k because at that price you could get a low-mid range vehicle that was around 6 years old with around 100k miles. Obviously some vehicles in that price range would be older with fewer miles, some would be newer with more miles, but that seemed to be about the price range where you’d get a vehicle which you could reasonably expect to be mechanically sound for at least another 2-3 years. Less than that and you got into vehicles that were far more worn either by age or by mileage, so you’d be trading upfront payment for additional maintenance costs.
$10k is a lot of money to save up. That’s about my entire emergency fund right now. That’s almost 3 years of socking away $300 a month, or 2 years at $500 a month. Simply put vehicle ownership is horrendously expensive especially for folks making close to minimum wage
It used to be, but these days the average person can barely afford groceries without a loan.
Same with phones. Buy a second-hand flagship from a couple of years ago (eg pixel 8), and use a pre-paid plan.
It’s not just a few hundred dollars saved on the phone, it’s also a few hundred per year on less overpriced contracts.
Prepaid plans have to be more competitively priced because you can switch at will.
I buy all my phones off eBay from reputable resellers. There are plenty that make a living at refurbishing phones, rate each one on a scale, post pics of the phone you will receive. I pay around $120 for mine, $180 if it’s a bangin’ deal and I really want that unit.
https://caredge.com/guides/used-car-price-trends-for-2025
In October 2025, the average used car listing price sits at $25,512.
https://moneyzine.com/personal-finance/savings-statistics/
… that’s as of 2022.
Its worse now, considerably.
But, even assuming 2022 savings levels… that’s half the population that would need their savings to multiply by at least a factor of ~x42.5, to be able to afford the average used car, without financing.
… You are wildly, incredibly out of touch.
Sure, yes, its technically possible, technically doable, in approximately the same way that it’s technically possible and doable that I could become a millionaire by the end of 2026.
Yep, its a poverty trap to finance a car.
Correct.
… and that is the only viable choice for people in car centric, car dependent American, people who don’t have thousands to tens of thousands of dollars in savings, which is the vast majority of people.
In conclusion: America is a poverty trap.
… Metric had a song about this, what, nearly two decades ago?
Buy this car to drive to work
Drive to work to pay for this car
Say you wanna get in
And you’re gonna get out
But you won’t
'Cause it’s a trap
The average cost of a car is wildly skewed by luxury models and the absurd prices of new cars. The market has gotten more expensive, so it is more difficult to find reliable cars in the sub 5k range, but under 10k is possible. It’s possible to save a few hundred bucks a month and get progressively better cars without financing them, because depreciation isn’t significant at the low end of the market.
The average cost of a car is wildly skewed by luxury models and the absurd prices of new cars.
Yep. And?
Its also reality.
Most used cars on the market are luxury cars that are 5 years or less old… because car companiea just largely stopped making non luxury cars.
This is what the used car market looks like right now, I don’t care that its abnormal, I care about trying to evaluate you statement … in reality, as it currently exists.
It’s possible to save a few hundred bucks a month.
This is the idea you’re not getting:
No.
Its not.
Not for half the population.
Pay is too low, costs of living are too high.
People largely cannot actually save a few hundred bucks a month, all that goes towards existing debt payments and increasing rent utilities and food costs… and fucking health insurance.
You don’t understand how many people were operating on razor thin margins, and now, huge numbers of people are running net negative, getting stuck in some new poverty debt trap, maybe this time its chaining loans to keep buying groceries.
Your evaluation of what is possible is again, yes, technically possible, for a very small amount of people… but generally… it is laughably and wildly insufficient, useless to the vast majority of people it is potentially relevant to, because of how much the overall situation has changed, because of how out of touch you are with the basic parameters of the situation.
The US is a society where car ownership is mandatory to participate in society… and at least half of society cannot actually afford that expense, financed or not.
We need a systemic solution, otherwise, we will experience a systemic collapse.
- have no car
- cannot work
- take loan
- buy car
- can go to work (and pay for car)
How to skip steps 2-4?
Pay cash for a car that runs. You aren’t getting a loan without income in the first place.
Oh, ok then.
I’m 18, just outta high school, have no money, no friends or family willing to cosign a car, public transit sucks where I live.
How do I get a job?
Or car?
Which one do I get first, when they each require the other?
That is what I have done, I don’t like that debt either and some cunt at the bank getting 2/3rds of my housing expenses is only slightly better than a wanker of a landlord getting all of it.
That is a horrible tldr and completely against the precise and accuracy focused spirit of the poster. Very disingenuous.
A better tldr is lenders are looking at your current and past ability to pay your current, past, and predicted debt and sudden changes to the inputs make sudden changes to the point value, but that smooths out over a relatively short time frame on the scale of your life.
Nothing in that message has anything to do with better wages.
nah, no lender gives a fuck about your financial situation, certainly not in america. bankstreet turned boom and bust investing into an science, nothing has changed there.
for the overwhelming majority of people all debt is a trap, for everyone else…it’s still a trap, just a useful one.
It’s not really a trap, it’s how our current society pools resources to make big things happen. Obviously you can make big things happen through authoritarian means (like pyramids) but in a less authoritarian society, which I think everyone except the lemmy ml folks would say is good, the way you make big things happen is through borrowing money at the lowest possible interest rate. There’s a reason the fed rate is such a critical, newsworthy figure in our society – not just for the us but for many countries.
That’s not to say there’s not a better way. It’s also not to say that credit scores are particularly related. But it’s not a trap.
They are right, its a trap.
If the system were set up in a way that you could actually get to the point where those “big things” were not always required, on an individual basis, it wpuld not be.
But that isn’t the world we live in. We live in one where everything needs to keep raising in cost until there is nonescape from the debt requirement for anyone. And the squeeze will happen until everyone becomes a part of the trap.
well let me know when star trek gets here. I’d love to take part, I just don’t live there yet.
In other words, Anon is right on every point? Honestly, I thought some were exhaggerations. But thanks for confirming each and every.
Great write-up, thanks!
Having said that, it’s hard not to feel that these rules have been semi purposefully left vague so that people take the wrong actions that will cost them extra money
To add on-top of that, I feel like this system, and most systems around this, are all setup to work great for the rich and the “providers” and just plain less good for us. It’s almost like a casino in that the house always wins
Having said that, it’s hard not to feel that these rules have been semi purposefully left vague so that people take the wrong actions that will cost them extra money
This sounds like perhaps you believe this is an intentionally convoluted process designed to trap people. Like it is a set of financial gymnastics that borrowers must learn and perform before getting a loan.
I don’t think thats the case or the origin. I think its much more likely that, prior to FICO scores, lenders went looking at people that successfully pay on debt and then started analyzing those borrowers choices. They found those that were successfully followed a set of behaviors, and then Fair Isaac (the company behind FICO) created a FICO score (there are actually a whole bunch of different FICO scores) baking in those behaviors.
I will admit that companies that have no business using credit scores are now using them for various other aspects of life, but that wasn’t the intent for FICO scores to begin with from the outset.
To add on-top of that, I feel like this system, and most systems around this, are all setup to work great for the rich and the “providers” and just plain less good for us. It’s almost like a casino in that the house always wins
The truly rich likely don’t have to deal with FICO scores as the lending products they’re using are asset based anyway. I will say that this system is NOT designed to help borrowers. Its not meant to hurt them, but its certainly to let lenders know who has a better chance of servicing a loan or not.
I mean, the rule is to not carry a balance, make payments on time, and don’t borrow more than you can pay back. They aren’t very cagey about those rules. The exact ways particular actions impact your score isn’t relevant to the best practices.
There’s a lot wrong with the credit industry, but being upfront about payment practices really isn’t a problem.
Thank you, holy shit, I get so frustrated seeing the most obviously-disproven misconceptions flying around even communities that purport to be savvy, lol.
Though one thing you didn’t mention that I think always should be: re credit card, don’t pay SO early that the agencies never see that you borrowed in the first place. In other words, wait until at least your statement date to pay your card (off, ideally). It’s your statement balance that gets reported, so if you pay before the statement cycle ends, the agencies won’t even know that the transaction(s) happened at all. Pay the card off anytime between your statement hitting, and your due date, and you’re golden, credit score improves, and you accrue no interest.
I’m pretty sure they see everything, but the way it’s chunked up can create artifacts. Balances are tabulated monthly, but they also see your payments. A higher balance means higher utilization which lowers your score. Paying early counts as a history of on time payment and lower utilization, which is good for your score.
https://www.chase.com/personal/credit-cards/education/basics/should-you-pay-off-credit-card-early
Also worth mentioning: what’s the alternative?
If there are no credit scores but there are still loans, the banks / entities making the loans have no real way to know if their loan is going to be paid back. Because of that, the loans are a lot more risky. What happens when a loan is riskier? The interest rate is higher, or people are just outright rejected.
Either or, depending on the risk tolerance of your lender.
A low limit credit card with 0 interest if you pay off in full before it’s due is a great way to build your credit score.
Just buy stuff on it you’d normally buy without credit, then pay it off ASAP. And you’ll build a reliable reputation as someone who can handle credit. Just don’t spend more than you can pay off by the time it’s due.
Yes, but why is this game even required?
the loans are a lot more risky. What happens when a loan is riskier? The interest rate is higher, or people are just outright rejected.
And the likelihood is that the people who are outright rejected will follow unfortunate patterns.
Excellent summary, and thank you for the bold section on paying credit card interest. I can’t count the number of times I’ve heard that myth.
Your comment is a blessing, thank you for the significant effort <3
It’s all a scam, man. Money’s just pretend. I converted all my cash to radishes. At least when the economy goes into a death spiral I’ll still have radishes.
Im considering it as well. but the question is before I begin would be that a diet of only radishes everyday can prevent scurvy, if so im all aboard.
You can trade me some of your radishes for some of my sweet potatoes.
Credit scores are like… (And I’m sorry about this)…
spoiler
Like The Game
You should be sorry
Freeze Equifax, and then live your life within your means.
The trick is to not give a shit about credit scores, of course I don’t live in the US which helps.
The problem is, usually people and services that one uses, DO give a shit about your score. Unless you live off grid (not in the energy sense, but as a member of society) in the wilderness, you will have to deal with It, unfortunately.
Unless you live off grid
It’s quite easy to pay cash for stuff and forget that credit cards and credit scores exist, even when living in a big city.
I have never had a problem with completely ignoring it my whole life. Didn’t matter to rent a room, didn’t matter to buy a house. Never plan on borrowing money for anything other than buying a house either. I would rather go without - and often have. Never learnt to drive because I couldn’t afford it and outright refused to take a loan to do so. My bike works well enough instead.
My bike works well enough instead.
Same here, I’ve gotten weird looks for not owning a car. But hey, at least I got a pair of nice legs I get complimented on twice a year. lol
I understand, while that can happen with some individuals, it’s not true for the vast majority of people.
I too rather go without this shitty system, but that’s not how it goes unfortunately, got denied a house financing twice because of the low score (got some debts a década ago and the score never went back up), I managed to use a friend’s name for financing, then later I transfered it to my name, many loops and roundabouts.
You know my favorite fact about credit scores? Paying your utility bills on time for your whole life will not raise your credit score one point. Forty years on time every month nobody cares. However missing enough payments on your utility bill that it gets sent to collections will lower your credit score. Kind of makes you want to burn down some buildings doesn’t it?
And rent. My last rental had a special offer though: pay an extra fee every month and they’ll report your rent to the credit bureaus, raising your score through the roof.
Shitty deal, but yeah, moves like this will save you money.
Dad: “You know how when you and your gf want to learn how something works and you get books at the library and learn about it? (90s, OK?) You can learn how money works.”
Lemmy: NOAAWW! Want money want credit! No learn!
Reminds me of a coworker telling me overtime is bullshit because they charge you more taxes and you actually make less money.
Oh honey. That’s why you’ll never have more money.
Absolutely. I could candidate some buildings in particular. They have some sort of pedo brand.
You can use Kikoff or CreditKarma or things like that to regularly report your paid on time bills, and that does, slowly, incrementally, increase your credit score.
Yeah its still total bullshit that that isn’t just like a pre-baked in part of the credit system, but you can do this.
Careful, that’ll lower your score
Paying your utility bills on time for your whole life will not raise your credit score one point.
FICO Credit scores measure exactly one thing: How good are you at regularly paying on debt over time? Thats it.
Utility bills are generated and cleared every month (assuming you pay). If you got in a financial jam, you could probably lower how much HVAC you use or lower your water usage while times were tight. You can’t do that on installment loans. The full loan payment is due every month. Utility bills are not a great measure of the ability to regularly pay on debt over time, which is what FICO scores measure.
There’s some that have now adapted their policies to include bill payments
That one actually makes sense to me. A utility bill isn’t credit, it’s a different debt, so paying it when you’re supposed to doesn’t demonstrate responsible use of credit. On the other hand, if you can’t pay off any sort of debt on time, you probably aren’t a good risk for loaning money to.
Also, it’s the kind of payment you cannot miss. I’m fucking off my CC bills ATM because I’m unemployed, cannot pay. I have to scrounge the power, roof and water bills.
Credit scores are used to tell companies how much they can earn on lending you money.
Paying back quickly reduces the amount they can earn, lowering your credit score.
Not paying it back obviously lowers the score.
The way I understand it, to raise your credit score you need to slowly pay back your loans, so you pay back maximum interest.
Note however that I am just a cynical IT guy in Sweden with zero actual exposure to US/UK style credit scores, and that I may be talking out of my ass.
100% spot on.
It’s absolutely a scam designed to extract even more wealth from the poors.
No joke, I’ve had a car dealership tell me they can’t sell me the car I want because my credit score was nonexistent (no credit history in 7 years). I was paying in full, in cash, literally in an envelope in my hand.
Grand total of 8k, all in 100s, super easy to count.
But no, I didn’t have a “good enough credit score” so I couldn’t buy that car from them, despite having the money to do so.
Mental gymnastics on that one.
Here in Sweden, that would also have been rejected, most stores won’t accept cash at all.
I had to pay for my car using a wire transfer a few days before I picked it up.
I do think that it would have been funny to just use tap to pay, but apparently that would have increased the cost by a lot.
That’s insane to me.
I have money to buy something, and I’m being refused the sale despite this money being legal tender.
I get what you mean, and agree to some extent, but the reality is that handling cash is expensive and dangerous.
Back in the early 2000s, there was a large wave of high profile armours car robberies in Sweden.
Some even completely blew up the armoured car.
This lead to a debate and a deliberate effort to reduce the ammount of cash used in Sweden.
I remember reading something about 97% of all transactions inside Sweden are now done electronically.
This has lead to banks having offices that don’t handle cash, and that banks are looking at cash deposits with suspicion, since you can’t trace cash.
This, as usual, only really affects normal poeple, and criminals have ways around it.
In the US, it is legal tender to pay off all debts. But merchants can refuse to give you debt if you are paying cash. Thus have no obligation to accept it.
Just imagine paying for a car with something like an SJ credit card and get the motherload of priopoäng!
(For the non-Swedes, SJ is a train company with a version of a frequent flyer miles point system, and they like most of those have a credit card where every SEK spent earns you 1 point. A trip from Malmö to Stockholm (600km, ~4,5h) can be bought for some 12-16000 points. A new car costs anywhere from 300000 sek up to a million and beyond.)
I think there has been some EU-wide regulation that you can’t pay more than 10k€ in cash or sth, it’s to prevent money laundering.
I think you just got a shitty dealership. “Legal tender for all debts public and private” means just that, they aren’t allowed legally to refuse dollars. My cousin also successfully did what you are describing.
Not necessarily a shitty dealership, just one with low margins.
Cars are generally sold by sellers with incredibly low margins (talking like a few hundred dollars, max). They make their money through the financing. They probably didn’t want to sell the car in cash, because some other chud will come along and buy it on credit and get them a higher margin.
Pro tip - always get your own financing when purchasing a car, don’t get it through the dealer. But don’t let them know that, look over their finance package when signing the paperwork, try to negotiate out any origination charges, etc. then simply pay the loan off immediately with your private financing.
They can easily refuse cash. It’s not a debit until you owe them money. If they decide not to sell you a car then there’s no debt. You aren’t obligated to see someone a car if the manner of the sale isn’t to your liking.
You are correct. What they can’t do though is only allow you to buy the car with one method of payment, which is what is being described here.
Why on earth do you think that’s the case? They’re selling something, they’re not in one of the limited industries where you have limited rights to refuse, and method of payment isn’t one of the reasons you can’t refuse to do business with someone. A handful of places prohibit not accepting cash, but it’s not enough that I would assume that’s where they were, particularly if a business opted to just casually refuse.
That’s not really relevant here yet. GP doesnt have a “debt” before the transaction takes place. Nothing about that statement forces a business to do business with you. They are perfectly within their rights to only agree to do business with you if you pay in chickens.
That isn’t how holding a business license works.
Sure everybody has the right to refuse service, but they can’t offer service only through one means of pay.
https://www.federalreserve.gov/faqs/currency_12772.htm
Is it legal for a business in the United States to refuse cash as a form of payment?
There is no federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law that says otherwise.
A few states have introduced bills to require taking cash (Idaho, Mississippi and North Dakota), but as far as I’m aware none have ever actually passed into law.
I think you would be surprised how many states already have laws like that on the books. Mine does.
No joke, I’ve had a car dealership tell me they can’t sell me the car I want because my credit score was nonexistent (no credit history in 7 years). I was paying in full, in cash, literally in an envelope in my hand.
There are car dealers (especially at the low end of used cars) that don’t make money selling cars. They make money with horrible debt and payment terms trying to trap vulnerable people. The worst of these dealers may end up “selling” the car 2 or 3 times repoing it each time when the buyer can’t pay.
So its first possible that this dealer didn’t want to sell you a car for cash because its against their business model.
Grand total of 8k, all in 100s, super easy to count.
$8k in cash is super sketchy for a single purchase. Its untraceable and that sets off fraud alarm bells. The dealership also may not be set up to deal in large sums of cash like that lacking the security to do so. Lastly there are laws at the state and federal level called KYC (Know your Customer) for some transactions that require the seller to verify the money is legit. With cash, thats nearly impossible.
You might have had more luck showing up with an $8k cashiers check or offering an $8k wire transfer from your bank. Both of these are exempt from lots of regulations (because there’s a paper trail) where cash would not have that luxury.
But no, I didn’t have a “good enough credit score” so I couldn’t buy that car from them, despite having the money to do so. Mental gymnastics on that one.
I’m guessing that was just an excuse to not sell to you because either they’re the sketchy dealer (that likes to sell loans not cars) or they thought you were super sketchy as a buyer.
No joke, I’ve had a car dealership tell me they can’t sell me the car I want because my credit score was nonexistent (no credit history in 7 years). I was paying in full, in cash, literally in an envelope in my hand.
The dealership wanted you to finance so that you’ll pay them interest, because they make more money that way. If they completely refused, what’s most likely is that the car was being sold at a price that gives them zero/negative profit margin, so without financing, they’d literally take a loss selling it for straight cash.
There must be something else to it. I’ve never paid any interest on my credit cards and I paid off my mortgage early; by your logic I should have a low credit score, but it’s actually in the “Excellent” range.
Yeah paying back early doesn’t affect it as far as I can tell. Lenders just want to know if you’ll leave them in the lurch or not. If you pay back early that just means they can reinvest the cash sooner.
There must be something else to it.
Massive understatement—it’d be more accurate to say they’re completely wrong, lol.
In another comment, someone mentioned that it’s not just repayment of interest that profits credit card companies.
Even if you pay all debts monthly before interest can compound, the CC companies still charge processing fees to merchants on a per-transaction basis (which merchants either pass directly to consumers or indirectly through higher prices). They still get their cut, even if you don’t see it on a line item.Recently I had house work done. The contractor offered to charge me 5% less if I paid with cash or check instead of credit card.
You have great interest paying potential because of your reliable handling of finances, so your score is high to make it easy for you to take on a lot of debt down the road.
Well the back need some safe bets as a baseline.
Your ass is speaking truth
I always pay my loans back on time and every now and then the bank rise my credit limit. I think it’s because I also have a bank account with them and they can see I have the money ready to go. I don’t make much money for them, but I do make a consistent amount and the banks like that too.
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
liefalse.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.
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).
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.
Paying back a loan quickly will not lower your credit score. If you have a line of credit that closes as soon as you pay off a loan (eg a car loan) your score can go down if it changes your utilization rate (how much you could take out in loans vs. how much you have taken out) but paying off a loan early won’t impact your score.
You can look up what things are factored into a consumer credit score. You can see for yourself that early payments are not part of the formula.
If you’re talking out of your ass, I’m impressed
Thank you, I have been training daily
You are entirely incorrect. The credit card company makes most of their money from the fees paid by the merchant. They make money when you, the customer, spend money because the merchant gives a chunk of it to them, usually with an additional flat fee. (Different merchants and card processors have different payment structures. A grocery store is more likely to pay a much higher fixed daily fee to avoid unpredictable transaction fees on small purchases)
They don’t lower your score if you pay back early. People get confused because they see their score drop after going from $10k credit card limit with $800 in monthly usage paid on time every time and a $500 balance on a $25k car loan that’s been paid on time every month to just the credit card. The reason it went down is that the number of regular timely payments went down, which means fewer trust signals, and credit utilization went up. (3% to 8%). It doesn’t however snap down as though you hadn’t just made a bunch of good payments, it just doesn’t boost when you’re done.
The credit card company makes the most money when you make a huge number of modest purchases and then immediately pay them back. When you have credit card debt their money is sitting in the merchants account. They want to minimize the time they don’t have their money so they charge you based on the risk that you never pay them back, after a grace period. (You have usually a month before any interest acrues).
It’s why as you get better credit scores the credit card company starts offering you increasing incentives to buy things. Bonus cash back on purchases at places that tend to be frequent, smaller purchases without bulk processing rates and so one. They’ll refund you on purchases in a dispute with the merchant and then figure out the merchant dispute independently (usually by just dropping it because they don’t care about $124.99 in potentially substandard curtains or whatever they just want the customer to keep buying curtains and the merchant to keep thinking it’s a net positive). You’re a walking $0.25 + 3.0% per purchase. Making you regret spending money is the last thing they want.Hmm, I don’t think so. I’m in my 60s and I’ve always paid my credit cards in full each month when they’re due. Until very recently, I did have a mortgage and paid the regular payment (with occasional extra payments for principle), do they did make money off of me there. My credit rating has pretty much always been at or near the highest it can be.
Makes sense when you learn and realize that this is the new way of red lining people. Particularly POC who are less likely to be able to build credit because of poverty.
A few pieces of history here
- The credit system didn’t exist until around 1989.
- Back then, your “trustworthiness” was vague. So if you were black in America walking into a bank, they can easily reject you. And they’d pass this information around like “So-and-so was rejected because
he was blackwe at the Ku Klux bank believe he is untrustworthy” so now banks all over the US has that information and will auto reject you. - In 1970s, they push laws to deny credit based on gender, religion, race. You know, because women couldn’t have bank accounts.
So, the credit system fixed a few problems.
Now, there’s a few other issues. Credit score + education + zip code easily tells people more about you. Lots of data loopholes.
Im disgusted by the credit score system for the points you laid out. And it’s a imperfect system that did solve some big problems.
It changed but is still used to affect people who used to be redlined before that was made illegal. As for the laws passed in the 70s, yeah, everybody obeys those all the time don’t they?
Yep! Credit scores work for the people they’re supposed to: wealthy folks who give their kids $$$ at 18, add them as an authorized user on their own cards, etc. All the one-up stuff poor people can’t afford. This is just a numerical way of saying “you’re poor go to hell.”
My family was not wealthy but they helped me open a card at 18, which I used instead of debit payments and just paid off in full.
Being poor isn’t an excuse for being stupid.
Correct me if I’m wrong, but being an authorized user doesn’t improve your credit score
Yes it can improve their scores if the main user keeps it in good standing. It can have a negative impact if the main user doesn’t make payments on time, maxes it out, etc.
It might not be a blanket rule, but if, as an authorized user, you see the line of credit on your credit report it is impacting it.
I hqd a score of 800 after about 8 years starting from a $200 secured card I got after moving states with my gf and living our lives working at restaurants.
You don’t have to be rich to get a good score, it’s about habits and debt load.
Ridiculous, you can have a fantastic credit score just by using a credit card in place of when you’d otherwise use cash, then just pay the card off each month (which you should be able to do with no problem if you didn’t borrow more than you had in cash) no later than the due date.
No interest accrued, credit score over 800. Easy.
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Why is that crazy? Your parents don’t know, school and bankers just feed the same propaganda line they fed your parents.
Its a very complex system of math and rules, but it isn’t impossible to … raise your credit score.
Closing a loan or credit line actually often lowers your score because it lessens the total amount of credit you theoretically could be using, if you maxxed everything out.
Your ‘Credit Utilization’ is what % of your total maximum possible credit you are using.
So, when you finally pay off a huge loan of some kind… well, that account closes, and now your relative credit utilization probably goes up, because the system is now only looking at say your credit cards, instead of your credit cards + your big loan.
If CC Balance is 30k / 50k Max,
Big Loan is 5k / 500k Max…
You’re at 35/550, or 6.3%, very good.
Pay off Big Loan?
30/50, 60%, pretty bad.
Theres no like, reward mechanism that you get in the system, for paying off a large loan successfully, beyond all those payments toward it counting as on time payments.
So basically, you should actually never close down a credit account of any kind, after you fully pay it off, to the extent that you can do that.
Just… use it sparingly and make regular payments, or put the card in a safe, destroy it, who cares, as long as the account still exists.
(big asterisk on that: unless it has some kind of regular due payment just to even have the account, even if you’re not using it at all, have no balance on it at all.)
Thats also true because another big factor in credit scores is how long you’ve had the accounts you have.
It literally does just take time to build up that element of it, time of you making regular payments and never leaving a balance that rolls over into the next month.
I’m not trying to defend this system, its horseshit, truly evil, a mandatory labyrinthine scam that everyone is forced to participate in, which almost everyone loses.
I’m trying to summarize useful advice.
I was homeless for 2 years.
When I finally got a bit more stabilized, I had scores around 520, because yeah, I spent money I didn’t have so that I could eat, and not sleep outside in blizzards and heatwaves.
Its now been about 2 years since that point, and I’m up to between 670 and 710, the 3 agencies still considerably disagree as to which accounts I even had… as I got mugged and had my identity stolen multiple times, and I was only able to convince different agencies of different amounts and extents of that… and also crippled by those muggings…
But the point is, its not impossible to rebuild your credit, even while you’re living off of only SSDI as I now am.
Its exceedingly dfficult to do so, but not strictly impossible.
You can find real, in depth guides on how all this shit works, but it’d probably take most people a solid week or two of studying it to fully grasp it.
So what do you do when you pay off a CC to improve your utilization, and they close the card without warning, and your score drops?
If they close your card without warning, well, then you can’t really do much about that.
There’s probably some other factors that went into them deciding to do that, late or missed payments, something lile that.
So… I think Kikoff and Kovo both offer variations on this idea, but I’m familiar with the Kikoff one:
You pay them $10 bucks a month. For a year. At the end of that, you can eithet renew it, or l, they just give you $120 bucks, they give you your money back.
While for most people this is probably pointless, if you’ve missed a lot of payments, doing something like this can help chip away at improving your on time payment record.
Kikoff also has another thing where you can pay them various amounts of money a month, there are multiple tiers, the highest is $35… and they basically set up what appears to credit agencies as a credit card, but you can’t actually use it as a credit vard.
But, if you have very little existing credit lines, it can significantly increase that ‘total available credit’ number, and the various tiers also give you differing levels of access to challenging items on your credit record you think are fraudulent or wrong in some way, gives you access to something lile Aura or DeleteMe, where it periodically checks for and tries to delete your data from data brokers.
That also takes a while to complete, but the point is that you can do this setup too, and it boosts your total available credit, and of course also counts towards your count/percentage of on time payments.
Kovo apparently also has some similar types of things like this, but I have not used them myself.
EDIT: Oh right and Kikoff also just tells you your credit scores, updates maybe once or twice a month, forgot about that.
No CC gets instantly closed when you pay it off. I pay my CCs off every single month.
I’ve had a consistent score of a little over 800 before and after purchasing my house by paying off my credit cards ahead of time. I had no major long term debt other than a mortgage either. That said, this is pretty much the equivalent to that Chinese social credit score crap but it’s real in this case. It just means you’re ranking high in some opaque game on your financial prospects that the banks are playing.
It’s not that opaque.
Remind me, were we supposed to be disgusted and afraid of the Chinese social credit score system because it included woke BS like how nice you are to others, and how things you do improve society, rather than just laser-focusing on the only important thing— whether your existence can be monetized by rich assholes?
My original comment points out the social credit system is something that doesn’t really exist but was used to scare western capitalists. I’m merely saying that non-existent Boogeyman is actually being used through a financial lens in the US instead.
It was definitely pitched in western media as something we should all fear. I just found it funny that everything that they tried to scare us with (“it might be used to determine whether you get a job or can rent an apartment!”) applied equally to our credit scores.
E: So, yeah, completely agree.
And has been since the 20the century.
Ugh, lemmy.ml is spreading to other instances.
They’re right, quit simping for the aristocracy you delusional peasant
Lol
No, because the writing was weird and foreign.
You were supposed to he disgusted at the other stuff.
“Weird and Foreign” has entered the chat. 👀
Well that’s why you’re supposed to be afraid of it.
There was some conservative user a while ago on lemmy that thought I was a “Chinese Bot”/“Scammer” because of the “Asian Writing” in the username, I’m an American citizen lmfao
Fucking sinophobia lol
There was some conservative user a while ago on lemmy that thought I was a “Chinese Bot”/“Scammer”
Clearly they were an idiot too because if they knew anything about China, they should have seen the Taiwanese flag and known were you not from or supportive of the PRC. Seriously, people need to pick up a history book now and then. There’s a good chunk of American history mixed in there too with how Taiwan came to be (or stay being a nation).
Oh I mean I am from PRC, that’s more like an opposition thing I do because I don’t like the 5 star red flag since its associated with ccp, so I use this flag in the ROC context.
I’m so sorry people are that stupid. Do you need a hug? Or an axe?
I need a Glock
Rooftop Korean are my idols
