All of that is technically true, but still kind of a shit policy as it consequently raises the cost of borrowing on someone who paid back the full loan plus interest.
You can rationalize all these shit policies with any number of talking points. Some of them might even be actuarially sound. But they’re still shit.
All of that is technically true, but still kind of a shit policy
Your complaint is with lenders then, not credit agencies. If someone misuses a tool, its not the fault of the toolmaker, but the person using the tool. Would you blame a hammer manufacturer because it is really crappy at driving in screws? I would hope not. You’d be upset at the person using the hammer to try to hammer in screws.
Your complaint is with lenders then, not credit agencies.
If the credit agency adjusts your score downward and then reports me out as “less credit worth” then my beef is the business that is effectively slandering me.
If someone misuses a tool, its not the fault of the toolmaker
If the tool reports inaccurate information, the toolmaker is at fault.
Who would you rather give a loan to? A person who you know is currently able to pay you back or a person you know was able to pay back the loan 10 years ago?
Exactly, so that answers the question. When you finish paying your loan, you stop paying back money and thus your credit score is slightly lower than when you were actively paying back.
That’s the opposite of my point. Let me correct myself here. The person who just *finished paying me back because they can obviously *make every payment until it is paid back again, as they have obviously demonstrated.
it consequently raises the cost of borrowing on someone who paid back the full loan plus interest
This is mostly likely untrue because she was paying off her debt the whole time she had the loan, and her credit score and history were probably improving that whole time. Maybe her score went up 300 points over the years of that loan, and then dropped 35 points.
her credit score and history were probably improving that whole time
Until she paid it off, at which point it dropped.
Maybe her score went up 300 points over the years of that loan
Maybe, but I highly doubt it. And 35 points is a big drop when you’re already in the 700-range. That can be worth a quarter point on a mortgage loan, which will end up costing you tens of thousands of dollars over the life of the note.
And 35 points is a big drop when you’re already in the 700-range.
Which means the tons of points she likely gained by paying off the debt for years saved her at least a point.
I’m not arguing that a lower credit score isn’t worse, I’m pointing out that cherry picking a single month movement to claim that she got screwed for doing something that actually likely helped her doesn’t make any sense.
No. Because there’s a soft ceiling. If she started in the 700s, she wasn’t going to get a 1000 credit score by the end of the loan. Those don’t exist. She wasn’t going to hit 850 for carrying a single small commercial loan, either.
cherry picking a single month movement
This isn’t cherry picking, its about incentives.
If I’m carrying a car note and I don’t want to be saddled with debt, I’m forced to take a credit hit because I’m finished paying my loan. This impacts the cost of a future loan when my car needs to be replaced.
By contrast, if I’m loose with my money, I’m effectively rewarded for refinancing or rotating out my vehicle before my loan expires and remaining in debt indefinitely.
The credit score becomes a means of penalizing people for failing to carry these burdensome loans uninterrupted.
If she started in the 700s, she wasn’t going to get a 1000 credit score by the end of the loan.
Of course, assuming she started at 700, and not much lower. But even if she did start at 700 and only went to 800, that’s still a net gain of 65 points.
This isn’t cherry picking, its about incentives.
lol. It’s one number in a vacuum and you’re basing your entire argument on it. Not only is it blatantly cherry picking, but you’re assuming everything else in the favor of your position in order to make it as bad as possible.
If I’m carrying a car note and I don’t want to be saddled with debt, I’m forced to take a credit hit because I’m finished paying my loan.
All of that is technically true, but still kind of a shit policy as it consequently raises the cost of borrowing on someone who paid back the full loan plus interest.
You’re moving the goal posts now. Before your argument was that paying the loan back in full with interest hurt her, which is almost certainly untrue and what I was addressing, and now you are arguing that she would have been better off going for a new loan in the month before she closed out the loan than the month after. The latter argument I can’t really challenge as much but is pretty meaningless.
The credit score becomes a means of penalizing people for failing to carry these burdensome loans uninterrupted.
I know this is BS from personal experience. I’ve only ever had a small car loan, which I paid off early, and a mortgage. I carried credit card debt one time about 4 years ago when we moved across country and my wife was in between jobs, and that was only for about 3 or 4 months until her pay checks started coming in. And there was a good bit of time between when I paid off my car and got our mortgage and we got a fantastic rate and my credit has comfortable sat about 800 for close to a decade now.
Yes, it’s annoying that you have to be using credit to prove that you can currently use credit responsibly. But what other way is there? Are they just supposed to assume you are good with credit because you don’t use it? That’s like thinking it’s safe to believe some stranger you just met on the street because they have never lied to you before.
All of that is technically true, but still kind of a shit policy as it consequently raises the cost of borrowing on someone who paid back the full loan plus interest.
You can rationalize all these shit policies with any number of talking points. Some of them might even be actuarially sound. But they’re still shit.
Your complaint is with lenders then, not credit agencies. If someone misuses a tool, its not the fault of the toolmaker, but the person using the tool. Would you blame a hammer manufacturer because it is really crappy at driving in screws? I would hope not. You’d be upset at the person using the hammer to try to hammer in screws.
If the credit agency adjusts your score downward and then reports me out as “less credit worth” then my beef is the business that is effectively slandering me.
If the tool reports inaccurate information, the toolmaker is at fault.
Who would you rather give a loan to? A person who you know is currently able to pay you back or a person you know was able to pay back the loan 10 years ago?
The grade dropped as soon as the account was closed, not ten years later.
So this is
And the answer would definitely be 2).
The person who just paid me back, because they can obviously pay me back.
Exactly, so that answers the question. When you finish paying your loan, you stop paying back money and thus your credit score is slightly lower than when you were actively paying back.
That’s the opposite of my point. Let me correct myself here. The person who just *finished paying me back because they can obviously *make every payment until it is paid back again, as they have obviously demonstrated.
This is mostly likely untrue because she was paying off her debt the whole time she had the loan, and her credit score and history were probably improving that whole time. Maybe her score went up 300 points over the years of that loan, and then dropped 35 points.
Until she paid it off, at which point it dropped.
Maybe, but I highly doubt it. And 35 points is a big drop when you’re already in the 700-range. That can be worth a quarter point on a mortgage loan, which will end up costing you tens of thousands of dollars over the life of the note.
Which means the tons of points she likely gained by paying off the debt for years saved her at least a point.
I’m not arguing that a lower credit score isn’t worse, I’m pointing out that cherry picking a single month movement to claim that she got screwed for doing something that actually likely helped her doesn’t make any sense.
No. Because there’s a soft ceiling. If she started in the 700s, she wasn’t going to get a 1000 credit score by the end of the loan. Those don’t exist. She wasn’t going to hit 850 for carrying a single small commercial loan, either.
This isn’t cherry picking, its about incentives.
If I’m carrying a car note and I don’t want to be saddled with debt, I’m forced to take a credit hit because I’m finished paying my loan. This impacts the cost of a future loan when my car needs to be replaced.
By contrast, if I’m loose with my money, I’m effectively rewarded for refinancing or rotating out my vehicle before my loan expires and remaining in debt indefinitely.
The credit score becomes a means of penalizing people for failing to carry these burdensome loans uninterrupted.
Of course, assuming she started at 700, and not much lower. But even if she did start at 700 and only went to 800, that’s still a net gain of 65 points.
lol. It’s one number in a vacuum and you’re basing your entire argument on it. Not only is it blatantly cherry picking, but you’re assuming everything else in the favor of your position in order to make it as bad as possible.
You’re moving the goal posts now. Before your argument was that paying the loan back in full with interest hurt her, which is almost certainly untrue and what I was addressing, and now you are arguing that she would have been better off going for a new loan in the month before she closed out the loan than the month after. The latter argument I can’t really challenge as much but is pretty meaningless.
I know this is BS from personal experience. I’ve only ever had a small car loan, which I paid off early, and a mortgage. I carried credit card debt one time about 4 years ago when we moved across country and my wife was in between jobs, and that was only for about 3 or 4 months until her pay checks started coming in. And there was a good bit of time between when I paid off my car and got our mortgage and we got a fantastic rate and my credit has comfortable sat about 800 for close to a decade now.
Yes, it’s annoying that you have to be using credit to prove that you can currently use credit responsibly. But what other way is there? Are they just supposed to assume you are good with credit because you don’t use it? That’s like thinking it’s safe to believe some stranger you just met on the street because they have never lied to you before.