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And, yes, those who "understand" the rules don't get too burned by the lenders, and are therefore "rewarded".

Not sure why all those quotes are needed. Read the agreement. Follow the agreement.

I can imagine a time when I would pay pretty much any interest rate in some situations.
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Me neither.

I was quite aware that utilization of credit above 10% (not 30%) impacted your credit score negatively.

Apparently the FICO score system includes a rule of thumb "keep the amount of revolving debt below 30% of available credit".

The above article says, though, that the debt to credit ratio begins to affect the FICO well before the level reaches 30%. It mentions 7%.


Interesting to hear that 7% is the new 10%, since what's been on this board for years is to keep your credit use below 10% As an example, here's a thread from 11 years ago where the 10% recommendation was made https://boards.fool.com/close-credit-card-or-leave-open-2691...

How do people get a FICO of 850? If you want a score above 800, pay attention to this "rule of thumb"? Perhaps ask for a limit increase such that the amount of monthly charges (that I always pay off) is less than 7%?

First, you have to choose the right model to look at your score on. I have lots of different options - 2 banks that give me periodic score updates and several different credit monitoring sites that also offer free scores. According to one of my banks, my score is currently 843. It's never been lower than that in the past year, and was 850 for 2 of those months. According to the other bank, my current score is 823, and has pretty steadily increased from the 796 it was when I started using their app about a year ago. The big difference? The bank that scores me higher uses a FICO scoring model, while the bank that scores me lower uses a Vantage scoring model. Here's a pretty good explanation of what the differences are https://www.thebalance.com/fico-score-vs-vantagescore-961144... Depending on your credit habits, you may well score better using one model than the other model.

I generally keep my credit card utilization around 2% - 3% of my total credit limit, and try not to go above 10% of the limit on any single card in any particular month. I also:
- pay every single payment on time
- pay off my credit cards completely every month
- limit credit inquiries
- have a mix of different loan types (general use credit cards, 1 store credit card, mortgage for my house and mortgages for rental properties; my car loans have all dropped off my score (more than 7 years old) but when they were counted, they also helped improve the mix)
- think about the impacts for opening new accounts before I apply for them, and make sure that I consider that the negative impacts (credit inquiry, decrease in average account age, 'new account' impacts, etc.) are going to be more than offset by the positives (additional credit limit, rewards for new account, etc.)

If you need to use more than 10% of your credit limit on a monthly basis, but you still pay off your cards every month, you can get into the habit of paying off your credit card balances each week, instead of each month. That way, the maximum balance that will be reported will be lower, so it will appear that you are using less of your credit limit. From a credit scoring perspective, that's probably a better option than asking for a credit limit increase, since the inquiry to increase your credit limit will negatively impact your score for up to 2 years.

The article also says 60% of Americans carry a balance on their credit cards. Therefore, 40% do NOT.

Therefore, those "average credit card debt" FUD stories are based on skewed numbers?


Well, for the 60% of people that do carry balances, their average is greater than the overall average. So, I'm not sure that it's "FUD" for them - it may actually be understating their problem(s). That said, averages can ALWAYS be skewed by instances at the extremes. Consider a population where 1 person carries $100k in debt, 4 people each carry $50k in debt, 55 people each carry $10k in debt and 40 people pay off their cards every month, so they carry no debt. 60% of the people are carrying debt and 40% aren't. The total debt is $850k, so the average is $8,500 - a lower debt total than any of the people who are actually carrying debt. So, it's certainly not "FUD" for those who are carrying debt, although it's probably "FUD" for those who pay off their balances every month.

Even if you look at just the 60 people carrying debt, the average debt is $14,167. That is a little higher than the balance of the people carrying $10k in debt - but not enough so that I would say it's "FUD" - it's still in the same ball park. And it's certainly not "FUD" for the people who are carrying $50k or $100k - their balances are still way higher than the average.

Some portion of that 60% carrying CC balances, is now over due on their CC payments, some are 90 days past due, and the article says the number that are 90 days past due has "ticked up".

Yes, the delinquency rates have increased recently. But they are still lower than historical rates https://fred.stlouisfed.org/series/DRCCLACBS

AJ
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Like you, AJ, I don't carry a balance, and my FICO has been over 800 since... ? I don't know, cause I don't track it regularly. Seems like it's mostly 820-830?

I only have two CC s. I don't know the percentage of my monthly expenses to total available credit. But, it might be in the 10% neighborhood?

Is 850 really better than 820? When would I really care?

Those FUD stories usually come across to me as "OMG!! EVERY AMERICAN OWES CC DEBT $XX THOUSANDS! OUR GRANDCHILDREN WILL BE PAYING.. TEOTWAWKI!" Etc.

I don't remember any of those stories saying "but wait, 40% of CC users pay the balance each month! Ie 40% do NOT have CC debt!".

FORTY PERCENT are "responsible" users.

Most articles do NOT report that, and are therefore trying to spread FUD about how bad is CC debt.

FUD n Blood sells. Good news doesn't.

I agree that CC debt is not FUD for those in debt. It's a tragedy, regulations are anemic in response to abuse by both debtors and creditors. And FICO is part of that abuse.

🙂
ralph
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I just checked my CCs for the credit limits. My monthly expenses typically run 6-8% of the total limits, FICO was 825-827. Over the last couple months, I've been traveling, and expenses are 15%, FICO has dropped to 813-817.

One card said that my score has dropped due to no info from recurring payments (No mortgage payments, no car payments, etc)

Therefore, to get 'credit' I'll have to pay interest? Have I ever said that I believe the FICO should be spelled SCAM.

The same card also said 'due to payments made in a non-agreed manner'. Since I've been traveling, I've paid some expenses up front - I knew that I'd be charging $2000 so I paid that in advance. I also paid some in the middle of the pay period (again, in advance). I'm ASSUMING that this is the 'non agreed manner'?. AJ, you suggested paying weekly as a means to prevent the percentage from going over 7%? That MAY not work, since the user 'agrees to pay during the payment period'?

The other card said 'x may affect your score' - i.e. no info on what exactly has caused the FICO to drop - this one did tell me it's Transunion.

I pay my share of the rent, to my room mate who then makes the rent payment to the apartment complex, so no record of that, either.


LOLOL

I have only the monthly expenses currently on my CCs... NO OTHER DEBT! The credit agencies can 'see' my bank account info, they KNOW the liquid assets I have.

Your FICO SCAMmed Fool
ralph

I requested a credit limit increase from the two CCs. One denied it out right, perhaps because I don't actively use that card? The other said 'we'll get back to you in 24 hours'...

We'll see
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One card said that my score has dropped due to no info from recurring payments (No mortgage payments, no car payments, etc)

That's the 'mix' of credit types issued. You can provide that mix by getting store cards and other types of accounts, not just mortgages or car loans.

Therefore, to get 'credit' I'll have to pay interest?

Not necessarily, it's possible to get 0% car loans, for instance.

Have I ever said that I believe the FICO should be spelled SCAM.

Why is it a scam? There's lots of documentation on how the scoring is done, and how to improve your score. With scores above 800, I'm not sure why you're so worried about your score.

The same card also said 'due to payments made in a non-agreed manner'. Since I've been traveling, I've paid some expenses up front - I knew that I'd be charging $2000 so I paid that in advance. I also paid some in the middle of the pay period (again, in advance). I'm ASSUMING that this is the 'non agreed manner'?.

I don't know if your assumption is correct - you'd have to ask the credit card issuer. That said, in your credit card agreement, there is probably a prohibition on paying more than you actually owe on your credit card at the time you make the payment. If your credit card agreement has that prohibition, and you paid anything before the charges were actually posted to your card, then, yes, you probably breached the agreement, and would be considered to have paid in a non-agreed manner.

Here's the back story on why paying more than you owe on your credit cards is prohibited: Credit card issuers have found that scammers were pre-paying credit cards with payments that bounced after they were given credit for the payment. Before the payment bounced, but after they were given the additional credit over and above their credit limit, the scammers were using their cards for amounts higher than their credit line (often for cash advances) because they had the additional credit that was given for the payment that would bounce. The scammers were then walking away from the card. Credit card issuers decided that they didn't want liability over and above the credit limit that they had approved for the borrower. Therefore, many credit card issuers prohibit paying more on your credit card than the currently posted balance, and some issuers are also more aggressive about declining charges that will put you over your credit limit, rather than approving them and charging you a fee.

AJ, you suggested paying weekly as a means to prevent the percentage from going over 7%? That MAY not work, since the user 'agrees to pay during the payment period'?

Yes, I am suggesting paying your current balance weekly, where 'current balance' means that you have made charges to the card, and that those charges have actually posted to the card - not that the charges are just 'pending'. If the charge has already posted to the card, it's part of the current balance, so you aren't paying 'in advance'. It's only if you are paying before charges have posted to the card - when they are pending, or before you actually make the charge, that it's considered paying 'in advance' and likely would be a breach of your credit card agreement. I

The credit agencies can 'see' my bank account info, they KNOW the liquid assets I have.

Sorry, that's just flat out wrong. Credit bureaus do not have access to your bank account info. They only get reports from your creditors on your credit accounts, NOT on your deposit/brokerage accounts. Contrary to another somewhat popular belief, credit bureaus also don't have any information on your income. While you may fill out asset and income information on credit applications, that information DOES NOT go to the credit bureau. It goes to the lender to whom you are applying for credit with. The lender DOES NOT share that information with the credit bureau - they only use the information to determine if you are qualified to get the loan. If you are approved for the loan, the lender will likely start sharing information about the loan with the credit bureaus, but it may take up to 3 months before the new loan will appear on your credit report. If the lender pulls your credit, the inquiry is likely to show up within a few days.

I requested a credit limit increase from the two CCs. One denied it out right, perhaps because I don't actively use that card? The other said 'we'll get back to you in 24 hours'...

Why did you ask for the credit increase? Did you ask why it was denied? And please remember, if you allowed them to pull your credit, your score will probably take another hit. That's why I specifically said:

If you need to use more than 10% of your credit limit on a monthly basis, but you still pay off your cards every month, you can get into the habit of paying off your credit card balances each week, instead of each month. That way, the maximum balance that will be reported will be lower, so it will appear that you are using less of your credit limit. From a credit scoring perspective, that's probably a better option than asking for a credit limit increase, since the inquiry to increase your credit limit will negatively impact your score for up to 2 years.

Again - note that 'credit card balances' means that the charges have actually posted to your account - not that you are pre-paying before charges have posted.

AJ
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Hi AJ. MANY thanks for the replies 🙂

I asked for the increase to see if they would give me any information on why I would be denied.

I'm not sure that I care about the FICO, since I don't plan to apply for any loans. It's been a non issue for me for more than 10 years. (And yes, I consider myself very fortunate!)

The credit reporting agencies don't get information about deposits, etc, but they DO get information about overdrawn accounts and fees etc, yes? Therefore, they know I do not over draw my account.

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

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.

🙂
ralph
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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.

AJ
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Those FUD stories usually come across to me as "OMG!! EVERY AMERICAN OWES CC DEBT $XX THOUSANDS! OUR GRANDCHILDREN WILL BE PAYING.. TEOTWAWKI!" Etc.


That strikes me as weird. Don't those stories usually use the word "average?" As such, how do you perceive them to mean "every?" Don't you know what the word "average" means? It does not imply anything whatsoever about the condition of any subset of the whole.

It MIGHT mean that a single person has all the debt, or it MIGHT mean that every person has an equal share, but it doesn't imply either, or any specific distribution in between. It ONLY tells you what the average is.

xtn
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Therefore, to get 'credit' I'll have to pay interest? Have I ever said that I believe the FICO should be spelled SCAM.


Wow. I'll present the following (reasonable? you decide...) arguments:

1. You don't NEED a FICO score.
2. It's something that benefits you.
3. FICO targeted its products to lending institutions, not general consumers.
4. And it isn't a scam to those institutions, inasmuch as it is a product that generally performs as advertised for them.

xtn
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True. There are HUGE benefits to society from making credit available - Grameen loans prove this?

And, yes, those who "understand" the rules don't get too burned by the lenders, and are therefore "rewarded".

You and I've had some very similar stuff happens experiences, WRT job loss and potential debt.

It is intuitively obvious to me (and apparently to you, too) that I can "play the credit game by their rules" in a way that benefits me personally.

Yes, the interest rate a card could charge is irrelevant if one pays the balance each month.

Yes, many folks on this board have "learned the debt lesson". And help others get out of the debt hole. That's why I posted the article about the 30% rule.

That's all true.

While easy credit does have huge benefits to society, draconian punishments have enormous negative consequences to that same society. Just look at the fear that CC debt is going to precipitate a recession.

FICO, as it's currently set up, gives lenders draconian power and magnifies those negative consequences to society. FICO is a tool of the lenders, there is nothing on the consumer/borrower side to balance it.

Naive users accept FICO at face value. They do not realize FICO is not there for the borrower, but rather for the lender. And lenders use FICO to harm the borrowers. FICO is legal, but it's also a SCAM on borrowers.

FICO is a SCAM (on borrowers) even though it's "legal".

Perhaps the CARD act should have placed more regulations on FICO and lenders?

🙂
ralph
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If you want a score above 800, pay attention to this "rule of thumb"? Perhaps ask for a limit increase such that the amount of monthly charges (that I always pay off) is less than 7%?

A FICO score above 800 requires a long credit history and low reported balances. It doesn't require paying interest.

My FICO score temporary below 800 when the charges for the family cruise were reported as the current balance. The balance was paid off but it took several months for my credit score to recover above 800.

Normal monthly charges are below the 10% range. Even though I refused to update information one credit card increased my credit limit. It might help my credit score. Still, my credit score was a few points higher last August and there is no obvious reason why.
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Naive users accept FICO at face value. They do not realize FICO is not there for the borrower, but rather for the lender. And lenders use FICO to harm the borrowers. FICO is legal, but it's also a SCAM on borrowers.

FICO is a SCAM (on borrowers) even though it's "legal".


Credit scores separate responsible users of credit from the irresponsible. It is useful for those who are responsible with their finances.
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Yes, the interest rate a card could charge is irrelevant if one pays the balance each month.

I wouldn't put it that way. You have some control of the interest rate. If you want a lower interest card and your credit is good, you can seek out a card with a lower interest rate. If the credit card company raises the interest rate even though you are paying the balance each month, then find a new card.

Naive users accept FICO at face value. They do not realize FICO is not there for the borrower, but rather for the lender. And lenders use FICO to harm the borrowers. FICO is legal, but it's also a SCAM on borrowers.

FICO is a SCAM (on borrowers) even though it's "legal".


Not it isn't no matter how many times you post it in all-caps. It tells the lenders if you are a risky borrower. The harm to the borrower is a low FICO score which is a result of the borrower's own actions.

PSU
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While easy credit does have huge benefits to society, draconian punishments have enormous negative consequences to that same society.

Please identify the 'draconian' punishments you are citing. Credit card companies aren't asking for people's children, sending people to debtor's prison* or chopping off people's heads - those would be draconian punishments. And, as already stated, the ability for lenders to impose penalty rates was greatly curtailed by the CARD Act. Additionally, the CARD Act required lenders to provide information to their customers information on how long it would take them to pay off their debt if they only paid minimum payments, therefore encouraging customers to become more responsible borrowers.If someone gets in too deep, they can declare bankruptcy and rid themselves of potentially all of their debt, possibly even student loans.

I will say that the student loan mess is a problem - but that is not credit card debt, and it's the Federal Government who is setting the draconian terms, not the credit card issuers. So if you have a problem with the way that student loan debt is being handled, you need to take it up with your Federal Government representatives, not blame it on the credit card issuers.

Just look at the fear that CC debt is going to precipitate a recession.

Please cite your source for these fears. I have not seen anyone forecasting a recession because of credit card debt. I have seen some concerns about overall debt - but that includes things like student loans, mortgages, car loans and business loans, not just credit card debt. But even those concerns don't cite debt as the only potential cause for a recession - they also cite issues with corporate profits and trade.

FICO, as it's currently set up, gives lenders draconian power and magnifies those negative consequences to society. FICO is a tool of the lenders, there is nothing on the consumer/borrower side to balance it.

Huh? Yes, credit scoring (not just FICO, but Vantage, too - among others) is a tool to help lenders determine whether someone is likely to pay back the money that they are borrowing. Again, what 'draconian power' are you citing that the lenders have? If they choose to not lend to someone because that person is unlikely to pay back their loan, how is that 'draconian'? It helps keep people out of those 'debt structures that they can't get out of' if they don't get to borrow. If the lender does choose to impose a penalty rate, it's not just because someone's FICO score went down - it's because the person missed a payment, or because someone's FICO score went down AND, when the card is up for renewal, the person chose to accept that penalty rate, rather than having the account closed. That's not 'imposing' it on the consumer. That's the consumer making choices.

Naive users accept FICO at face value. They do not realize FICO is not there for the borrower, but rather for the lender.

In this day and age, after the first time someone who applies for a loan, anyone who remains a 'naïve' borrower has chosen to be one. Any time someone has a harmful impact, such as being turned down for a loan, or not getting the best rate for a loan, they get a notification from the lender about what factors were used in making that decision. If the borrower chooses to ignore those notifications, and chooses to not fix those issues, they are choosing to be naïve.

FICO is legal, but it's also a SCAM on borrowers.

Again, you have cited no facts for this - just your opinion. You, of course, are welcome to that opinion, but until you can cite facts to back up your opinion, you are the one who is spreading FUD.


AJ

*There are local governments that are jailing people who don't pay fines or fees for things like traffic tickets and parking violations. That does seem draconian to me, but, again, it's not credit card issuers who are doing that, and if your local government does, you need to take that up with them.
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Yes, the interest rate a card could charge is irrelevant if one pays the balance each month.

I wouldn't put it that way. You have some control of the interest rate. If you want a lower interest card and your credit is good, you can seek out a card with a lower interest rate. If the credit card company raises the interest rate even though you are paying the balance each month, then find a new card.

...

PSU


The effort is worth it to you but not for me. I look for the card that gives me the best benefits and ignore the interest rate.
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The effort is worth it to you but not for me. I look for the card that gives me the best benefits and ignore the interest rate.

Did I say it was worth the effort? Did I even say I care about interest rates?

No and no.

PSU
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And, yes, those who "understand" the rules don't get too burned by the lenders, and are therefore "rewarded".

Not sure why all those quotes are needed. Read the agreement. Follow the agreement.

I can imagine a time when I would pay pretty much any interest rate in some situations.
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Did I say it was worth the effort? Did I even say I care about interest rates?

No and no.

PSU


Sorry, I misread your response.
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If you want a lower interest card and your credit is good, you can seek out a card with a lower interest rate. If the credit card company raises the interest rate even though you are paying the balance each month, then find a new card.

And then watch your credit scores fall due to A) inquiries on your credit history and B) the average age of your accounts goes down due to brand-new cards in your wallet.
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And then watch your credit scores fall due to A) inquiries on your credit history and B) the average age of your accounts goes down due to brand-new cards in your wallet.

Everyone should understand the ramifications of their actions.

PSU
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And, yes, those who "understand" the rules don't get too burned by the lenders,....


Those who DON'T understand the rules don't get burned by the lenders either. They get burned by their own ignorance and/or bad decisions.

I've been irritated with lenders, but never once have any of them violated the agreements I've signed. Never once.

I don't think you know what the word scam means. FICO has never deceived any borrower for its own gain. The word scam involves dishonesty, fraudulent behavior, etc. What has FICO been dishonest about? Sure, maybe people don't correctly understand what FICO is all about, but that doesn't mean FICO scammed them.

Your characterizations scream of a victim mentality. You know, like the whiners who think spoken words they don't like should be considered acts of violence. Heck, I read an article the other day complaining about how our government's climate change policies are racist because climate change negatively effects low income minority neighborhoods the most. I mean, come on, really? But that's what you sound like.

And I'm not hating on your or anything like that. You're perfectly entitled to your opinions. I'm just telling you how your opinion on this topic is coming across, that's all.

xtn
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LOL xtn. I promise! I'm not taking it personal. 🙂

And, I know how "my opinion" comes across. This is not the first time I've expressed it.

A point at which I see most folks reasoning being different than mine is how to define legal, moral, and ethical.

And how the definition affects society.
A SCAM may be legal, but be dishonest or fraudulent at either the moral or ethical definition.

Many seem to believe that because FICO is legal, that is not a SCAM.

Be that as it may... This board has discussed the way that percentage of debt (debt/credit ratio) affects FICO.
According to the article in the OP, there is an industry "rule of thumb" that somewhat codifies that.

That was the original information that prompted this thread.

🙂
ralph
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{{Many seem to believe that because FICO is legal, that is not a SCAM. }}

As someone who was not born to wealthy parents, I do not think of FICO as a scam, but it is one of the few ways that a person can prove their creditworthiness without family connections.


c
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True. It IS a useful tool. And society benefits from using it.

If it is so wonderful and unbiased, why did the government pass regulations FORCING the credit reporting agencies to give free copies of her/his credit score each year, to each individual who requests a copy?


🙂
ralph
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rainphakir,

You wrote, True. It IS a useful tool. And society benefits from using it.

If it is so wonderful and unbiased, why did the government pass regulations FORCING the credit reporting agencies to give free copies of her/his credit score each year, to each individual who requests a copy?


That's because of the Law of Unintended Consequences that most legislation falls prey to...

When the FCRA was first enacted in 1970, it was designed to create a level playing field for consumers while simultaneously promoting and indemnifying CRAs from the potential consequences of publishing inaccurate information about consumers. (Liable claims can be largely unbounded - especially if the injured party can show that the company should have reasonably have known it was in the wrong.) This law set up the dispute resolution process we know today. It also set up statutory damage amounts and permits you to litigate your claims in small claims court. In exchange, the CRAs essentially became immune to liable claims and their associated punitive damage awards.

This had unexpected consequences... CRAs asserted proprietary ownership over individual credit files and refused to provide a copy to the individual without payment unless forced to under the FCRA. As consumer credit evolved and became widely used, it became apparent that this left consumers with a frustrating dilemma: Either cough up lots of cash on a regular basis to monitor your credit report or risk it and wait until you've been denied credit.

Once credit scoring started becoming a thing, it became apparent that the hard inquiries required to get a free report were not themselves "free" - thus the unintended consequences. Being refused credit was itself damaging your credit report, at least according to FICO. Eventually this became a big deal. The lies the company was telling about you were considered proprietary and you couldn't even dispute them without paying some kind of price. This eventually rose to the level of political awareness and legislators eventually did something about it - they required free annual credit reports. And eventually they required the ability to freeze your credit too...

What I think some CRAs are even now still struggling to understand is that providing a more accurate view of consumer data increases the value of their product, so it's actually in their best interest to let consumers view the data whenever they like. But of course the CRAs counter that it costs them money to provide access and the more access required, the more money. Of course with the online age, that argument holds only a very tiny amount of water...

- Joel
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If it is so wonderful and unbiased, why did the government pass regulations FORCING the credit reporting agencies to give free copies of her/his credit score each year, to each individual who requests a copy?

Actually, Congress didn't pass a law giving everyone access to their credit SCORE - the FCRA law requires that each year, every consumer get access to their credit REPORT. Two different things.

AJ
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True. It IS a useful tool. And society benefits from using it.

If it is so wonderful and unbiased, why did the government pass regulations FORCING the credit reporting agencies to give free copies of her/his credit score each year, to each individual who requests a copy?


🙂
ralph


Inaccuracies occur. It doesn't mean that it is biased.

The forcing of CRAs to provide copies of credit reports (not score) allows people to correct problems and find identity theft.
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{{If it is so wonderful and unbiased, why did the government pass regulations FORCING the credit reporting agencies to give free copies of her/his credit score each year, to each individual who requests a copy? }}


Because like all human institutions, errors can creep in. Especially errors created when different systems try to talk to each other.


For what it is worth, we have never identified any errors in our free credit histories.


c
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cattleman22,

You wrote, For what it is worth, we have never identified any errors in our free credit histories.

I've found exactly one.

But I've had to fix / fight a few before I could get reports for free!

Once back in the '80s my ex and I spent half a day at a local TRW (now Equifax) office waiting in a queue so a rep would see us. I think we'd both been denied on a credit card application, so I had only paid by having my credit report dinged by a hard pull and a subsequent denial. I don't think I even knew what a CRA was until that incident much less the FCRA.

The rep came out with cryptic, coded reports on 14" (wide) computer (probably mainframe) printer paper. My ex's report had stuff on it from her mother (intentional, sort of; not that her mother asked for permission and not that her mother's payment history was spotless either) and from some third person. How they mixed that third person up with her I have no idea since they had different names and SSNs. I recall my own report had a few minor mistakes; but we must have spent at least an hour with the rep just on my ex's report.

That was the only time a CRA had us come into their office. After that it became increasingly difficult to even get a human on the phone. I remember paying to pull my credit report and my ex's back in the late '90s when I was going to refinance my house for the second time (second refi that is). That's when I discovered she had started putting me on accounts she was opening without my knowledge. Worse the lenders were listing me as a co-owner. I spent a couple of *months* in those fights. At one point in a fight with Dillard's (they had denied my dispute despite the fact that they lacked my signature on anything, so I decided to send the CRAs copies of my correspondence too) I accused them of fraudulent misrepresentation that was going to cost me real money and threatened them with litigation. The correspondence must have done a trick my phone calls couldn't - they backed down, struck the record from my report and withdrew my name from the ex's account. (Actually Dillard's closed my ex's account too. :-)

That same report showed a delinquent account with a local urgent care facility. I was never notified of being delinquent. Moreover I was pretty sure that never happened since in recent years I had become quite diligent in following up paying those types of bills over the phone with a credit card as soon as the adjusted bill or EOB showed up. I got nowhere over the phone, so I went to their office and camped out until the clerk could see me. I had her pull my physical file and show me her records. I came in with credit card statements showing payments to them and wanted her to account for each payment. In the process she pulled a couple of adjacent files. Apparently she had misfiled the credit card payment receipt and had sent the bill off to collections by mistake. She apologized profusely and had the file pulled from the collection agent and the record from the CRAs pretty promptly.

BTW, that fight in the late '90s made me feel rather empowered. I realized that even though I was getting xxx'ed around (fill in your own expletive) by the CRAs, I didn't always have to just take it and to some extent I could fight back.

- Joel
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And, I know how "my opinion" comes across. This is not the first time I've expressed it.

Hey, nobody appreciates that more than me. Plenty of my opinions go against the PC approved opinions, and I'm not shy about expressing them. I should carry a sign that says "Trigger Warning."

Anyway, back to the topic...


A SCAM may be legal, but be dishonest or fraudulent at either the moral or ethical definition. Many seem to believe that because FICO is legal, that is not a SCAM.

You seem to think that my defense of FICO as not being a scam is based on the fact that it is legal. That is not my basis. My basis is that I can't think of any way that FICO has been dishonest or fraudulent or unethical or immoral. Can you provide an example of how FICO has been any of those things?

xtn
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If it is so wonderful and unbiased, why did the government pass regulations FORCING the credit reporting agencies to give free copies of her/his credit score each year, to each individual who requests a copy?

Well, they did no such thing.

1. They didn't force FICO to do anything. It's a separate entity than the CRAs you know.
2. They forced the CRAs to provide free reports, but not free FICO scores.

And even if that weren't the case, ask yourself why FICO, or any business, would WANT to give its product away for free. They wouldn't, of course.

Now ask yourself why our government (or more accurately, the entitled whining masses who put pressure on our government) think it/they has/have the right to force a business to give its product away for free. I mean, I'm happy to get my free report, but the way it happened disgusts me.

"Hey, we want your product. The product that you've invested time and money into collecting/producing. We know you didn't develop it for us, but we don't care. We know each report you generate has cost/expense for you, and that you normally recoup those costs/expenses and a bit of profit by selling the reports to lending entities, but we don't care. We want it. We're going to band together and FORCE you to give it to us. FOR FREE! MmmmmwwwwwwaaaaaaahahahaHAHAHAHAHAHAH (evil villain laugh)

Now THAT is unethical and immoral. And yes, no matter what misguided point anyone tries to make about why we have a right to the product, that is exactly how it went down.

xtn
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CRAs asserted proprietary ownership over individual credit files....


Joel,

I respectfully take issue with that bit. The key word is files. A lot of people will read that bit and think the CRAs asserted ownership over the information, but that isn't true at all.

The accurate way to say it is that they INHERENTLY HAVE ownership of the FILES (or, more accurately, the reports) they developed.

Sure, those files contain data reported to them about individuals. But that doesn't matter. If a professional photographer takes a picture of you, he OWNS that picture and the rights to it. He did the work required to produce the picture. Doesn't matter that the content of it is you. Unless he sells you the picture or some of the usage rights to it, it all belongs to him. He doesn't even have to let you look at it if he doesn't want to.

The concept is the same with credit reports. I know, there are arguments that this isn't the case, but they're all just attempts to justify consumer greed. The logical reality is that we pushed through the FCRA because of that greed. Because of entitlement. We weren't going to let a little thing like logical, reasonable ethics stand in our way.

Don't get me wrong here. I understand that most of the FCRA was logical and reasonable and necessary. It's just the part about a FREE report that wasn't. Heck, if we want to see court documents, even about a case concerning us personally, there is a processing fee to the Clerk. If we want to see the plat of our own property, there is a processing fee to the P&Z Dept. If you want to see your own tax return, you're going to have to pay the accountant that prepared it for you. The return is all about you, having only information about you within it, but he did the work to produce the return, which is his product, not yours, unless you pay him. And yes, if we want a copy of that picture the photographer took of us, we have to pay him for it. It was not unreasonable for us to have to pay $12 or whatever for a credit report, at least not by the reasonable standards illustrated above that we are all used to.

By forcing CRAs to give away credit reports, based on the notion that it's OUR information because it's ABOUT us (which is false), we've basically said we're okay with forcing our photographer to give us the pictures we are in, with forcing our accountants to give us the returns containing our information, etc. Entitled justifications don't make it any less wrong.

xtn
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xtn: "I respectfully take issue with that bit. The key word is files. A lot of people will read that bit and think the CRAs asserted ownership over the information, but that isn't true at all.

The accurate way to say it is that they INHERENTLY HAVE ownership of the FILES (or, more accurately, the reports) they developed.

Sure, those files contain data reported to them about individuals. But that doesn't matter. If a professional photographer takes a picture of you, he OWNS that picture and the rights to it. He did the work required to produce the picture. Doesn't matter that the content of it is you. Unless he sells you the picture or some of the usage rights to it, it all belongs to him. He doesn't even have to let you look at it if he doesn't want to."


Not exactly, IMO.

"In basic terms, a photo release form is a contract between the photographer and the client, subject, owner of something in a photograph. Release forms secure legal permission to publish images of people and property.

Publishing refers to posting online in a public forum (such as social media or your website), print medium, television medium, and everything in between."

https://expertphotography.com/photo-release-form-photography...

"In the United States, a photographer can get in trouble for using someone’s likeness commercially without a release form from the subject."

Even photos taken in public have limitations. "You cannot use these images to promote yourself [the photographer] if the subject is recognizable. The law also says that you [the photographer] cannot commercially use these images in any derogatory, defamatory, or slanderous way."

Given that the much of the CRA files is not public information, I would suggest that CRA is much more akin to photographs on private land, and cannot be published without the consent of such person, and any reasonable person would reserve the right to review before publication.

Just my $0.02.

Regards, JAFO
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JAFO31,

You wrote, ...

Given that the much of the CRA files is not public information, I would suggest that CRA is much more akin to photographs on private land, and cannot be published without the consent of such person, and any reasonable person would reserve the right to review before publication.


It's exactly the same - especially since most of the information on the report is not public. But when you sign for a line of credit you are (usually) providing the creditor with among other things, that signed release. I suppose if the contract you signed lacked such a provision you could sue both parties for the disclosure - at least up to your actual damages. But most professional lenders are going to have a release in their contracts.

- Joel
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JAFO,

Your points about release/permission are valid. But as Joel points out consumers, as a general rule, have given the release/permission necessary to enable the reporting industry as it currently functions. So I don't think you've establish that the position I illustrated in my previous post is invalid.

xtn
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joelcorley:

JAFO31,

You wrote, ...

Given that the much of the CRA files is not public information, I would suggest that CRA is much more akin to photographs on private land, and cannot be published without the consent of such person, and any reasonable person would reserve the right to review before publication.

"It's exactly the same - especially since most of the information on the report is not public. But when you sign for a line of credit you are (usually) providing the creditor with among other things, that signed release. I suppose if the contract you signed lacked such a provision you could sue both parties for the disclosure - at least up to your actual damages. But most professional lenders are going to have a release in their contracts."

Except that the release is typically in favor of the lender, and may not necessarily authorize the CRA to deliver the files (much would depend upon actual release document). And theoretically, the release could be conditioned upon the person receiving a copy of the report concurrently with the lender.

Regards, JAFO
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Except that the release is typically in favor of the lender, and may not necessarily authorize the CRA to deliver the files (much would depend upon actual release document).


It's been a long, long time since I've applied for any credit. And, although I am one of the rare people who actually reads the stuff he signs, I've long since forgotten any specific language I may have read.

But I'd be willing to bet that most of them have very non-restrictive language that gives the lender and any of its "partners" substantially free rein over the data within an "as permissible by law" context.

xtn
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