Credit Rating Nonsense

[ThomasH]

Sorry, this is going to be a little long winded.

I've been debt free for a number of years, until last year when I purchased my LX2610HSDC.

I have found that credit scores matter the most when you don't have much to put down. The larger the down payment, the less the loan company cares about your credit score. And at some point, they only care if you are breathing (well, not quite, but it seems that way). Generally that point is when your down payment puts you in an equity position.

Years ago, I purchased a new wakeboarding boat from a dealer that was liquidating stock as he was going out of business. I purchased a $75,000 boat for roughly $55k, and put $12k down. At the time, I was self employed, had a credit score below 700, and was applying as stated income. There aren't many more strikes that you can get on an application.

Strike 1 - Boat loan are very high risk for lenders
Strike 2 - Low Credit Score
Strike 3 - Self-Employed / Stated income (no proof of employment)

Despite those risks, they approved me without a second thought. I had significant skin in the game with a $12K down payment, and I walked away from the deal with an equity position. Only downside is the interest payment sucked, but I planned on paying it off in 1 year or less.

But other priorities came up and 2 years later, I still had the loan with a crappy interest rate. So I went and did what almost no one is able to do. I refinanced the boat to bring down the interest rate. This is almost unheard of because banks NEVER get boat owners who have real equity in their boat. 99.99% of the time, the owners are upside down in payments, and boat loans are extremely high risk. I still had a low credit score as the boat was my only debt, but once they found out that the boat was still worth 10k more than I owed on it, they couldn't get the loan paperwork processed quick enough. That loan I payed off 1 year later.

When I bought my 2015 Diesel VW Jetta, had no problem getting 0% for 60 months because of the down payment (20%). Which by the way I got more than that back in cash due to the emissions scandal, but that's another story.

When I bought the LX2610HSDC with BH77, I had no problem getting approved for the 0% for 84 months because of the down payment (20%). I wish I had included the front mount snow blower, but I was trying to keep the payment down.

To sum it up. I really don't care much about my credit score. With a large enough down payment, just about anything is possible. I only have 1 credit card, which is a corporate card given to me for travel expenses which I haven't used in 2 years. Other than that, I have had no other credit cards for the past 12 years. I don't have a problem using credit for large purchases (vehicles, tractors, home loans, etc), but for 99% of our daily routine, it's cash only. I will NEVER EVER have a personal credit card again.

Oh BTW, you can rent a car with a debit card. You just have to know which rental company to use.

 

[D2Cat]

From your response I'm guessing you don't know about Dave Ramsey? Or was I too obscure in my reference?

Some time back, I was listening to his radio program and decided to order a couple of books. I called and found out they do not take credit cards, only debit. So I never got them. Have one CC, that's it!

 

[random]

No, I knew who you were talking about but some of his listeners (aka some of my relatives) take him way to extreme and have no flex on the use of credit. So I thought I might mention it isn't some huge boogey monster if you use it responsibly or as an emergency fund you'll be fine.

I think that many people who follow him are super hard-core about credit because they've done so badly with it before.

 

[random]

Some time back, I was listening to his radio program and decided to order a couple of books. I called and found out they do not take credit cards, only debit. So I never got them. Have one CC, that's it!

Well, at least they run their company according to their stated values. That's pretty rare.

 

[ccoon520]

Oh BTW, you can rent a car with a debit card. You just have to know which rental company to use.

I'd believe that.

Just the only time I actually had to have one because my car was stolen in a city pretty far from where I lived they required a credit check before I could rent one. I didn't really have much of a choice in the matter, which is why I filed it under emergency because there wasn't really much time for planning.

 

[Edwinasyneak]

Yes, I agree with you that credit points are one of the most important things when you find yourself in the situation of getting a loan. I personally use yhdistalaina.com in order to get my credit score up faster and I advise you to find a similar website for credit score boosts. I also suggest you don't trade loaned money because it is very risky and you could lose a lot of money very fast. And since I am no expert I suggest you talk to one in order to do these kinds of actions as safe as possible.

 

[Dwight Bremer]

We payed off our home and property a few years back and my credit rating dropped while my wife's did not. I asked Equifax about the reasoning behind that.

They said they would look into the "situation". A few weeks later I remembered to check and my credit rating was even lower and the wife's was unchanged.

Works a lot like government in a logical sense.

 

[Henro]

We payed off our home and property a few years back and my credit rating dropped while my wife's did not. I asked Equifax about the reasoning behind that.

They said they would look into the "situation". A few weeks later I remembered to check and my credit rating was even lower and the wife's was unchanged.

Works a lot like government in a logical sense.

LOL Big time...

 

[Dwight Bremer]

Wife's Mother died a couple years ago. Transunion has her credit rating @ 640, Equifax 840. No debt when she passed and certainly none now.

Must make sense to someone.

 

[fried1765]

I’ve always lived a debt free life, except for an occasional Car loan which made sense economically.

I did borrow via a home equity loan to buy the property next-door, again because it made economic sense as far as federal taxes go.

So anyway, I got sick of the home equity loan and decided to pay it off in 2020. And paying off that loan was a major ding against my credit rating! Dropped from 860 to 820 (FICO, MAX is 900). Nothing else changed.

Credit rating means little to me in reality.

Actually, I am in a position to pay off any debt I have if I would decide to do that, but I don’t because I don’t want a hit as far as federal income tax goes. Not that I have a lot of money, just very little debt.

If I needed to loan money to somebody, I can’t think of a better person than someone like me!

So for paying off debt I am penalized...not that I care really...but find this curious.

what is wrong with this picture???

"Credit rating nonsense" is certainly the appropriate title for this thread.
In many situations there seems to be absolutely no logical reason as to how your credit raring is determined.
I love my credit cards though!

Last year my 3 no fee cards paid me back over $1,100 in cash.
I play their 30 day no interest payment game.
Not quite sure why they do it, but I love free money!

 

[lugbolt]

supposedly early payoff of an installment plan shows irresponsibility, which is why they ding your credit.

It's stupid. It ought to HELP your credit!

I've got a 5 year note on a car and I hate the payments. I'm just going to pay it off. But...then they ding my credit substantially. It is a DUMB practice.

In a way, it could be thought of the fact that they want you to stay in debt, and that is just wrong.

It was explained to me a long time ago, you can have a 200 credit score and have enough money to buy anything you want, with zero debt....if you play the cards right. I don't know if I agree with that but whatever. Just passing it on.

 

[Oliver]

In today's Email came notification from OTT of Lugbolt's post and from my bank "here's a monthly reminder to review your FICO® Score" which I typically delete but I went ahead and looked. LOL it changed -21 down to 775. According to whoever dreams these scores up it dropped because:
1) Lack of recent installment loan information.
2) Proportion of balances to credit limits on bank/national revolving or other revolving accounts is too high.
Makes no sense to me but it also doesn't matter, I guess unless they drop it to the point it effects my insurance rating.

 

[aaluck]

Ill give you my experience...and some unsolicited advice.

When I was going to college in the late 80's (I'm 52 now) there were credit card 'racks' in every hallway of the school. You filled it out, mailed it (yes mail) and a credit card came in about two weeks. No credit score or anything else.

Flash forward to 2020. My daughter and son, both with jobs cannot get a credit card (which you need to rent a car, book a flight, hotel, or just in an emergency, etc.) because they have no credit score--not even a $500 credit limit one-- ridiculous. So here is my advice to those of you with teenage kids...

Get a couple of $500-$1,000 personal loans that you will need to co-sign on. Put the money in the bank as an automatic withdrawal payment and just eat the little bit of interest. DO NOT pay them off early--as stated above. If/when you get them a car... put them on the loan. Heck, if you get a car loan for yourself or wife put them on that loan. Do anything you can to help build their credit--not so they can accumulate debt but so they get better rates when the HAVE to use credit.

Believe it or not this credit score is used on a LOT of things. Insurance rates, job interviews, interest rates (obviously), etc. Just my $.02 worth

 

[random]

It was explained to me a long time ago, you can have a 200 credit score and have enough money to buy anything you want, with zero debt....if you play the cards right. I don't know if I agree with that but whatever. Just passing it on.

Pretty close to what Dave Ramsey teaches. Credit score is all about taking out loans and paying them back. If you always deal in cash you'll never even GET a score. Take out loans, default, file BK, then save up cash - that would get you into that position.

Flash forward to 2020. My daughter and son, both with jobs cannot get a credit card (which you need to rent a car, book a flight, hotel, or just in an emergency, etc.) because they have no credit score--not even a $500 credit limit one-- ridiculous. So here is my advice to those of you with teenage kids...

Get a couple of $500-$1,000 personal loans that you will need to co-sign on. Put the money in the bank as an automatic withdrawal payment and just eat the little bit of interest. DO NOT pay them off early--as stated above. If/when you get them a car... put them on the loan. Heck, if you get a car loan for yourself or wife put them on that loan. Do anything you can to help build their credit--not so they can accumulate debt but so they get better rates when the HAVE to use credit.

Weird. My son just got a Discover card with NO previous credit and no co-sign from me. As of now, it is the ONLY item on his credit report.

He uses it for gas and pays off most of it every month. "most" because from some research I did several years back, I found that the sweet spot for the best score results is 4-5% of your limit. Below that and your scores actually go down (too LITTLE use from the credit agency perspective)

 

[aaluck]

Weird. My son just got a Discover card with NO previous credit and no co-sign from me. As of now, it is the ONLY item on his credit report.

We did not try discover but heard they were not as stringent. Should have tried that first, but at that point having been turned dow a couple of time probably made the score go down further.

 

[ddavis83864]

Good on anyone who remains deft free or as close as possible. Keep banks out of your life, makes life much more simple.

Credit scores are nothing more than an identifier to tell banks that you like to borrow money and pay even more money back for the privilege.

For what its worth a "ding" of 40 points from 860 to 820 isn't major. That would still put a person in the to 20% of all Americans. It would also list you as exceptional credit worthiness.

 

[William1]

The wife and I use one credit card. All transactions go on it, that means all bills except taxes. We pay in full every month. Typical amount spent is 2.5% of the credit line. Once or twice a year, the expenditure will be 5% of the credit line. That will cause our score to drop a few points. The following month back to 2.5% and the FICO comes back up.
The only time anyone looks at it is when we buy a car and pay by check. They want to double check we are not scammers I suppose.
If you have an awesome credit score, you also probably do not need to borrow any money.
Sometimes, a purchase in a store is discounted if you open a credit line with them. A 10% discount is nice but then it is one more credit line I have to worry about someone data breaching and making me miserable, just because I wanted to save $100. All we have credit wise these days the one credit card.

 

[ctfjr]

fwiw - For the past year or two I've been getting these cc offers. Typical one is open an account and spend $500 in the first X months and we will credit you $200. I try to take advantage of every one. I get the card, charge the min I need to, pay it off, wait for the credit, charge something of that value, wait for the statement balance to show $0 and then cancel the card.
It dings my credit score every time from 20-40 pts, for a month and then it goes right back up.

 

[RCW]

I haven't checked my credit score in a couple years.

Like you guys said, some of the stuff related to your score's ups and downs are illogical in my pea-brain.

We've had debt all our lives. Mortgage, car payments, credit cards, etc.

I admire the "debt-free" lifestyle, but for us, it was never an option.

We both came from lower-income backgrounds; my family was poor, my wife's was low-income....

We both worked through college and paid for it ourselves.

We've attained some decent incomes after 30+ years.

Now, house is paid for, even after many improvements.

We have 2 car payments, and I have my wife's OnStar on my CC. I also had to co-sign for our youngest's undergraduate student loans.

As empty nesters, we have a little cash in the bank, a little bit of stocks with good equity, and I pay most stuff by cash...that I've done for years.

I don't get credit card offers in the mail anymore....in fact, last one told me my credit limit was reduced to $500.

My recently graduated son(Magna Cum Laude), who lives 150 miles away, gets many per week ....I throw them out.

They can have their credit scores.....

 

[lugbolt]

Pretty close to what Dave Ramsey teaches. Credit score is all about taking out loans and paying them back. If you always deal in cash you'll never even GET a score. Take out loans, default, file BK, then save up cash - that would get you into that position.



Weird. My son just got a Discover card with NO previous credit and no co-sign from me. As of now, it is the ONLY item on his credit report.

He uses it for gas and pays off most of it every month. "most" because from some research I did several years back, I found that the sweet spot for the best score results is 4-5% of your limit. Below that and your scores actually go down (too LITTLE use from the credit agency perspective)

Dave himself was who told me that, been, gosh 12 years ago? Right before I bought my house. He did a deal at the church and touched on lots of things. After it was over, myself, my girlfriend's mother, and him set down to talk about church finances and we got to talking about personal too. On that, my dad used to be an advisor for the UPRR purchasing dept so I had "take care of your credit" pounded into my bean the first 20 years of my life. Dave agreed and expanded on that. So far, I've had one hiccup of which I had no control over.

Really, Ramsey's stuff is mostly common sense.

A big finance deal right now in my case is 2 cars. I own a 93 Mustang and a 2019 Mustang. I Daily the 2019 and owe about 18k on it. The 93 is in paint PRISON and has been since 27 Dec 2020. The guy doing it has been jerking me around and I'm within a cat hair of being pissed about it--and trust me, if you know me you don't want that. I don't get violent but I can't make a person miserable. I need that car back ASAP so I can reassemble it and then sell it, use the money to pay the 2019 down.

yes to younger folks, get a credit card and set a limit as to how much you can run up on it. Basically, I had a $100 limit on mine and I used it for gas, and sometimes lunch (or dinner if I was out with a girl or whatever). I didn't have the money to pay it completely off every month and it just worked out that 4-5% was what was left. Next month I'd have it paid off, then buy more fuel. In no time the fico was up to 870. The trick here that most younger folks get into trouble with is to use it in moderation.

Most young'ns I know of get a card and they run down to the liquor store, buy $500 worth of booze/beer/etc, then stop at the tobacco store & spend $100 on the card, then take their bar-whore gf out on Fri night for a $200 wine and dine and then back to the apartment and drink/smoke up what he spent the money on, all while making minimum wage. In one month's time they've managed to run up $1500 in debt which they can't pay off, and do it the next month....and 23% interest on that much money? They get NOWHERE, but further into a financial rabbit hole. Thousands of times I've seen it!! I've dated some of them! Even better? Paying RENT on a credit card. I know people that do that. And I know of some that pay their home mortgage on credit which is absolutely stupid. Now you pay compound interest on your home mortgage PLUS 20 something percent interest on the credit card.