Stupid Credit Companies

So, I paid off a mortgage a few years ago, and got a medical bill finally off my credit, that I spent several years challenging. I also stopped using credit cards too often, after getting them all paid off.

I figured my credit would go up, and it did, a little-- getting that medical albatross off of it really helped. But it didn’t help as much as I thought, and then it took a hit when the mortgage dropped off, and suddenly instead of a 15 year credit history, I had only a 9 year (my oldest credit card) credit history.

I had been using nothing but a debit card, keeping the credit cards just for theoretical emergencies, and slowly my credit began to drop, a couple of points a month. My brother knows more about this stuff than I do, so I asked him “What gives?”

He told me to use my credit cards. Pay them in total every month, so I never pay any interest, but use them (and I get the rewards too). So I moved things like my Netflix and Hulu payments from debit to credit, and a put credit cards on my Amazon and PayPal accounts. I set them up for autopay, so I won’t get any late fees by stupidly forgetting to pay something when I had plenty of money to do so.

A couple of weeks ago, I bought a plane ticket, made hotel reservations, and bought some theater tickets on a credit card. It had seemed to be working, I guess, because my credit scores were inching up a couple of points a month. Then I charged all that stuff for the trip, plus some other unusual expenses I had last month (I broke my glasses, and had to pay for the new ones, new prescription, everything, OOP, due to a catch in my insurance, and my laptop started to malfunction, etc., etc.) I will pay the card off when it is due, but it’s got a pretty big balance sitting on it.

Just checked my credit scores: Equifax went up 22 points, and Transunion went up 26 points.

What a stupid system.

To be fair, if you never use the cards, they don’t know how good you are at paying them back.
I agree with your brother, use the cards, as much as you feel is responsible. I put everything I can on credit cards (mostly for the points, but also to protect the ‘real’ money in my checking account) and pay it back, constantly. Between my 3 credit cards, I’ll bet I make 5-10 payments per week. I check them everyday and as soon as a charge posts (even if it’s pending), I send a payment.
No balance, ever, but a ton of points racked up.

It’s a credit score, not a I’ve got cash score. Use credit and pay it off responsibly, maintain credit responsibly, etc. If you don’t ever use credit responsibly, the monitoring agencies, don’t know how you will behave, so they rate you lower.

They care about card balances over 50%. They don’t care how long it’s been that way, just consider 50% to be your limit even if you’re paying it off monthly.
But yeah, credit is a game you have to buy your way into in order to get decent terms. Alternatively, you can probably get by just fine with no credit at all and just pay for your stuff up front. If you have the time to build up sufficient cash.

Credit scores are not a reflection of how well people manage their money, it’s how well they manage debt. If you choose not to use credit and stay out of debt, you don’t have a good credit score.

The goal is not to encourage us to become good money managers, but to encourage us to think of debt as normal. Not just acceptable when needed, but necessary to live.

If Americans were taught to manage our money when we were young, this would not be the worst thing in the world. But of you look at the amount of unsecured debt Americans owe, you will see that we aren’t taught to be wise with our money, and it will be a real problem before long.
Don’t think I am trying to preach at you. We have serious debt and are struggling to make minimum payments on just a few accounts, while others are so far gone that collection agencies don’t even call us anymore. If I don’t find a good salaried job soon (or a job that pays as well) we’re in deep trouble. We were not taught good money management or basic economics, and are learning the hard way. I haven’t looked at my credit score in three years (actually, we didn’t look, the car salesman did) and I hope I don’t have a need for it until the car loan and student loan are paid off.

It gets sillier. Until a couple of years ago, I apparently had no credit score at all. Which apparently raises red flags on background checks, which meant a severe threat to my livelihood. So I go to my bank to see about getting this fixed, and apparently the solution is for me to loan money to myself, so that I can demonstrate how good I am about paying myself back. How is that supposed to prove anything?

Yes, it’s called a credit score, but it’s supposed to be a measure of financial responsibility (at least, if I were trying to decide who to loan money to, I’d loan it to the more financially-responsible person). Behaving responsibly with your finances shouldn’t lower it.


Yes, exactly. And the best way to manage debt is to not incur it in the first place.

It does seem as though some people use their credit score as if it was some inherent measure of moral worth. I think this is misguided.

It always seemed to me that a credit score was more a measure of how much money a bank thinks it can make by doing business with you. While it is good to have banks wanting to do business with you, they aren’t doing it for your health.

So anyway, you probably shouldn’t sweat the details of your credit score.

Debt is a tool. Used correctly, it can make your life significantly easier.

FWIW, I use my credit card for everything.
I mean - why not? I get Amazon points with it, and there is (generally) no penalty for paying by credit vs check, and I pay the card off each month. Also, it makes tracking my expenses easier.
My credit score is a thing of beauty (813 and 816 as of today). Big deal.

Well in my case it’s because I don’t have one, never have, and wouldn’t know where to get one that’s not a ripoff.

I’ve occasionally thought about getting a credit card, annoying as it would be to have to manage it, but I honestly wouldn’t know where to start.

Get any card you want that doesn’t charge a fee. As long as you pay the whole balance each month, you won’t owe any interest. So it doesn’t matter what interest rate they give you. Best place to start is probably whatever bank you use.

Have you read all of this? No debt, ever, no credit score. Not incurring it in the first place is not a good thing in this debt-driven society.

If you never incur any debt, what happens when you go to a lender for something like a house or car or other items that most people aren’t going to be able to pay for with cash, upfront.
I understand that you can say that not incurring any debt implies you’ve never spent outside of your means. But how does a bank know what will happen when they hand you more cash then you’ll make in a year (or two or five)?

Fortunately (or unfortunately, I’m not sure) if you’re responsible enough to not incur any debt, you’re likely responsible enough to game the system very easily. Get a few credit cards, put one or two charges on them and pay them off right away and no matter what you do, never, ever close the oldest one.

Interestingly, from the time I started paying attention to my credit scores, I racked up about 10k in CC debt, got a house, paid the CC debt off and my credit score has always been impeccable. Partially because I called my credit card companies every few months to ask for a credit limit increase (even when I owed 10k or so, my limit was about 30k) and partially because in all that time, I’ve never had a single delinquent payment.
I plan to get a credit card in my daughter’s name when she turns 18 and use it just a little here and there. For no reason other than to start building up her credit so when she’s ready to buy a house/rent an apartment/get a car etc, she’s not starting with a blank credit history.

They don’t really care how your personal finances are, they care how likely you are to repay a loan. Not taking out any loans doesn’t tell them much about how you would repay a loan.

If you want to use cash only, that’s a perfectly legitimate plan. Just you must “go all in” and never ever have reason to request credit on ANYTHING. You’d have to be willing to go without any services that demand credit as a condition of doing business.

I guess that raises a question “Should it be legal to demand use of credit, by a person who is offering cash”.

Sure, why not? And, just to be 100% clear, that is legal. Keep in that while you can use cash to settle up a debt, no one is required to provide you with goods or services because you offer cash.

If I’m offering to pay up front, what benefit do they get from insisting on credit?

Do you have a bank account? Or a Credit Union? They both issue cards.