No credit. No score. Still bought house. There are ways around the system. Same for my cars usually. Buy them at auction. Ditto for phones. You don’t need that new $1200 iPhone. A used one for $250 cash and holding onto it for 6 years is much better.
Bought first home in early 2000s, sold that one and bought another since then. There is no way I would have been able to save up enough to pay cash during that time.
I didn’t claim to have paid all-cash for my house. I had a mortgage, I simply found a predatory by-owner lender and worked through all of his bullshit. They offered my mortgage on balloon, seeing that basically nobody ever managed to get a house paid off during the balloon period. So I did without…basically everything, for 8 years while I put every last penny I had to paying it off before the balloon was due. Lender said he’d been doing this for 45 years and had never seen anyone pull it off and he’d be happy to sell me another any time.
But during this time, I was paying what I would pay in rent, as a mortgage, basically paying MYSELF. Everything I worked so hard for and paid into during that 8 year stint, is STILL MINE. Every penny I paid, I still own. Meanwhile, everyone here sits on renting shit for $2k-3.5k/month and whines about never having enough money for anything.
And if you’re sitting there saying to yourself “30k over 8 years?! wtf that’s not hard?” – well, I was in the middle of my cancer treatments as well, and I can’t work nearly as much as anyone else. So it’s kind of hard to sympathize with the dipshits saying they make $80k/yr and can’t afford a house, when I made it work during cancer treatments and less than $20k/yr.
I make less than $25k/yr, lol - I learned to fix my own beater cars. Bought a 3/2 during the 2008 crash for $30k because it was almost gonna be condemned, and was a by-owner sale - I only needed like 8k down, and then worked on fixing it up myself. It was barely livable when I bought it.
My guy, the shitholes where I live sell for $100k minimum, and come with several hundred a month in lot rent, because they’re trailers. A shitty condo is $200k or more, plus, again, a few hundred a month in association fees. I could move somewhere with a lower cost of living but I’d easily take a 50% paycut, so I’d be in the same situation. It’s not about not being willing to live in crappy places, it’s about even the crappy places being well outside of what nearly everyone can afford without a mortgage.
You really should take advantage of any first time homebuyers programs you have in your state, and talk to a real estate agent to keep a look out for you. Deals pop up all the time, and the reason you’re not seeing them is you don’t have access to the multiple listing network (MLS), while a real estate agent does. All you see on the market is “what’s left”, after shit gets snagged up. You have no idea what’s available out there.
My point is that you can’t just buy a house without credit these days. There are no homes at cash prices, at least not the kind of cash most of us have or could get in any reasonable amount of time. JuSt BuY a UsEd PhOnE (and also wait for a massive recession)! So easy!
I did the same kind of thing he did, bought a meth lab in 2011 for 50k owner carry contract, evicted the meth heads (that was fun) then gutted it and spent a few years sleeping on the floor, working full time for $16 an hour at day and fixing up the place at night. Had an electrician and plumber friend come show me how to do stuff and help me out for pretty cheap. Sold it in 2020 for 175k when I got married and used that and the new wife’s credit score to get our family house where it’s safe to have kids
A lot of luck and a lot of work. It’s not easy and there was a lot of luck involved for sure.
It’s cool that you were able to improve your situation with a lot of luck, hard work and sacrifice but a basic middle class existence shouldn’t require a lot of luck.
Hahahahahaha, "no credit, still bought a house", ok mr my uncle left me gold bars in his will, the leprechauns showed me the end of the rainbow, hahahahahaha
It's incredibly expensive being poor, lots of people are poor, there are of course ways to be poor, and without good credit, but everything costs three to four times as much in the end, if you don't have cash on hand.
Been poor my whole life. Guarantee 99% of people on here make far more than I do. I can’t work as much as others due to health issues, and I still managed it though cunning, sacrifice, and good timing.
The timing was more a factor of having a real estate agent as a friend. If you’re using bullshit like Zillow to look for properties, then you’re an idiot.
Zillow is not MLS, and most of what people are seeing ‘on the market’ is shit that’s left over from being snagged up. Get yourself a real estate agent that can keep an eye out on property for you, and there are plenty of deals that come across their desks that you could be notified of before it hits general availability. They don’t make money unless they find you something, so they are generally on the ball when it comes to keeping an eye out. Everyone here whining is just showing their inexperience and lack of drive for actually fixing their situation. Instead they just want to be stuck in a rental loop their entire lives.
No, you bought in 2008 when prices plummeted to insanely low levels due to economic collapse that was ALMOST worse than the Great Depression. There were lots and lots of modest or shitty houses like yours available for cheap then, all over the country.
It was 95% that, and maybe 5% your resourcefulness and willingness to sacrifice or whatever.
Buying a house like yours for 30k (even inflation-adjusted) are nearly nonexistent in the vast vast majority of the US at this point. They're definitely not out there by the hundreds of thousands in lower-middle income neighborhoods like they were in 2008-2010.
For a significant number of people to be able to do the same thing in the same way, there'd have to be a similar cataclismic event again.
At one time you walked into a bank, showed how much money you made, and got a home loan.
But that allowed too many Black people to buy homes, so credit scores were invented as a way to discriminate against people using a black box with no real published metric.
It’s funny how the other person who replied to me said credit scores are actually the solution to racism. I think you’re the one who’s right it’s just funny. I’d like to take this opportunity to say it’s retarded that you can pay rent for years but not be approved for a mortgage with equal or lesser payments.
You’re showing way too much faith in the institutions that invented the red lining in the first place to imply that the ol’ boys club system wasn’t waaaaay more rife with systemic racism.
The post war recovery laws were literally lobbied to specifically exclude black folks, but sure, home buying was easier for them then than it was post credit scores.
My dude, you're missing about thirty years of history.
Redlining was made illegal by the Fair Housing Act in the late 60's. It may have still existed in some fucked up form but it was no longer the standard by which lending was done. There's a reason the rate of home ownership among Black people has steadily risen ever since, and yet it still isn't close to any other group of people.
The whole system is fucked and it's largely set up to fuck Black people because some mayo motherfuckers still want to own humans.
It might have been “illegal” but lenders were still basically doing it anyways, just calling it everything else imaginable. Shit they still do it when they think they’ll get away with it, folks have actually tested it, real estate brokers list houses shown by white “owners” at higher values than those shown by black “owners”
I certainly have problems with the way current financial institutions operate, but prior to the credit score there wasn't a standardized, scientific way to assess lending risk. It was left to a good ol' boy process rife with racism, classism, and sexism. Sadly, we're better off with what we have now, as flawed as it is.
There still isn't a standardized and scientific way to assess credit risk. There are three major companies, several minor ones, and all of them offer multiple products.
IT'S ALL A FUCKING SCAM. We just blindly accept random institutions compiling all of our data and telling a bank whether or not we should be given a loan regardless of our ability to pay it back. It has little to do with income anymore, which should be the only allowable metric. Don't want the risk? Get the fuck out of the mortgage business.
Mortgages were, prior to assholes screwing the whole thing up with mortgage-backed securities, seen as one of the lowest risk things banks could handle.
If you default on a mortgage the bank forecloses and auctions the home. This was QUITE rare before the housing crash. The problem was that the banking industry became so lax that they were giving loans to people that actually did NOT have the money to pay for them, figuring that they could just seize and sell the home as they always had. The problem THEN is that mortgage-backed securities were a thing by that point and every foreclosure caused another domino to fall over.
It became a shitshow because banks fucked themselves over being greedy pieces of shit.
It was so much better before! When being a woman, or god forbid, being black, counted as serious criteria. Oh, and you best be friends with the banker. (Read the part, again, about being a white man, who was well accepted in the community.)
It’s not a scam, it’s a step forward. Time to take the next step.
Because there are standard metrics for where the score comes from. Each of the big three has slightly different weighting, but it all broadly comes out the same.
The numbers aren’t made up. You can look at your credit report and see what is affecting it.
Yes, you brown-nosing corpo-slurping bootlicking twit, I do in fact keep a pretty damn close watch on my credit score because suckups like you will fellate and propagate any capitalist horseshit you can so I have to rather than just NOT WORRYING ABOUT IT and only applying for lines of credit in line with my income levels.
Instead it becomes this stupid game of laddering where you can apply for an increase now, but you can't apply for new credit, but also you need a new loan to maximize your score, no not that kind of loan, no also don't pay off the loan that's bad too, why did you need more credit again?
Anyone ignorant enough to support this needs their own separate financial system that caters to their intrinsic need to be a sub.
Literally nobody is making you apply for lines of credit outside your income levels… that’s entirely on you.
There’s no game to play. You take out credit, you pay it back. You have revolving credit, you pay the balance every month and don’t carry debt. It’s literally that simple.
I have never had to apply for an increase in credit limits, pay your bills and banks/credit card companies will just do it automatically.
So you've never had an emergency or a need for a large one-time purchase. Good for you. You are not everyone. The sooner you learn and understand that people that aren't you exist, the sooner you can graduate high school.
Yes, I have indeed lol. I had a year where our hvac went out and our son second child’s birth bill which racked up thousands that we had to pay out of pocket. We had tens of thousands in unexpected bills that year.
We had to drain most of our savings and take out a large loan to cover it all. Guess what I did. Paid the damn loan back.
We had to drain most of our savings and take out a large loan to cover it all. Guess what I did. Paid the damn loan back.
Seriously? You think draining your savings is the same as not having any money, lol. You are a wee bit out of touch. Born on 3rd base and expects everyone up to bat should get a home run.
Lmao dude I was born to white trash drug addicts and never lived in one place for more than 9 months because they could never afford rent and kept getting kicked out. I have lived on my own since I was 15
Born on third base my ASS. I have worked my ass off since I was a teenager. I’ve lived in friends storm cellars, couches, and my truck at times to get where I’m at now.
I made saving a priority since my first job working at fuckin Burger King in high school.
So you had friends that helped you live at their place, do you think that maybe there people who don’t have that kind of support system? You did not pull yourself up by your bootstraps, you had a lot of help along the way.
Also, now go tell the you that was living in your truck to take from your savings and pay your bills.
Jesus dude yeah people have had it worse but it’s not a competition. You accused him of not earning his financial position and he explained how your attack on person is baseless. Having friends is a support system, it doesn’t mean you had it easy. If you were not raised by wolves, you’ve had people help you too.
Whatever you say dude. I know I had help. Virtually everyone has help along the way. If you have literally nobody that will let you crash on your couch, maybe you should look deep inside why nobody likes you.
Me living in my truck did take from my savings to pay bills. Half the reason I lived in my truck was not to be wasting money on renting some shitty apartment and draining my savings. I maintained a savings the whole time.
Keep complaining instead of doing something about it. It’ll guarantee you stay poor.
How about when you left the house to live on your friend’s couch? You had savings then? Did you pay your friends rent? LMAO, How much was your savings, $10? Did you have it in a bank account at 15? So many questions that I think you’re having battles with your inner self answering. I normally don’t like to see this kind of struggle, but this time I’m enjoying it.
When I left the house? You mean when my parents drug habits caught up with them and we ended up homeless.
I didn’t live on anyone’s couch. I spent a day or two at most at a friends house at a time.
I had a few thousand saved up. And yes had a bank account where my pay was direct deposited or my parents would steal it.
You can wallow in your self pity and tell yourself that everything is luck or some bullshit to get out of helping yourself. That’s fine. I’m doing more than well now lol.
I spent a day or two at most at a friends house at a time.
Welcome to living on someone’s couch, lmao.
What’s super hilarious is that you think I’m poor. Just because I have compassion for people doesn’t mean I don’t have money. Your world view is fucked up if you think being shitty to people who are in a hard place, a place you’ve actually been, is a decent way to go.
Why do you think that was one friend or something? That’s not living on someone’s couch.
And I have plenty of compassion for people actually trying to make their lives better. I have zero compassion for people that sit there and just blame everyone else, thinking they should get everything handed to them.
Would you be this toxic if you had help when you were younger instead of left to fend for yourself? I honestly don’t get your world view, it’s honestly depressing. Lazy seeming to you may be someone in shock and not knowing what to do because they’re overwhelmed. Why would you not want help for others that you didn’t get? It didn’t make you stronger, it made you hard and judgemental for some reason. I’m glad you got out but damn if you’re not pulling up the ladder behind you.
I haven’t been toxic. Toxic is the prevailing attitude online, at least on Lemmy, that nobody should have to work for anything and everything should just be free, never mind that someone has to actually work to make that shit they want for free.
Toxic is the attitude that anyone who isn’t working at a minimum wage job subsisting on ramen just lucked into it without any work at all
I am all for helping people. I have personally helped a ton of people that have needed it. I’ve given my couch, my truck, money, food, stuck my neck out for people for jobs, clothes, you name it. I love lifting people I care about up. What I hate is trying to help someone that just leeches off of others and gets mad when you cut off the help. And I’ve been around enough to see that most people complaining online are that person.
And I’ve been around enough to see that most people complaining online are that person.
How would you know that and who made you judge and jury? Wouldn’t you want to help a few too many people with some who may not need it, than not helping enough? Good luck man, you seem resentful that others aren’t having to suffer instead of being happy they got out. As far as complaining, all I see is people like you complaining that people don’t want to work. I think this is my last comment, have a good weekend.
Are you arguing that the system is made up or that it’s unfair to the poor?
I would agree with the latter, but you haven’t been terribly consistent in your argument. I’ve had troubles with my credit score in the past, which is part of why I understand how it works.
I agree that credit scores unfairly disadvantage the poor, but that’s merely a reflection of deeper economic issues that should be dealt with. Abolishing the credit score won’t enable the poor to suddenly buy houses.
The numbers are made up, unless you can actually prove your original statement.
Edit: oh, and since proving a negative is essentially impossible, you can’t actually prove your original statement, so I would recommend not making statements like that, and try to rephrase.
Yep it’s not a mystery at all if you care enough to read about it. All these “capitalist dystopia” complainers sound like what I probably thought about credit scores when I was in my early 20s and had terrible credit from being irresponsible with credit cards. My credit score is 800 now because I simply pay my bills on time and have an established history of doing so.
Yeah, it’s not a perfect system and I would welcome increased federal oversight and greater transparency because it does have the potential for abuse.
That said, it’s not numbers made up to keep the little guy down. Lenders want to lend money because they make money off it. The whole point is to determine whether or not you’re a safe investment.
We could have a discussion on the merits of modern usury, which can be deeply predatory and abusive. It’s not the credit score that’s the problem.
i dont see the problem with improving your credit score by sacrificing a virgin to the volcano every year, at least anyone can do it instead of just the well accepted white men
im being unfair of course, unlike modern credit scores tossing a virgin into the volcano doesnt still put minorities at a disadvantage
Why? Income is a terrible metric. Regardless of how much money I’ve made, I’ve always spent within my means. I’ve never carried debt, but always has my cc to build the credit score.
The idea that some bozo who spends more than he earns has a better credit score than me just because he makes more money makes absolutely zero sense to me.
I suggest you lie on a few credit applications (not really). You'll be amazed at how readily you get approved just because your income crosses a certain threshold, even with the same score.
Several years ago I was looking to add a couple of cards, primarily for emergency reasons. I apply for a card and get rejected. Six months later I get a new job that's promising me a significantly higher income but I haven't started receiving more money yet (contract work is fun). I apply for the same card, same information, knowing my credit score had not changed, the only difference in my applications was my income (that required no verification) and that time I got approved.
So apparently the banks have a different thought process than you.
And what the fuck is wrong with you that you even think about someone else's credit score? Are you also mad that your neighbor is gay?
I never said it wasn’t a factor, only a terrible one that shouldnt be the only one. Also try improving your credit score and see the better rates and cards with better benefits open up to you.
And what the fuck is wrong with you that you even think about someone else’s credit score?
Considering you think I spend time thinking about people’s credit score because I think it’s better metric for getting credit, this question is all but a straight up admission that you spend a lot of mental energy thinking about the income of other people.
About 780 last I looked. Utilization went up when I decided to do some travel this year. But go on thinking that the only people that want a system reformed are the ones that don't know how to work it.
I'm sure that'll get you far in life. All the way to brown-nosing middle management.
If you don’t take credit facilities but pay for your expenses in cash, you are considered a risk. Credit scoring based on credit card purchases is akin to being required to be spied on every step of the way just so you can access what you practically can without the credit in the first place. I don’t have a problem with people who are fine with that kind of behavior. But there should be a way of fair assessment even if you pay in cash.
Why would you be better off? In the rest of the world you just have to provide proof of income and proof of savings and debt and banks can calculate how much they are willing to loan you for the purchase of a house. Seems to work fine, and I don’t have to have pay interest on meaningless loans just to prove that I can.
The problem is that just having the income and savings doesn’t necessarily guarantee that you’ll be as good about paying back a loan as someone of your same income and savings.
That’s supposed to be where the credit score helps, but the current system is so shady that it basically just reads as the ol’ boys club system but asking pretty please to pretend there’s a formula and method being used.
I think there are plenty of failsafe mechanisms. But most importantly, if you fail to pay your mortgage, the bank has the right to take possession of your house. Those forces the bank to do it’s due diligence with regards to the value of the house. Also, if a bank has been too lenient with its mortgages, it can get into serious trouble - the government here enforces pretty strict rules to prevent people from getting in over their heads.
This thread is full of people who don’t know what they’re talking about. I mean the whole thread is based on the implication that the credit bureaus are a government program.
Yes, the Chinese social credit system is a government created thing that’s more a way to punish people who don’t do what the government wants.
The American one looks dystopian at first glance, but it’s privately created by and for lenders so they all have a shared understanding of the optimal amount and rates to lend to someone. If you or I sit down and make a spreadsheet ranking houses we might buy or quality of restaurants near us, and then give them to a friend so they don’t have to create their own from scratch, we’re doing something not that far off from what credit scorers are doing.
For 25 years I’ve only carried a debt on my credit card one time, and that was for a few months under special circumstances. I have a top credit score.
Why do Americans think you need to carry a debt to build credit? That is the opposite.
I put EVERYTHING on credit card, and pay everything off on time. Never missed a payment. My credit score was the highest it can be by the time I turned 21. I’ve never paid a penny in fees or interest.
Holy hell they sure do. A lot of Americans don’t even understand you don’t immediately start accruing interest. You clearly have not witnessed the absolute insanity of Americans saying that they use a debit card because they “don’t want to pay interest” or they “only spend money they have”.
Also the comment you’re replying to was likely in agreement with the premise established by the person they were replying to.
The ignorance is astounding but to be expected. 12 years of mandatory schooling and not one class on personal finance. These are not difficult concepts. They’re just never conveyed.
The 12 years of mandatory schooling that they already get is wasted on most of them anyway. Mention President McKinley, and most Americans will respond with “who?”
Education in the US sucks in a lot of ways for a lot of people for a lot of reasons, and most “students” don’t end up retaining much of anything as a result of those forces. We’re trained to get grades based on attendance and participation, from material that is taught to the test. Very little of your grade has anything to do with whether you actually learned, digested, and retained anything…
We were all taught about the Whiskey Rebellion in high school. But bring it up in any conversation about taxes, and 99% of the time you’ll get a blank stare, or “the what?”
So we can pile “financial literacy” on top of all the other things that are jammed into American curricula, and it won’t make a damn bit of difference in the end. Because it doesn’t matter what is taught - it’s not going to be learned anyway. Payday lenders will still make bank, buy-here-pay-here dealerships will keep recycling the same cars at a huge profit, the poor will still play the lottery, and Santander will keep making car loans to under-qualified applicants at extortionate interest rates. People will still buy $70k pickup trucks on a $50k salary, and roll their negative equity into the next overpriced consumer wealth/masculinity signaling device.
I arrived to the US less than 5 years ago and I have top credit score. I never carry a balance, open credit cards that offer a lot of credit, benefits and bonus to increase my available credit (I have about 6 or 7 cards at the moment) and just wait. In less than a year I already had 740 which was enough to get a car loan with 1.9% apr (lowest offered was 1.85%)
I’m the same as you, and I think we kinda had an advantage because we started with a blank slate. No student loans (if you arrived as a working adult), no prior debts, and hitting the ground running (if you arrived with a job waiting for you).
That just because you managed to do that doesn’t make it the norm.
You could argue that that simply isn’t an option for many people. If you can live life without using a credit card implies you have not struggled for that extra cash, whereas some people simply don’t make enough to not use it.
I still don’t see how this makes it survivorship bias.
But that being said, if you’re not going to be able to pay off something in a few months, then you can’t afford it with or without a card, because buying it with the card just makes it more expensive. Sometimes you need to tide yourself over, I did that when my wife was switching jobs and we were moving so there were extra expenses. But I quickly paid it all off when we returned to normal income.
I believe it’s SB just for the fact that having a line of credit available and not using it simply isn’t an option for some people.
Imagine you have a line of credit and you lose your job, but you still need to feed your family. Then that person is going to do what they need to provide food.
The bias come from you commenting in the vain of I did this, ergo everybody else should be the same, when in fact we are not all the same.
Similar to how someone from a council estate can make it as a politician, which neglects to consider that 99% of people from council estates with that dream didn’t make it.
I hope that makes more sense. I suck at explaining things.
For it to be survivorship bias you would need to address a failure based only off successful cases (survivors). But in this particular case, the premise is that one can attain a good score with or without accruing debt. That’s just a factually accurate statement about reality; it has nothing to do with addressing issues.
I think (and I’m really not trying to put words in your mouth here so correct me if I’m wrong) that the premise you are arguing for is that most Americans will, at some point, rely on borrowed money to make ends meet. In that case it would make more sense to claim survivorship bias because a well-off individual claiming that they don’t need loans is not evidence that there is no problem with our general reliance on loans. They are just a success case or a “survivor”.
Imagine having to shoulder the burden of unfucking the litigation meth feces garbage destruction wrought on your house because you didn’t do a credit check on your tenants. All this on top of the property taxes, mortgage, insurance, and upkeep of your property. Pay your bills and maybe you won’t have to live in your car, stupid.
Idk, doesn’t seem like magic to me. Just pay your bills. Grow your existing credit cards. Spend responsibly. Keep below 30% utilization of credit limit of each card and overall.
Start early (when you are 18) and by the time you actually need to use it (car or mortgage products). Then you will be gucci.
It’s a shame basic financial literacy is not taught in schools.
My dad told me to never use credit, never even get credit cards, pay for everything in cash. If I didn’t do my own research and start building my credit score when I moved out at 21, I would probably not be living in my own house at the moment
If you aren’t aware, that is very much incorrect. All you’re doing is lining the pockets of the credit card company. Pay your credit card statement in full each month and don’t carry a balance to avoid paying interest.
There are certain exceptions, but I’m considering them out of scope for this case.
You need to have a form of credit, like a credit card. Even if you pay it in full every month, that’s still debt. In my native country almost nobody owns credit cards, just debit cards. I’ve been living in the US for 12 years now, building credit wasn’t that hard, but it took several years, I have almost perfect score now and own a house, but the whole idea was dumb to me too when I started. And I still need to remind my wife that the money in our bank accounts is not really how much we have, because we need to subtract credit card balances out of it.
Well, this it ignores the external costs. Companies are charged by the credit processors and those fees get passed to customers. Some vendors will explicitly charge more for credit, but most vendors just raise prices for everyone. The amount of money you get in points doesn’t cover the added costs.
You’re not wrong… but as you said, those are external costs. While it’s fine to wish for a simpler, more equitable system, given that the prices are mostly the same no matter how you pay, wouldn’t you rather be part of the group receiving the benefits? Paying with cash or check or a non-reward card is leaving money on the table. The cost of handling cash and checks isn’t necessarily any lower than credit card processing fees and people don’t have much tolerance for strange new forms of payment, which leaves merchants without much leverage to push back against rules which prevent them from passing on the higher costs of the reward cards to those using them.
I’d rather see all companies pass their fees only to those using credit cards. Then there are no external costs and everyone is in the clear about what’s going on. I like the convenience of credit cards, and sometimes I’d be happy to pay the extra fee. Other times I don’t. I suspect many people are the same eay.
In the US it was ruled that card companies cannot stop vendors from passing on costs, so you see a lot more of that now. By raising awareness of the issue, it will continue to progress toward that system. It will also foster competition, where card processors will be inclined to lower fees because customers will see the charges, whereas before they were invisible.
I’ve seen “cash discounts” in many places but that’s a bit of a false economy as cash can cost just as much to handle as an average credit card in the form of security and “shrinkage”. I’ve never seen a business charge a higher rate based on what kind of card you use, which is what it would take to have an impact on the rewards system.
Are we from the same country? Debt is something I don’t understand unless for a home or a car. If I have money to buy a tv, I pay in advance, or I wait until I have the money. I am not judging different points of view, just this is how I was raised
If you have $500 for a few TV, and you want a positive credit score, buy the TV with a credit card. Then, before the interest kicks in, pay off the credit card.
I just wanted to make sure that the 4chan OP wasn’t referring to debt as carrying a balance and paying interest. I know two people who were previously under this incorrect assumption and basically giving away money for free to their credit card companies.
Are you confusing debt with credit line/limit, or am I misunderstanding your comment?
If you are referring to debt, could you provide me with a source for your claim?
I linked to myfico.com in my previous comment which is run by FICO - the company behind the FICO score. I think they would know a thing or two about what affects your credit score.
What I hate the most is how your score goes down for paying off a loan early. Getting penalized for actually being financially responsible is infuriating. I paid off my car less than 2 years into a 5 year loan and my score went down a couple dozen points. Just because they couldn’t get more money from interest.
Interestingly our poster here has put the reason, I hadn’t thought about it that way, but how valuable you are to creditors is what the score is. Paying off early losses then some money, so score goes down. Hilarious. What an amazing system! ☹️
Oh goody. Just thought of another amazing use for ai! You could use it to figure out the maximum length and interest a single borrower would be expected to pay and set the terms on that! Wunderbar!
You know there are people in bank and credit institutions that have been doing this for centuries? Probably millennia… EU explicitly requires that some of this is done by what you call AI (i.e. mathematical models) because they are fairer than humans and safer for customers and society
Just a small correction because I worked around that area (not for loans but for investment), it’s all Algorithms rather than AI.
Algorithms are basically mathematical formulas turned into code, whilst AI is a totally different beast that can produce quite different results on slightly different inputs and it’s not really made by turning mathematical models into code but rather it’s trained with real world data containing inputs and outputs and “somehow” finds the patterns in that data and can predict the correct outputs if given fresh, never seen before inputs.
AI is probably used for fraud detection (and I expect nowadays it’s likely used in algorithmic trading to try and predict market movements) but unless a lot has changed since I was in the business, it’s not used for valuations.
It was just to give an idea that what OP mentioned is already an established thing, fairer than alternatives.
Most of the time trivial linear logistic regression is used in this context. Nowadays decision tree ensambles are pretty heavily used, which are ML. Simply they perform better with fewer data than neural networks on structured tabular data.
What you refer to as AI is probably methods based on deep learning. The truth is that they work exactly as any other algorithm that you are referring to. They are used for regression and classification, same way as a standard linear regression. The difference is that the models are non linear, and their complexity is so that a lot of data are needed to train them.
But conceptually one can absolutely create a credit score with deep neural networks. It is just an overkill, for performances that are likely worst than a random forest on relatively small training datasets
Neural networks-based methods are indeed used in fraud detection
We don’t need more discrimination in loan approval. A few years ago, Amazon built an AI that would look at resumes and rate how likely the candidate would be hired. The AI trained itself to recognize female sounding resumes (went to women’s only college, is involved in women’s organizations, does not use manly enough language) and flag those as undesirables.
Ah ok. I don’t know much about it, but I’ve heard that AI could sometimes be negative toward commonly discriminated against groups because the data that it’s trained with is. (Side note: is that true? someone pls correct me if it’s not). I jumped to the conclusion that this was the same thing. My bad
An AI is only as good as its training data. If the data is biased, then the AI will have the same bias. The fact that going to a women’s college was considered a negative (and not simply marked down as an education of unknown quality) is proof against the idea that many in the STEM field hold (myself included) that there is a lack of qualified female candidates but not an active bias against them.
That’s not why it went down. It probably went down because they had less credit extended to them after paying off the loan. How much credit you’re using affects your score.
They don’t care that u paid it off early. They care that your loan to income ratio just took a hit.
That doesn’t really make sense either. Why would a high amount of debt relative to income be a good thing? How does it indicate a person is more likely or capable of paying off a loan? If anything it means the opposite.
The specific rule you point out is stupid but easy to hack. Your score didn’t go down because they lost the interest you’d have paid. When you pay off a secured debt, the loaned amount is deducted from your total credit potential, which increases your utilized credit percentage. The hack is to open a line of credit against the secured asset before it’s paid off or another line of unsecured credit. Your credit utilization will drop, thus increasing your score.
My score is over 800 and has been for over a decade. I have like 12 credit cards but only use 2 and pay them off every month… Costco for the store and gas and a high cash back card for everything else. The others I keep open with 1 small purchase each year. Every store wants you to have one, so they’re easy to get. I have added and paid off multiple small to medium (10-60k) secured loans over the years and my score only fluctuates a little for a few weeks then goes back because my total credit with the dozen credit cards is so large.
But most people won’t need to do that any way, it’s overkill for like 99% of people.
If you have a credit card that you use and pay off regularly, a couple of paid off car loans or something like that and no overdue bills on your history, you’ll be absolutely fine.
Exploits A) often benefit the player by letting them skip a lot of work with big rewards, and B) usually get fixed real fast.
Now if doing this meant you never had to work a job in your life again and you could get actually make significant income, sure, I’d consider it an exploit.
Where would one look to find a high cash back card? I’ve been wanting to improve my score by switching to using a credit card for primary shopping that I pay off, but I can’t seem to find any good offers/deals/contracts/whatever term you’d use for a credit card. Probably my score though.
For simple cashback without yearly fees, 2% on everything or 5% on some things is about as good as it gets. I do everything on chase for simplicity and I’ve been reasonably happy with them. Twice now they have detected someone trying to use my credit card number (not sure how they got it), stopped it, and alerted me instantly. I mostly use the freedom unlimited card which was one of the better cards when I got it a few years ago.
You don’t understand how credit scores relate to loans then, let me help you.
The credit score is not just how likely you are to repay your loan. It’s how reliable of a borrower you are. They spend resources analysing the transaction, then allocate some funds for you with the expectations that these funds will be returned given a certain schedule. When you repay too fast, it’s not what’s happening.
Try to see it the other way around. If you were keeping some funds on-hand to lend, and you spent the whole evening deciding if you’re going to lend me 10k$ for months. You decide you will, and you’ll make 500$ out of it. Not a bad deal: these funds would come at you 300$, so you spent your evening for 200$. Great!
Two days later, I bring you back your 10k and 10$ of interest.
It means you spent your whole evening for 6$…
If I do that to you a few times, I guarantee you that you won’t like me as a borrower.
Not just paying a loan off early, even having the loan eventually drop off the credit report completely. This month the only change was an old, paid-off mortgage and line of credit dropped off my credit report. My credit score dropped substantially.
“I want your money but I don’t want you to see how trustworthy I am. Just give me money”
Seriously how entitled is everyone these days. It is not a human right to borrow money, you are at the mercy of the banks because your are asking them for a favour. If you don’t like that, don’t ask them for money.
You always have the other option. Build savings instead, but then you have to wait for the things you want and you might have to live with family while doing so. I’m not saying this path is easy, but I’m not the one objecting to a lender wanting to know how good or bad I am with money before expecting them to risk theirs.
Not everyone has family they can stay with. Many have shit credit due to health conditions that are not their fault. Credit checks are increasingly used for apartment leases and car insurance. Is it entitled for a person to think they should be able to have a place to live?
“Not everyone has family they can stay with.” No I know that. Which is why I said it’s not easy to go this path.
“Many have shit credit due to health conditions that are not their fault. "
Which is not an argument for " give me your money without looking at my past” it’s an argument for mitigating circumstances to be better considered.
“Credit checks are increasingly used for apartment leases and car insurance.”
This is wrong. A security deposit is the landlords financial guarantee. I also think insurance should be based solely on driving record, not age , gender or where you live.
“Is it entitled for a person to think they should be able to have a place to live?”
If they expect to be lent money for it, no questions asked them it is absolutely the definition of entitled. You are not entitled to a place to live on someone else’s money. It is your responsibility to provide for yourself and your family. I’m all for expanding welfare programmes, help to buy schemes, rent control etc etc. Those things are something we all pay into and provide us with a safety net is bad things happen. Those things should make sure you are able to have a place to live, but don’t expect a bank to lend you 500k to buy a house without some idea of is they can trust you.
Now in saying some of this I find myself in the dirty position of siding with rich banks. I am not intending to do that because I hate that they make shit loads and squirrel it away for themselves, charge me for borrowing when I’m in negative and pay me back very little for using my money when I’m in positive. This is not about that, I’m only interested in what is fair in the isolated transaction of one party pending another money. Wouldn’t you want to know how likely you are too get back your money if you were the lender? Would you lend money to your friends with a gambling problem? Is the current system of credit check fair? Not exactly. It should be enough to be able to demonstrate financial responsibility. I paid rent for 20 years without missing a payment, but it wasn’t enough to demonstrate financial stability or responsibility and that is plain wrong.
Taking this logic to the extreme, wouldn’t someone with liquidity but no credit score face serious issues towards accessing housing and services, as per the post?
I’m in this boat and it kind of sucks. I have a lot of savings after a few decades being a programmer, but my credit history consists of nothing but a few late bill payments over the years - never had a credit card or a house or car loan. To rent an apartment I always had to get my brother or father to co-sign the lease, or else I would just rent a room from somebody (which usually never required a credit check). I can’t get a credit card from a bank or even cards from stores.
On the other hand, it kind of doesn’t suck since I have no debt whatsoever, and I just bought the house I’ll spend the rest of my life in for cash. For the last fifteen years I’ve driven cars I bought for cash on eBay or Autotrader. There were times in my life when if I’d had access to easy credit I would have dug a big hole for myself, and the (very rational) unwillingness of anybody to lend me money saved from financial disaster.
If you’re good with your money, you should at least consider cards with cash back rewards. You can get cards that give you 2% back on everything. BCP will give you 6% on groceries but comes with a $95 annual fee.
I always pay my cards the moment a charge posts. No point in carrying debt and risking paying any interest.
My mortgage company didn’t even look at my credit score once they saw my savings and income, which were REALLY not that much, just OK. But apparently good enough. So, I think credit score is only one thing they look at, and other positive things can outweigh a negative score.
What were your savings, if you don’t mind? I managed to get a house priced at 274k this year with only 20k saved, but a really good credit score, and about 100k income between me and my partner.
I don’t remember exactly, but it was probably not far off 20k saved with more like 50k income. House price was quite a bit lower than that, no equity from any previous homes owned.
Credit score usually just determines what your interest rate is. Not whether you get the loan or not. Your cash flow (direct deposits) are more indicative of whether u can pay the loan vs credit score.
You don’t actually need a good credit score to get a loan. The only reason FICO scores exist is to reduce the amount of work banks have to do to investigate potential customers. However, many smaller banks are willing to do a manual underwriting, where they look at your history and make a decision based on that instead.
Obviously if your credit score is low that is indicative of poor borrowing habits which will probably be corroborated by manual underwriting. However, if you have no credit history at all, you will probably get a better outcome than if the bank only looked at the FICO score.
Look for community banks, which are very small banks that serve your local community. Those banks are far more willing to give customized service like manual underwriting.
Better credit scores will definitely net you a lower interest rate, though. Zero credit history is a major liability for lenders, so even small banks or credit unions with private investors will want some kind of benefit or incentive for taking on an increased risk of default.
The real fucked up part about credit scores is that it seems like it should be something the federal government regulates, but they don’t. For-profit companies do. And when they get hacked and expose all of your data so scammers can assume your identity for eternity, they can’t be held liable or responsible. All of that just so lenders can feel safer about who they give money to.
I’m actually part of a credit union and would recommend it to many people. The credit union didn’t get interest rates as low as what the big banks did a few years ago, but they’re also not as high as the big banks are currently.
One thing I really liked about the credit union was that they didn’t use my credit score when deciding my interest rate, they only checked it to make sure it didn’t have any glaring issues. Also I like that the credit union doesn’t sell my mortgage to a third party.
I also would recommend credit unions over banks. I have a local one that I use but I also have an account with PenFed, which is open to the whole nation and is one of the few places that offers a 2% unlimited cashback on everything no-fees card.
Regulate how? It’s a tool for lenders to decide if they want to lend or not, and on what terms. If the government was to make one, banks would still make their own because it’s for them to decide how to do business.
What would the government do? Prevent banks from using tools to make decisions?
Regulate how? It’s a tool for lenders to decide if they want to lend or not, and on what terms.
And also a tool for landlords to decide whether or not to rent to you, for insurers to decide what your rates should be, and employers to decide whether or not to hire you. It isn’t just about bank loans.
What about transparency? Sure, you can request a free copy of your credit report… once per year. Any more often than that and you have to pay. How do I dispute errors or inaccuracies on my report? How do the big three calculate my credit score? Why do each of them come up with a different number for the same individual despite sharing a similar set of parameters, and which one is used against me if I am denied for something on the basis of poor credit? What happens when they mishandle my sensitive data like my Social Security number, and what kind of legal options do I have to seek recompense?
You might be surprised to learn that the government does in fact regulate consumer reporting agencies. Ever heard of the Fair Credit Reporting Act? A lot of those rules came about from the systemic abuse of the clients of these credit reporting firms, including institutional racism.
The question is, why are these firms still allowed to operate as independent agencies and not as an apparatus of the state? What is the value of having these entities be private?
I don’t disagree that these services are necessary for our economy to function, and we can’t just tell people that they can’t come up with a system to determine loan risk for their clients, but there are some serious problems with the way credit scores work and how they are used in making certain decisions that should, in my opinion, be handled by an entity not concerned with making a profit off of their mostly unwilling clientele.
I think the way it could be approached would be for a government agency to start doing their own, force company to report the information to their service, and to provide the service free for individuals, and cheap for corporations.
It would then be relatively fair for individuals to be allowed to deny these companies the right to get their data
This way, the credit agencies would be free to do whatever they want, but they would have to step their game up, or just get obsoleted.
usually I love to shit on muricans, But Germany has something similar. A private company called “Schufa”. This private company secretly calculates your credit score (no one knows realy how they calculate it) which determines if you get an apartment (for rent) or not. Living in the wrong street already kills your credit score here.
If the Schufa doesnt have information about you, it counts as negative.
As someone, who loves dunking on the Schufa, as any good German should. The Schufa-Score isn’t nearly as insane as some American credit score systems. Having an registered checkingsaccount & no outstanding bills or debt payments is enough data to have a high score.
You don’t need to repay debt to show, that you are able to.
Credit scores are the West’s social credit system.
If we value our freedom from a controlling, oppressive system, then we should penalize the creation, selling, buying and usage of credit score data. And we should keep on top of it to include any emerging attempts to re-establish an equivalent system.
I was always taught not to get credit cards or loans. My mom, a teacher, always saves up her money and then pays for her cars and houses in full. Not once did I need any kind of credit score or anything. I have cars, a home, cell phones… internet, etc… and no credit for scammers to ruin lol!
Add comment