Why credit score is so important

[highland145]

Are there any benefits of going over 750? I've been at 780-790 for about a year now without it changing. My first credit card was about 7 years ago.

Probably not. Mine was 805 when I bought the land last year. Both banks still wanted 35% down on raw land even though I got it at ~60% of the value.

 

[Capt Caveman]

Are there any benefits of going over 750? I've been at 780-790 for about a year now without it changing. My first credit card was about 7 years ago.

I believe once you go over 800, it doesn't provide any more benefits.

 

[highland145]

That's like saying you were an independent contractor in Nigeria. There's no way anyone can confirm your claim that you are responsible. It's possible you didn't actually know the money was there.
Having a bunch of credit cards that are paid every month shows a record that you are fully aware of how much you spend, and you pay it back on time. Not getting anywhere near the limit shows you have self control. If you're on a cash budget, there's no way you can show me if you have self control or not.

Yep.

Simple solution. Use your cards and pay the off every month. Get a heloc.

 

[DominionSeraph]

I'm sure the OP was fully aware of how this situation contrasts his political views.

You're so cute.

Spidey is a hardcore conservative apologist. They do not have a consistent worldview. They believe that whatever would be convenient to them to be true is true.
It would not be convenient for spidey to correlate his actions with the political beliefs he also holds out of convenience, so he would not.

Conservatives get away with using this retarded system of beliefs because the societal system we have works to minimize the power of stupid people and to shield people from any effects when stupidity wins out. So they are distanced from reality and never have to face the stark reality of the utter devastation that would result if they did try to put their childishly naive systems into place.
Spidey's theorycrafting system is completely slanted, and he can't theorycraft his way out because his system is hugely slanted to be egotistically self-serving. He is unlikely to be hit by a moment of clarity, which means getting hit by a hard dose of reality is his best bet for correction.

This isn't a properly formatted dose, but perhaps the related effect of the evidence presented in this thread that nobody likes an idiotic, mindless cheerleader will have an effect.
But probably not. His protective measures have probably already kicked in. He will probably dismiss our justified schadenfreude as a game of positioning moved by politics, and so his blindness will continue.

Pretty sad, but such is life.

 

[spidey07]

I believe once you go over 800, it doesn't provide any more benefits.

For this fee 740 was the cut off. Meaning the top line was >740. And then it tiered down, 721-739, 701-720, etc. But I think the graduations were at a 10 point resolution and not 20.

 

[OutHouse]

That's like saying you were an independent contractor in Nigeria. There's no way anyone can confirm your claim that you are responsible. It's possible you didn't actually know the money was there.
Having a bunch of credit cards that are paid every month shows a record that you are fully aware of how much you spend, and you pay it back on time. Not getting anywhere near the limit shows you have self control. If you're on a cash budget, there's no way you can show me if you have self control or not.

no debt, living with-in your means and saving 100K is not proof enough?

 

[OutHouse]

Yep.

Simple solution. Use your cards and pay the off every month. Get a heloc.

ah Dave Ramsey is right. your credit score is how much you love debt.

but its all a non issue for me. if i cant pay cash for it im not buying it. once my house is paid off i will owe NOBODY not a dime. Right now i have NO credit card bills, No car loans, no student loans. man i cant wait for that day when i will be totally free and clear of any and all debt.

 

[Capt Caveman]

For this fee 740 was the cut off. Meaning the top line was >740. And then it tiered down, 721-739, 701-720, etc. But I think the graduations were at a 10 point resolution and not 20.

When I recently got my credit score from Experian, it provided info on how to read the results. I'll go over it when I get home.

Aren't you looking at a federal loan? I'm thinking they may have different criteria on credit score and rates?

 

[Capt Caveman]

ah Dave Ramsey is right. your credit score is how much you love debt.

but its all a non issue for me. if i cant pay cash for it im not buying it. once my house is paid off i will owe NOBODY not a dime. Right now i have NO credit card bills, No car loans, no student loans. man i cant wait for that day when i will be totally free and clear of any and all debt.

Earlier in the thread, I give an example why I prefer debt in certain situation. Should I cash out of a fund that's provided a 10% return since owning it 10+ years ago or take a 2.49% loan to buy a new car?

 

[highland145]

ah Dave Ramsey is right. your credit score is how much you love debt.

but its all a non issue for me. if i cant pay cash for it im not buying it.

Not so. Credit available is not debt. I hate owing anything but sometimes one has to. House, land, auto, roof, a/c, medical, etc.

FWIW, I only owe on the business but I have a heloc with a $106K limit and 1 visa only at $18K. Emergencies are just that.

 

[OutHouse]

Not so. Credit available is not debt. I hate owing anything but sometimes one has to. House, land, auto, roof, a/c, medical, etc.

FWIW, I only owe on the business but I have a heloc with a $106K limit and 1 visa only at $18K. Emergencies are just that.

i will admit the only and i mean the only time i use my captial one card is when i travel for the company. it makes it easier to swipe and go and fill out a expense report when i get back.

and i will carry my capital one card when we go on vacation just in case of an emergency and hotels are bitches when it comes to making reservations without a credit card.

 

[highland145]

i will admit the only and i mean the only time i use my captial one card is when i travel for the company. it makes it easier to swipe and go and fill out a expense report when i get back.

and i will carry my capital one card when we go on vacation just in case of an emergency and hotels are bitches when it comes to making reservations without a credit card.

Exactly. We're on the same page about debt and cash being king but the reality is crap happens and having access to credit is a good thing.

 

[ShawnD1]

i will admit the only and i mean the only time i use my captial one card is when i travel for the company. it makes it easier to swipe and go and fill out a expense report when i get back.

and i will carry my capital one card when we go on vacation just in case of an emergency and hotels are bitches when it comes to making reservations without a credit card.

Using cash sucks so hard. Always getting change back or tipping people for no reason to ensure you don't get change back. When I go to the bar, I buy drinks so the tab is near $20 because they don't take credit and I don't want to ask for change back.

 

[ponyo]

ah Dave Ramsey is right. your credit score is how much you love debt.

but its all a non issue for me. if i cant pay cash for it im not buying it. once my house is paid off i will owe NOBODY not a dime. Right now i have NO credit card bills, No car loans, no student loans. man i cant wait for that day when i will be totally free and clear of any and all debt.

I don't know if either extremes are right. I don't owe anyone a dime. Zero loans and debt. House, cars, everything is paid off. But I still have couple of rewards credit cards I pay off at the end of each month. But I froze my credit after I paid off the house because I don't need any more credit. And I stopped caring about credit scores. But we live in modern society and the benefit of credit cards outweigh any cons at the moment. I take the Clark Howard approach rather than Dave Ramsey.

 

[OCGuy]

It knocked her credit down to 670 or there abouts. If we removed this ding it added 97 points to her score. The broker had to use the middle score from the 3 agencies to come up with the fee which was something like 2.75% which was about 10k. It was all a chart based on percentage down and credit score. Above 740 with 20% down and there was no fee or it was only .25%.

Are you telling me there's a way to avoid this?

I'm telling you that although a 670 credit score does add "hits" to your rate...2.75% is ludicrous.

You would have to be doing cash-out to 80% LTV or a non-owner occupied transaction to approach 2.75% in hits.

Also the hit to the pricing can be built into the rate....take a little bit higher rate and pay no fees.

Tell me your whole scenario (LTV, are you including taxes and insurance in your payment, what rate they are offering) and I will give you an idea of what the hits would be with the banks I work with. (We are a direct lender, and we also sell to GMAC, Chase, and Flagstar)

 

[VirtualLarry]

That's what is so frustrating. We have zero debt besides my mortgage but that doesn't matter. The score isn't hurting us getting approved for the loan at all, but the banks are demanding that 10K fee based purely and solely on middle credit score and money down. If we went with 5 or 10% it would be even worse.

That's not a down payment or anything, that's a freaking fee. Put a match to it and set it on fire.:'(

Now you know that credit scores are a scam invented by the bankers, to make more money off of people.

 

[Eos]

Now you know that credit scores are a scam invented by the bankers, to make more money off of people.

Corporations attempting maximize profit? Say it ain't so!

 

[SunnyD]

Credit score = The how likely a lender is going to make money off you score.

 

[LegendKiller]

Now you know that credit scores are a scam invented by the bankers, to make more money off of people.

You do know that there's very limited ability to determine credit quality without using some type of standardized score, right? Credit scoring models have been created with private parties to tweak for indivudal company needs, however, the credit scoring companies have good all-around measurements.

Otherwise there would be no way to do risk-based pricing of loan products, requiring flat interest rate tiering across all buckets.

As far as the effectiveness of credit scores in predicting default rates, they are pretty damn effective. One of my prior jobs required analyzing over 500,000 consumer loans originated over 10 years, creating static pool loss curves by each quarterly vintage. For example, Q2-2002 originations would be tracked through maturity to determine the ultimate loss for that vintage. Ultimately I was able to bucket those loss curves among several attributes, including FICO, state, product types, age and income.

The correlation between FICO score and losses is pretty amazing, there is a clear delineation at 10pt buckets between FICO scores.

 

[spidey07]

<snip>
The correlation between FICO score and losses is pretty amazing, there is a clear delineation at 10pt buckets between FICO scores.

That would explain why this fee seemed to be broken down in 10 point margins. Each 10 points below 740 resulted in higher percentage fee.

 

[OCGuy]

That would explain why this fee seemed to be broken down in 10 point margins. Each 10 points below 740 resulted in higher percentage fee.

Its generally 20:

620-639, 640-659, 660-679, 680-699, etc

 

[LegendKiller]

That would explain why this fee seemed to be broken down in 10 point margins. Each 10 points below 740 resulted in higher percentage fee.

The buckets I used vs what anybody else uses are immaterial, I had them in 10pt groups to see if there was any statistical difference, there was, but the data was a bit too granular for normal use. We did use ~20pt buckets for some presentations and up to 50 for others.

The fact remains that the FICO score, while not perfect, gives a good measurement and approximation of risk. All tools have their flaws, understanding them is key to using the tool properly.

 

[chusteczka]

Thank you spidey for providing the information you did, even though you were blasted for it.

I typically enjoy reading most of what spidey and LegendKiller write. For someone who like colored ponies, DominionSeraph sure surprised me with his in-depth analysis of spidey on a topic I know little about.

 

[Genx87]

Wife and I are getting ready to buy our dream home so we went to talk to a mortgage broker to see where we stood. Turns out she's got one and only one big huge ding on her credit score, some bill that she never received or authorized and it's 60/90 days late. This single item is dropping her score 100 points, otherwise she'd be at 740+ (broker ran what if analysis stuff).

Anything under 740 and it's a sliding scale of fees due based on how much you put down and what your score is. A percentage of the mortgage amount ranging from .25 to as high as 3%. Even doing a typical 20% down this single 40 dollar charge that was late is costing us 10,000 dollars in fees.

Yeah, I'll be disputing that shit with the credit agencies and the debtor. Big mixup on card changes, name changes, her moving, etc. What's even more interesting is the broker said assets don't matter, all the banks care about is credit score and debt to income ratio (and appraisal, comparable properties). If we ran it on my credit/income alone I was approved for 4x my gross salary which is ridiculous.

Here's hoping 40 dollars doesn't cost us 10 grand.

Tell the bank to eat the mythical costs. Nothing is forcing you to utilize their service. Especially if it will cost you more money.

 

[OCGuy]

The buckets I used vs what anybody else uses are immaterial, I had them in 10pt groups to see if there was any statistical difference, there was, but the data was a bit too granular for normal use. We did use ~20pt buckets for some presentations and up to 50 for others.

The fact remains that the FICO score, while not perfect, gives a good measurement and approximation of risk. All tools have their flaws, understanding them is key to using the tool properly.

The funny thing is, if the general public was more educated on how to manipulate the FICO system, it would be less effective as a tool to measure ability/willingness to pay.