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Subject:  Re: Ever heard of the 30% rule? FICO Date:  8/22/2019  1:52 AM
Author:  aj485 Number:  312599 of 313032

The credit reporting agencies don't get information about deposits, etc, but they DO get information about overdrawn accounts and fees etc, yes?

No, that's a different type of reporting agency, called ChexSystems, where banks report bounced checks and overdraws on checking accounts. (I think that ChexSystems may have competition, but I don't know their name(s).) This information is not reported to the credit bureaus unless the accounts get to the level where there is a judgement against you for overdrawing your account, and even then, it's reported as a judgement, not as a delinquent account.

Therefore, they know I do not over draw my account.

But that's not what you said. You said The credit agencies can 'see' my bank account info, they KNOW the liquid assets I have. And that's flat out wrong.

And, FICO=SCAM because the "rules" are set up to "punish" individuals. The credit agencies exist to support the finance industry.

You are welcome to your view. But I see the system as rewarding individuals who are responsible and play by the rules. Yes, the rules are set by the lenders. But there would not be nearly as much credit granted if the rules that were in place before credit scoring became common were still in place, when it was a good old boys network, and you had to be the right color and the right gender and know the right person to get credit. I would suggest that very few of the startups that were started using credit cards could have been started without credit reporting. And that there would be a lot less homeownership without credit reporting.

Which brings the thread back to the 30% rule. This is apparently a rule of thumb used by industry to increase interest rates on individuals. Ie get individuals into debt structures from which they cannot escape.

How does it do that? Even if your credit score decreases during the year because you go over 30% of your credit limit, your credit card company is not allowed to impose penalty rates unless you are actually late with a payment, due to the CARD Act. Once your renewal date comes up, with proper notice, they are allowed to increase your interest rate, but even then, they need to give you the option of opting out of that increase, having your card closed, and just paying off the balance at the prior terms. (Yes, if the rate on your card is variable, and the base rate goes up, the interest rate on your card will go up, but, when the interest rate goes down - like it just did, the interest rate on your card goes down, too.)

That said - For those who regularly charge up their balances to more than 30% each month, but still pay off the total balance every month, an increase in their interest rate doesn't matter. By paying the balance off each month, they will pay zero interest. Those people who carry balances of more than 30% of their credit limits are not using their credit responsibly, and have a much greater chance of defaulting on their cards. That comes with consequences, and they will be charged higher interest rates.

But as far as getting them into 'debt structures from which they cannot escape' - it was their choice to put charges onto the card. Yes, stuff happens, and people sometimes can't extract themselves from the consequences of that stuff. But for those who choose to live above their means by using credit cards (and there have been a lot of examples of that on this board), they are making their own choices. They may not be totally clear on what those consequences will be - but that's not because the information isn't available. Personally, I am happy to help educate people, but unfortunately, many people don't seek to become educated before they make decisions that will burden them for years. And even after they finally recognize that they are in a deep hole, they still often aren't willing to be educated, and just keep saying that they can't implement suggestions that are made. They may be in a 'debt structure that they can't get out of' - but I contend that it's mostly because they made choices that put them there, and they are continuing to make choices that will leave them there.

I will also mention: Stuff happened to me, too - I was out of work for nearly a year at one point during the 90s, before I joined TMF. But I managed to make all of my loan payments during that time, and I didn't default on anything. But that was because, while I was working before I got laid off, I had put away a large emergency fund and was able to use that emergency fund (although I had no idea that it was called that) when I was unemployed. Without really being told by anyone, except maybe reading articles in Money Magazine, I had figured out that it was a good thing to put money from each paycheck into savings, just in case - so I did that. Once I was employed again, one of the first things I did was to build that fund back up again - again, just in case. Those were my choices, and I recognize that they aren't everyone's choices, even if they really should be, in order to attain financial security. Those who choose to make different choices do leave themselves vulnerable to those who are lending them money, since they are disregarding the advice that "Borrowers are slaves to lenders" and "Neither a borrower nor a lender be" - advice has been around for millennia.

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