I don’t think they have access to information for routine payments like utility bills. They would only know if you failed to pay for long enough that a service provider reported a bad debt.
If you don’t have any credit cards or loans, it’s difficult to build a very good credit score. I’m not sure what the default state is if they have no information about you, good or bad, but it doesn’t default to a top credit rating. It’s a bit counterintuitive, but if you manage your finances well and prefer never to borrow money, they simply have no information about whether you can be relied upon to repay a debt. You might have a million dollars in cash sitting in the bank, but they have no way to know that.
And absent a “credit score” where I live I was wondering what my score would be presuming all bills paid promptly and no loans of any kind. (In the last 2 decades)
Ignorance fought, thanks. In this context then, no news is good news. Lenders can make an assumption that if you’re an adult, you have bills, and if nobody has reported you as delinquent, then your bills have been getting paid on time. It may not be enough to get the lowest rates on an auto loan or mortgage, but it might be enough for someone to lend to you at an above-market rate.
After googling a bit, it seems that it’s possible to deliberately get your on-time utility payment history factored into your credit rating, at least at Experian:
My credit score went down 80 points when many years ago I paid off a $5,5K balance all at once after moving back to the US and getting a job with a decent paycheck. It bounced back in three months.
There are a few people who try to get to a perfect 850 just for the hell of it (as always there’s a Reddit group) but I’m surprised why you’re baffled that a small percentage of people are obsessed with anything. Way more people are obsessed with things like tv shows and professional sports teams which has zero utility. Do you need that explained as well?
I think it just wouldn’t exist unless you did something like what @Machine_Elf found, where you can request that they create a score for you by looking at routine bill payments, something they don’t do by default.
You will have a score from the first time a potential lender makes a hard enquiry, but that article is cagey about what the default number is if the literally have no information (good or bad) about you. I would have thought it made sense to report a confidence level (how much information it’s based on) with the score, but I don’t know if they do that.
We need to keep in mind that credit score is a metric that helps lenders, not us. But over time, consumers have been convinced that the higher the credit score the better off, but I don’t think that’s the case.
I don’t know what my creadit score it, but I think it’s good. My issue is that I haven’t paid interest on a credit card my entire life, I only have two credit cards and my mortgage is paid off.
So whenever I’ve gone to a financial advisor for some reason, I"m told I should work to up my socre by getting a loan and paying it off over time, which might make sence to the lender, but none to me.
Paying interest on a credit card is not what improves your credit rating. It’s using a credit card. The best way to improve your credit rating with credit cards is to have several cards (but not too many) with the highest credit limit they will grant you so your percentage utilization is low, making all your purchases on credit cards, and paying off the balance in full each month.
This is not some trick to get you to borrow money. It’s a trick you can use to make the credit agencies aware that you are reliable. It’s common sense - would you lend money to somebody you don’t know, just on the basis that you had never heard anything bad about them? If a better credit rating has no utility to you, there’s no reason to do it. And it’s better to do it with credit cards if you can, because that costs you nothing.
My parents encountered that problem in the 80s, when they first applied for a credit card, in that they had no credit record anywhere, apparently. They were cash-only, pay all-at-once sort of people (like many immigrants of their generation.) So, I remember my dad cursing and swearing, having to get some kind of store card and show a consistent pattern of payment, before they were able to even get their first Visa or Mastercard. The fact that they’ve never missed a bill in their life didn’t seem to matter, as the utilities and such did not report to the credit bureaus.
Perhaps. The credit report dinged me twice on this.
“Balance on credit card to high.” This is because I use only one card and it goes up to ~$8,000 a month and then it’s paid in full.
“No history of payments over time.” Not sure how I change this if I don’t pay interest. This seems very self-serving for the CC industry to me.
Again, I think this is self-serving to the lenders. Would I lend money and believe it would be repaid on time to someone who has showed they can manage money such that they pay their debts every month including $8k per month? Yes.
Do I think I’d make money lending to this guy? No.
If you make your loan payments, the lenders make money. If you use your CC, the CC companies make money. They make more if they can charge you penalties, but they’re already making money.
Every time you use a credit card, you are borrowing money. So yes, saying “You should use credit cards for most of your expenses” is semantically equivalent to saying “You should borrow a lot of money.” And all it takes is one missed payment on one of those cards to get slammed with a bunch of interest payments.
I do it, of course. I play the credit card game because I have to, because that’s the way our economic system is structured, and I wouldn’t have been able to get a decent mortgage rate or car loan without doing it. But it is a pretty perverse system, where living completely within your means and paying all of your expenses in full as they occur makes you someone that lenders want nothing to do with.
The system has issues but this is absurd hyperbole. My credit rating among the three agencies I’ve checked range from 809 to 823 and I get constant offers for loans.
I literally got my current rental over a couple of other applicants due to a higher credit score. And like others I’ve seen my credit score drop precipitously when I made such financially unsound moves as pay off a car and sell a house so I no longer have a mortgage. Alleviated by starting to use credit cards more regularly (I basically use them for all online purchases and pay them off promptly).
It’s a faintly ridiculous system that does sort of require a little bit of gaming to maintain your financial security. Unfortunately it is necessary because when it comes to things like winning a competition for a decent rental, you need every edge you can get.
It’s just one of those things that happen when algorithms are making the decisions which lends itself to gaming the system and weird unfairness. It’s generally a decent indicator though or the lenders wouldn’t use it. It’s certainly better than the past when a privileged banker could exclude single women and people of color as a matter of routine.
That said, it’s nothing new. My parents wanted to get a mortgage in 1963 and had never used credit. They were told then to take out a small loan loan with a term of a few months to show they were a good risk.
(I basically use them for all online purchases and pay them off promptly).