12mo ago

The numbers will determine your fate

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It is bullshit, but there are ways to game the system. Essentially, a higher credit score means you're a better mark for creditors. It means you pay your bills, but you're never debt free. In order to maximize your gains and keep the capitalist machine running, you always have to be leveraged in some meaningful way. Basically, if you're really poor, you're fucked, but if you can somehow manage your bills every month and put your normal expenses on a credit card of which you never use more than 50% of your limit, your score will go up. Finish paying off a car? Finance a new car! It's ridiculous, but that's what they want us to do to keep the ruling class in power.
- You're absolutely right.
  Basically your credit score is some amalgam of how much credit you have available, vs how much you owe, and whether or not you pay your bills. If you have available credit and you have never used it, you suck. Giving you credit won't get the lender anything for their trouble. If you have a little debt, and you consistently pay it (read, pay them interest), then your score goes up because you're paying your creditors, so other creditors know that you're a good source of income for them.
  The only thing that having a good credit score does, is give banks and institutions information on how much they could possibly wring out of you.
  My score should be through the roof, but I'm too leveraged, I have something like 80% usage of my available credit. But I have a nontrivial amount of debt that I have carried for years and I've (sometimes painfully) always paid my bills on time.
  My suggestion for anyone currently carrying significant debt trying to pay it off and increase their credit score: pay more than your minimum and take every offer they give you. If some institution says you're pre approved for some loan device, say yes. Even if you just throw it in a drawer. It will increase your total available credit driving down your occupied credit % and driving up your credit score.
  
  Filling out every loan offer is insanity.
  
  I would agree that the system is insane.
  If you're trying to build your credit score, having a bunch of credit that you're not using can help very much.
  That, in and of itself is the key: having credit that you're not using.
  If you immediately use any credit you claim, then you're going to eventually sink (go bankrupt), which takes 5 years, sometimes longer, to clear from your credit score.
  The insanity of the system is evident. Understanding what the credit score really means, can inform your decisions about how to best maximize your score, if that's your desire.
  I know people who are classifiably wealthy with terrible credit scores because they've never needed credit for anything, so they don't have any credit sources and certainly have not ever held a balance on a credit account for any length of time. So they look very bad on paper to creditors. Consequently I know very diligent people who are remarkably poor by comparison with near perfect scores because they know how to game the system in their favor, and do everything the way creditors want it to be done. They're never so leveraged that it negatively impacts their score, they have plenty available and they're never so much in debt that they can't pay their interest.
  It's a stupid system.
  
  I'm not saying the system isn't stupid, I'm saying that blindly applying for every credit offer carries risk in and of itself. Plus hard credit pulls will temporarily hurt credit scores anyway. I just wanted to caveat that piece of advice for folks because I think being cautious and intentional with personal finance decisions makes more sense.
  
  That's not what I suggested. I'm speaking more on the lines of being pre-approved for credit, which usually doesn't require a hard credit inquiry.
  Usually your own bank will do stuff like this, or financial institutions that you have history with.
  Credit increases and new forms of credit that are pre-approved are generally what people should focus on, not filling out applications for credit as much as possible.
  Such offers are not frequent as long as they're genuine, and usually result in a reduction in total credit utilization, which leads to a better credit score.
  I also agree that filling out requests for credit without being promoted by your existing financial institutions can be detrimental, at least in the short term.
  My credit isn't perfect and I'm continually trying to improve by paying down my loans and credit accounts to try to get them to and keep them below 50%, but if my bank sends me an offer for a pre-approved card, I'll go ahead and accept. When it arrives, I'll activate it then toss it in a drawer and do everything in my power to never use it, simply to get that utilization number under 50% and keep it there.
  
  Normally it would be. For anyone in the position of barely treading water financially it's a sound strategy.
  
  The key is to claim the offer, but not use the financial resource. Just use it to boost your available credit and decrease your overall debt used.
  If you claim it and immediately spend it, then you're only going to hurt yourself.

293 comments