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?

I live in Canada and I once went to a job interview. and in the application paperwork they asked for my credit score. I put the pen down and walked out of there. That was literally the only time it ever happened.

It was an American company...

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?

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:

source

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.

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.

The exact same as the Chinese "social credit" system that people whine about, except this one is capitalism based, so it's ok.

Credit just isn't my thing. It feels like a scam

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.

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.

Most of these points are myths, but as long as it’s funny, right?

Easy. It's a scam to screw over anyone they feel like.

It stopped being a can the applicant afford their current outgoings and afford this loan type system a loooong time ago. Now it's a noose round the neck of anyone that has ever lost a job and missed a couple of payments or got screwed over by a company changing billing software. The number means nothing, I'm sure on some kind of grading curve it averages out but so would throwing darts at a board and assigning scores that way.

The rich fail up and everyone else has to play by the rules or get fucked over.

/Rant over

The system makes no sense if you try to optimize it to get the highest score possible, you will find the differences in a single point have no logic behind it. But banks also typically do not care if your score is one point lower or higher. The number is just a quick reference point to make sure you aren't someone in financial ruin, and if the score is at least mid then they will factor in things like your current income to debt ratio more than the score. If you are a normal person taking out a single loan for a house and probably a car and you know you have stable income to afford it, then you probably don't need to worry about your credit score.

Credit score = milkability score.

I follow the old-fashioned idea of buying things with money I have, debit instead of credit.

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.

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.

Never owned a credit card, never will

"But how will you raise your credit score without accruing debt?"

I'd rather fucking die than spend my time participating in a system which wants to grade my Credit Utilization Normalization Tier (CUNT).