Author Topic: "What is wrong with millennial credit scores"  (Read 11746 times)

Rufus.T.Firefly

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"What is wrong with millennial credit scores"
« on: September 05, 2015, 06:52:30 AM »
http://www.reuters.com/article/2015/09/02/us-column-rebell-creditcards-idUSKCN0R21HN20150902

Millennials are known for frugality, debt avoidance, and paying cash for everything; 1/3rd don't even apply for credit cards. The horror...

Sure credit scores are relevant, but if this is the generation's worst financial sin, I think we'll be alright.

economist

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Re: "What is wrong with millennial credit scores"
« Reply #1 on: September 05, 2015, 08:24:37 AM »
I had an excellent credit score right out of college as a result of taking out approximately 40k in student loans. This gave me an established credit history early on. (I do not recommend this strategy).

iamlittlehedgehog

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Re: "What is wrong with millennial credit scores"
« Reply #2 on: September 08, 2015, 12:17:17 PM »
Hah! I think a lot of Millennials are wising up to the whole "your-life-depends-on-your-credit-score" scheme.
There are a lot of other methods of proving your financial responsibility that aren't dependent on something that shifts so quickly. Last year in August when I bought a car I had a 650 credit score - not amazing, barely good. Getting financing and finding a salesperson to take me seriously was a nightmare.

This weekend I went through the process again - this time round my score was around 760. We were in and out in 2 hours and got a great rate (not that it matters too much, it'll be paid off by the end of the year anyways).

A stable job and resident history can forgive some sins.   

runningthroughFIRE

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Re: "What is wrong with millennial credit scores"
« Reply #3 on: September 08, 2015, 01:29:13 PM »
I applied for my first credit card one Saturday morning at a local Chase bank after graduating from college.  As the woman working there was typing my information in the system and explaining that their approval software takes about a week, she goes "Oh!  Well then.  Looks like you've been pre-approved.  You must have pretty good credit." She seemed really surprised that someone my age would have decent credit.  The only think I could think of to say was "I guess so.  Neat."
« Last Edit: September 08, 2015, 01:33:26 PM by runningthroughFIRE »

Giro

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Re: "What is wrong with millennial credit scores"
« Reply #4 on: September 08, 2015, 01:38:38 PM »
It seems that debt = good credit.  If you have a job, a car loan, a credit card balance and $500 in a savings account, you have great credit!!!  No mortgage, no car loans, no revolving credit but investment accounts over $1Million = mediocre credit.

HUH????? 




Chris22

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Re: "What is wrong with millennial credit scores"
« Reply #5 on: September 08, 2015, 01:43:34 PM »
It seems that debt = good credit.  If you have a job, a car loan, a credit card balance and $500 in a savings account, you have great credit!!!  No mortgage, no car loans, no revolving credit but investment accounts over $1Million = mediocre credit.

HUH?????

Why is that confusing?  Your credit rating is your history of paying back your debts coupled with your total debt load.  You can't prove you're good at paying back your debts if you've never done it before. 

Also, note that a credit score is an indication of how desirable you are to lenders.  Paying no interest on your card (balance paid in full monthly) is obviously a good habit, but not of interest to lenders necessarily. 

Mississippi Mudstache

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Re: "What is wrong with millennial credit scores"
« Reply #6 on: September 08, 2015, 01:47:14 PM »
Yeah, Amex has a tool where they'll provide you with your credit score for free, as well as suggestions for improving it. My wife's score was >760. Their suggestion to improve it was to take out different types of loans (like car loans or personal loans). She was dinged for only having credit cards and a mortgage in her name. Her student loans were paid off 5 years ago, and we haven't had an auto loan in 2 years. Neither of us have ever had a personal loan, whatever that is. No thanks.

Kitsunegari

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Re: "What is wrong with millennial credit scores"
« Reply #7 on: September 09, 2015, 12:10:55 PM »
Seems someone learnt the lesson from the 2008 crash.
Also, maybe now banks will update to a better tool, one that will consider 'character' as well? As in, for people like us that don't have much credit history, but won't have debts for long.

EricP

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Re: "What is wrong with millennial credit scores"
« Reply #8 on: September 09, 2015, 01:50:47 PM »
Seems someone learnt the lesson from the 2008 crash.
Also, maybe now banks will update to a better tool, one that will consider 'character' as well? As in, for people like us that don't have much credit history, but won't have debts for long.

Most banks already use income to determine loan eligibility.  You can definitely get loans without a credit score if you have the income to back it up.  Not like it's hard to get a good credit history, though. 

StockBeard

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Re: "What is wrong with millennial credit scores"
« Reply #9 on: September 09, 2015, 02:57:40 PM »
I moved to the US 9 months ago. I have a credit card that I never used, and I have absolutely no credit history. For many agencies and organizations trying to sell me "stuff", this means I don't even exist. Comcast for example couldn't even verify that I existed, meaning they couldn't sell me their service. I took my business to centurylink.

I get less advertising in my mailbox, and I haven't found a thing so far I couldn't get. Maybe it's because I don't want any crazy stuff yet.
I haven't tried to buy a home.

MgoSam

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Re: "What is wrong with millennial credit scores"
« Reply #10 on: September 09, 2015, 03:53:22 PM »
I moved to the US 9 months ago.

If you don't mind me asking, where did you move from? I'm curious as to how it was to acclimate towards living in the US.

KittyCat

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Re: "What is wrong with millennial credit scores"
« Reply #11 on: September 09, 2015, 04:20:25 PM »
I had an excellent credit score right out of college as a result of taking out approximately 40k in student loans. This gave me an established credit history early on. (I do not recommend this strategy).
That's what I did, although to a smaller tune of 6-7k or so. When I finally learned my credit score due to applying for a car loan (lalalala), both the dealer and I were surprised about the high score.

JR

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Re: "What is wrong with millennial credit scores"
« Reply #12 on: September 10, 2015, 08:12:47 AM »
My credit score is almost 800 and the only credit history I have is a mortgage.

Avidconsumer

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Re: "What is wrong with millennial credit scores"
« Reply #13 on: September 10, 2015, 08:44:51 AM »
I moved to the US 9 months ago. I have a credit card that I never used, and I have absolutely no credit history. For many agencies and organizations trying to sell me "stuff", this means I don't even exist. Comcast for example couldn't even verify that I existed, meaning they couldn't sell me their service. I took my business to centurylink.

I get less advertising in my mailbox, and I haven't found a thing so far I couldn't get. Maybe it's because I don't want any crazy stuff yet.
I haven't tried to buy a home.

When I moved to the US, I had to get a secure line of credit, which basically meant I had to have 500$ in my bank account to have a 500$ credit limit. After 9 months, discovery offered me $1k credit. About 6 months later, Chase offered $14k. It's easy enough to build up.

The social security number we have is different and is never recognized. I don't mind that really..

Camarillo Brillo

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Re: "What is wrong with millennial credit scores"
« Reply #14 on: September 10, 2015, 09:22:01 AM »
After reading through this thread I went to Credit Karma to check my score.  I know that site doesn't give the precise score, but I understand it is close.  Anyway, I was annoyed that it was only just a bit below 800.  Last time I saw my actual score it was 816.   I started looking at the recommendations for increasing it on the karma site, and then I thought "What the hell am I doing?  I'm never going to need credit again in my life.  Why should I give a shit."

Avidconsumer

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Re: "What is wrong with millennial credit scores"
« Reply #15 on: September 10, 2015, 09:37:37 AM »
I financed my car to get a reduction in price, then paid it off immediately and my credit score took a hit, because I no longer had that line of credit. Closing lines of credit hits your score.

Chris22

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Re: "What is wrong with millennial credit scores"
« Reply #16 on: September 10, 2015, 09:39:15 AM »
After reading through this thread I went to Credit Karma to check my score.  I know that site doesn't give the precise score, but I understand it is close.  Anyway, I was annoyed that it was only just a bit below 800.  Last time I saw my actual score it was 816.   I started looking at the recommendations for increasing it on the karma site, and then I thought "What the hell am I doing?  I'm never going to need credit again in my life.  Why should I give a shit."

I'm also not aware of any advantage there is to having a score higher than whatever top tier is, somewhere in the 740-760 range.  Over that, not sure what the tangible benefit is.  IMO, pay your bills, and as long as you've paid something off (student loan, credit card, car, whatever) and have a history of paying on time (and don't go bankrupt or have anything repo'd) your score will be mid-700s and you'll never have a problem.  Gaming it for a higher score is probably not in your best interest, and maybe even to your detriment (take out more debt to raise your score probably isn't a great idea, etc).

Hall11235

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Re: "What is wrong with millennial credit scores"
« Reply #17 on: September 10, 2015, 09:46:56 AM »
I had an excellent credit score right out of college as a result of taking out approximately 40k in student loans. This gave me an established credit history early on. (I do not recommend this strategy).
Lol. Same strat I used. Wouldn't recommend it.

MgoSam

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Re: "What is wrong with millennial credit scores"
« Reply #18 on: September 10, 2015, 09:47:54 AM »
After reading through this thread I went to Credit Karma to check my score.  I know that site doesn't give the precise score, but I understand it is close.  Anyway, I was annoyed that it was only just a bit below 800.  Last time I saw my actual score it was 816.   I started looking at the recommendations for increasing it on the karma site, and then I thought "What the hell am I doing?  I'm never going to need credit again in my life.  Why should I give a shit."

I'm also not aware of any advantage there is to having a score higher than whatever top tier is, somewhere in the 740-760 range.  Over that, not sure what the tangible benefit is.  IMO, pay your bills, and as long as you've paid something off (student loan, credit card, car, whatever) and have a history of paying on time (and don't go bankrupt or have anything repo'd) your score will be mid-700s and you'll never have a problem.  Gaming it for a higher score is probably not in your best interest, and maybe even to your detriment (take out more debt to raise your score probably isn't a great idea, etc).

Once you're above 740, it's all the same for getting a mortgage, at least that's what one broker told me. I'm always a little wary of taking the word of someone that's trying to sell me something.

JLee

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Re: "What is wrong with millennial credit scores"
« Reply #19 on: September 13, 2015, 12:11:00 PM »
After reading through this thread I went to Credit Karma to check my score.  I know that site doesn't give the precise score, but I understand it is close.  Anyway, I was annoyed that it was only just a bit below 800.  Last time I saw my actual score it was 816.   I started looking at the recommendations for increasing it on the karma site, and then I thought "What the hell am I doing?  I'm never going to need credit again in my life.  Why should I give a shit."

I'm also not aware of any advantage there is to having a score higher than whatever top tier is, somewhere in the 740-760 range.  Over that, not sure what the tangible benefit is.  IMO, pay your bills, and as long as you've paid something off (student loan, credit card, car, whatever) and have a history of paying on time (and don't go bankrupt or have anything repo'd) your score will be mid-700s and you'll never have a problem.  Gaming it for a higher score is probably not in your best interest, and maybe even to your detriment (take out more debt to raise your score probably isn't a great idea, etc).

Once you're above 740, it's all the same for getting a mortgage, at least that's what one broker told me. I'm always a little wary of taking the word of someone that's trying to sell me something.

I think I heard that as well, but 760 is the number that comes to mind.

MrsPete

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Re: "What is wrong with millennial credit scores"
« Reply #20 on: September 19, 2015, 01:43:35 PM »
It seems that debt = good credit.  If you have a job, a car loan, a credit card balance and $500 in a savings account, you have great credit!!!  No mortgage, no car loans, no revolving credit but investment accounts over $1Million = mediocre credit.

HUH?????
Yes, when we paid off our house, our credit score dropped. 

People have the idea (maybe from those TV commercials about selling fish to tourists in tee-shirts?) that a good credit score means a positive financial status; that's not true at all.  You could live paycheck to paycheck, have not a single dollar in the bank ... but have a perfect credit score. 

Don't ever confuse a credit score with a solid financial position!

nobodyspecial

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Re: "What is wrong with millennial credit scores"
« Reply #21 on: September 19, 2015, 02:18:33 PM »
Never borrowed a penny except for a (now paid off) mortgage
I never thought of my credit score - but I think I will write off for a free copy just to find out

FLA

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Re: "What is wrong with millennial credit scores"
« Reply #22 on: September 19, 2015, 02:40:59 PM »


Why is that confusing?  Your credit rating is your history of paying back your debts coupled with your total debt load.  You can't prove you're good at paying back your debts if you've never done it before. 

Also, note that a credit score is an indication of how desirable you are to lenders.  Paying no interest on your card (balance paid in full monthly) is obviously a good habit, but not of interest to lenders necessarily.
[/quote]

that's why I don't get why I have a really good credit score (I am not trying to brag, I truly do not understand this), I have never paid interest on a CC or paid late enough for it to be reported, I realized I was gonna be like 2 days late a few times, called and they would take off the fine.  I am a divorced mother in my 40s, worked as a nurse (so credit score must have very little to do with income because mine was low).  Had cars, mortgage, always got a low loan rate, sometimes 0% with cars. Paid everything off early. I have a bunch of cards with high limits I never used except during the promos of 0% interest for 15 months, bunch of rarely used store credit cards. I pay everything with one card just to get points, pay it off every month.  What about any of that makes me a desirable credit card customer?  Aren't I the opposite of what they want?

Now disabled.  Got a letter from one company, they knew I had a much lower income and they were decreasing my limit.  I called and complained, was going to cancel the card and somehow ended up with a higher limit than I started with. I thought, OMG, no one is ever going to give me credit again with my new income, so I called my major cards and asked to have my limit raised. And took out one more major cc with a high limit, just in case.  So I have tons of credit I am not using and if I did it would be difficult to pay off.  I have no idea if trying to up limits and getting a new card would actually pan out or if it is the right thing to do in that I will have lots of credit to use in an emergency. 

I assumed the bureaus would get the lowdown on my new income and would massively lower my credit score, especially since I took out more lines of credit.  Waited a few months, checked, it had gone up!

ok, seriously, I do not understand this


JLee

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Re: "What is wrong with millennial credit scores"
« Reply #23 on: September 19, 2015, 03:08:09 PM »
Income isn't a factor on your credit score, so that part wouldn't matter. : )

Indexer

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Re: "What is wrong with millennial credit scores"
« Reply #24 on: September 20, 2015, 07:03:34 PM »
I use to work in lending, and the thing that surprised me the most about credit scores and the way banks analyze your ability to repay a loan past just credit score is that no one looks at your emergency fund. I had a lot of clients that lost their jobs in 08-10 and were unemployed for more than 6 months. Of those that had emergency funds I'd estimate 90%+ were still in great shape by the time they found a job. Of the people without an emergency fund I would say 90%+ were missing payments, overdrafting accounts, borrowing money from friends/family, racking up credit card debt, and/or defaulting. It would seem to me that a 3-6 month well established(you have had it awhile) emergency fund is a better predictor of your ability to pay your debts. I think this should be especially true if it is held at the same bank!

I think the reason they don't look at that is that you could spend it. My counter argument is of course that if someone spent a year building it and they have maintained it for over a year the obviously they have positive cash flow, they don't feel the need to spend every dollar they have, and those trends will probably continue.  Someone who only uses 10% of their available credit limit on their credit cards could also spend up to 100%, but only owing 0-10% is seen as a good thing as long as you are making that $25 min payment.

nobodyspecial

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Re: "What is wrong with millennial credit scores"
« Reply #25 on: September 20, 2015, 07:53:06 PM »
It would seem to me that a 3-6 month well established(you have had it awhile) emergency fund is a better predictor of your ability to pay your debts.
So they prefer to lend money to people that don't need the money?

Cwadda

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Re: "What is wrong with millennial credit scores"
« Reply #26 on: September 20, 2015, 08:59:46 PM »
I applied for a credit card a few years ago and got approved instantly. My only prior history was a federal student loan. Since then I've applied for 2 more credit cards and got instantly approved. Not sure how this is the case as a student with only $20k income. Credit score ~740 atm.

FLA

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Re: "What is wrong with millennial credit scores"
« Reply #27 on: September 20, 2015, 10:20:46 PM »
on my super exciting Sunday night, I just read a Consumer's Report article about how your auto insurance cost is greatly affected by your credit score.  Never knew that.

as an aside, insurers have been known to charge you more if you do not complain about a small increase in your bill.  You get put in a pool of people they believe they can charge more and they won't leave.  Never head that at all.

FLA

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Re: "What is wrong with millennial credit scores"
« Reply #28 on: September 20, 2015, 10:22:22 PM »
on my super exciting Sunday night, I just read a Consumer's Report article about how your auto insurance cost is greatly affected by your credit score.  Never knew that.

as an aside, insurers have been known to charge you more if you do not complain about a small increase in your bill.  You get put in a pool of people they believe they can charge more and they won't leave.  Never head that at all.

Mr Dorothy Dollar

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Re: "What is wrong with millennial credit scores"
« Reply #29 on: September 20, 2015, 10:46:18 PM »
I open CC on the reg. Take the bonus or the 0% while putting the pay off amount in my LMCU account getting 3% on the 0% cash. Credit cards can be fun.

FatCat

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Re: "What is wrong with millennial credit scores"
« Reply #30 on: September 20, 2015, 11:38:28 PM »
What about any of that makes me a desirable credit card customer?  Aren't I the opposite of what they want?

They make money every time you use your card. You aren't their favorite sort of customer, but you are very low risk and you're still making them money from merchant transaction fees.



As a side note.... I've seen reports before that they can lower your cc limit if you change the types of stores you shop at. If you go from shopping at expensive stores to shopping at discount stores/dollar stores, then they assume you've hit hard times and adjust your limit.

Kitsunegari

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Re: "What is wrong with millennial credit scores"
« Reply #31 on: September 21, 2015, 07:40:03 AM »

As a side note.... I've seen reports before that they can lower your cc limit if you change the types of stores you shop at. If you go from shopping at expensive stores to shopping at discount stores/dollar stores, then they assume you've hit hard times and adjust your limit.

This sounds really weird. Can they lower it without your consent, after you signed something they proposed to have a higher limit?
Also, I changed my shopping habits from 'normal' retail stores to charity thrift store, and by bank keeps trying to raise my cc limit.

Indexer

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Re: "What is wrong with millennial credit scores"
« Reply #32 on: September 21, 2015, 06:17:03 PM »
It would seem to me that a 3-6 month well established(you have had it awhile) emergency fund is a better predictor of your ability to pay your debts.
So they prefer to lend money to people that don't need the money?

Having a three month EF doesn't mean you can afford to pay cash for a car or house.  (Remember non-mustachians.)  People with an EF can still use credit cards or equity lines as well.

Yes I would prefer to loan money or rent to people who have EFs. ;)

MrsPete

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Re: "What is wrong with millennial credit scores"
« Reply #33 on: September 21, 2015, 09:25:03 PM »
Income isn't a factor on your credit score, so that part wouldn't matter. : )
You're totally right, of course, but I don't think the general public recognizes this.  Most people think a good credit score = financial security. 

It's kind of like weight.  Two people might weigh the same amount, but one of them is obese and the other is muscle-heavy.  The single number -- their weight -- is a valid measurement, but it doesn't tell the whole story. 

FLA

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Re: "What is wrong with millennial credit scores"
« Reply #34 on: September 23, 2015, 09:38:44 PM »

As a side note.... I've seen reports before that they can lower your cc limit if you change the types of stores you shop at. If you go from shopping at expensive stores to shopping at discount stores/dollar stores, then they assume you've hit hard times and adjust your limit.

maybe that was why they lowered my limit, I was only just out on disability, I was still an employee, I couldn't figure out how they knew.  thanks!

maco

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Re: "What is wrong with millennial credit scores"
« Reply #35 on: September 29, 2015, 07:58:52 AM »
I had an excellent credit score right out of college as a result of taking out approximately 40k in student loans. This gave me an established credit history early on. (I do not recommend this strategy).
I did the same, then the first year paid off 3 of 5 loans. They were the smallest ones, but they were also the highest interest rate. (At this point, I still have one, but the interest rate is below inflation and certainly below my mortgage)

When I bought a car 2 months out of college, I was surprised not to need my dad as a cosigner on the loan. (Yes, I paid the car off early)
« Last Edit: September 29, 2015, 08:01:40 AM by maco »

BlueHouse

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Re: "What is wrong with millennial credit scores"
« Reply #36 on: September 29, 2015, 08:34:57 AM »
and then I thought "What the hell am I doing?  I'm never going to need credit again in my life.  Why should I give a shit."
Yeah, I now see my FICO score on my Discover card statement.  Now that I no longer care, it's through the roof (835 -- highest it's ever been for me).  I'm still fairly spendy, but I pay my cards off every month and sometimes accidentally pay twice and so have credits on the charge cards.  My only outstanding debt is my mortgage(s).  I think my new goal is going to be to try to decrease my credit score by using credit cards less often. 

Reynold

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Re: "What is wrong with millennial credit scores"
« Reply #37 on: September 30, 2015, 12:51:20 PM »
Never borrowed a penny except for a (now paid off) mortgage
I never thought of my credit score - but I think I will write off for a free copy just to find out

Even if you don't need a credit score, it is not a bad idea to check with the yearly free reports from the major agencies just to make sure an incompetent employee hasn't made a mistake and assigned someone else's CC/bad debt to your name, which I know of happening to a friend with a common name.  Worse yet, someone may have stolen/hacked enough info to start taking out CCs in your name.  If they can hack Target, and the federal government, and Ashley Madison, and Premera Blue Cross, and my local dentist's payroll service, they can get info on anyone who has an electronically accessible financial life.  Which I suspect is most of the people on an internet forum dedicated to saving and investing money. :) 

Marus

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Re: "What is wrong with millennial credit scores"
« Reply #38 on: September 30, 2015, 01:34:21 PM »
After reading through this thread I went to Credit Karma to check my score.  I know that site doesn't give the precise score, but I understand it is close.  Anyway, I was annoyed that it was only just a bit below 800.  Last time I saw my actual score it was 816.   I started looking at the recommendations for increasing it on the karma site, and then I thought "What the hell am I doing?  I'm never going to need credit again in my life.  Why should I give a shit."

I'm also not aware of any advantage there is to having a score higher than whatever top tier is, somewhere in the 740-760 range.  Over that, not sure what the tangible benefit is.  IMO, pay your bills, and as long as you've paid something off (student loan, credit card, car, whatever) and have a history of paying on time (and don't go bankrupt or have anything repo'd) your score will be mid-700s and you'll never have a problem.  Gaming it for a higher score is probably not in your best interest, and maybe even to your detriment (take out more debt to raise your score probably isn't a great idea, etc).

Once you're above 740, it's all the same for getting a mortgage, at least that's what one broker told me. I'm always a little wary of taking the word of someone that's trying to sell me something.

Since I do loan reviews as part of my job, I'll give you an inside scoop on how pricing works.  I'm sure other banks/credit unions put their own spin on it but the same Principles should apply.

Based on your credit score, we assign you a risk rating between A+ and E.  This and the length of the loan determines what your interest rate is going to be.  Once you get a credit score of 680, you qualify for our lowest rate.  So from our perspective, anything above 680 is just for bragging rights :)

The other factors that we look at are your debt to income, which we base off of your current loans and lines of credit on your credit report.  Anything above 40% is going to draw extra scrutiny.  For what it's worth I think it's crazy that people would pay 40% of their gross income towards loans, but that's just me.

The other factor we look at is BNI, which is a measure of how likely you are to go bankrupt in the next 24 months.  I'm not exactly sure how this works but I know part of it is how close you are to maxing out your credit cards.  And if you've gone bankrupt before, you better have a good story, otherwise you're getting denied.

I'm sure there are plenty of good ways to game your credit score, but I'd suspect that for most people here it's not worth the time or effort.

Kitsunegari

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Re: "What is wrong with millennial credit scores"
« Reply #39 on: September 30, 2015, 01:38:59 PM »

Since I do loan reviews as part of my job, I'll give you an inside scoop on how pricing works.  I'm sure other banks/credit unions put their own spin on it but the same Principles should apply.

Based on your credit score, we assign you a risk rating between A+ and E.  This and the length of the loan determines what your interest rate is going to be.  Once you get a credit score of 680, you qualify for our lowest rate.  So from our perspective, anything above 680 is just for bragging rights :)

The other factors that we look at are your debt to income, which we base off of your current loans and lines of credit on your credit report.  Anything above 40% is going to draw extra scrutiny.  For what it's worth I think it's crazy that people would pay 40% of their gross income towards loans, but that's just me.

The other factor we look at is BNI, which is a measure of how likely you are to go bankrupt in the next 24 months.  I'm not exactly sure how this works but I know part of it is how close you are to maxing out your credit cards.  And if you've gone bankrupt before, you better have a good story, otherwise you're getting denied.

I'm sure there are plenty of good ways to game your credit score, but I'd suspect that for most people here it's not worth the time or effort.


This is all very interesting. Maru.
Slightly off topic: based on your experience, should we accept the credit card limit increase that the banks offer us? Or would it hurt our credit score?

maco

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Re: "What is wrong with millennial credit scores"
« Reply #40 on: September 30, 2015, 01:56:09 PM »
Based on your credit score, we assign you a risk rating between A+ and E.  This and the length of the loan determines what your interest rate is going to be.  Once you get a credit score of 680, you qualify for our lowest rate.  So from our perspective, anything above 680 is just for bragging rights :)
Wow, having paid off one small loan while still a student ($1000), my credit score was above 680 when I graduated. I guess that explains how I financed a car right out of college without a cosigner.

Quote
The other factors that we look at are your debt to income, which we base off of your current loans and lines of credit on your credit report.  Anything above 40% is going to draw extra scrutiny.  For what it's worth I think it's crazy that people would pay 40% of their gross income towards loans, but that's just me.
For reference... debt to income is based on ...minimum payments? I'm just thinking that a mortgage is usually more than 1 year's salary, so if it's total amount versus annual salary, that'd get weird with anyone who has a mortgage.

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Re: "What is wrong with millennial credit scores"
« Reply #41 on: September 30, 2015, 02:06:13 PM »
For reference... debt to income is based on ...minimum payments? I'm just thinking that a mortgage is usually more than 1 year's salary, so if it's total amount versus annual salary, that'd get weird with anyone who has a mortgage.
Yes, minimum monthly payments divided by monthly income. Some calculations use gross, some use net.

Marus

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Re: "What is wrong with millennial credit scores"
« Reply #42 on: September 30, 2015, 02:07:58 PM »

Since I do loan reviews as part of my job, I'll give you an inside scoop on how pricing works.  I'm sure other banks/credit unions put their own spin on it but the same Principles should apply.

Based on your credit score, we assign you a risk rating between A+ and E.  This and the length of the loan determines what your interest rate is going to be.  Once you get a credit score of 680, you qualify for our lowest rate.  So from our perspective, anything above 680 is just for bragging rights :)

The other factors that we look at are your debt to income, which we base off of your current loans and lines of credit on your credit report.  Anything above 40% is going to draw extra scrutiny.  For what it's worth I think it's crazy that people would pay 40% of their gross income towards loans, but that's just me.

The other factor we look at is BNI, which is a measure of how likely you are to go bankrupt in the next 24 months.  I'm not exactly sure how this works but I know part of it is how close you are to maxing out your credit cards.  And if you've gone bankrupt before, you better have a good story, otherwise you're getting denied.

I'm sure there are plenty of good ways to game your credit score, but I'd suspect that for most people here it's not worth the time or effort.


This is all very interesting. Maru.
Slightly off topic: based on your experience, should we accept the credit card limit increase that the banks offer us? Or would it hurt our credit score?

Great question!  I think it would actually help you, since if you have more credit offered, your credit line utilization (balance/available credit) will go down.  Credit line utilization is one of the factors that credit score companies look at. 

On the other hand...if you get a ton of offers to increase different cards all at once that might hurt since it could trigger an alarm that you're planning to do something stupid.  Unfortunately I'm mainly speculating here, since the process of assigning credit scores is frustratingly opaque.

Based on your credit score, we assign you a risk rating between A+ and E.  This and the length of the loan determines what your interest rate is going to be.  Once you get a credit score of 680, you qualify for our lowest rate.  So from our perspective, anything above 680 is just for bragging rights :)
Wow, having paid off one small loan while still a student ($1000), my credit score was above 680 when I graduated. I guess that explains how I financed a car right out of college without a cosigner.

Quote
The other factors that we look at are your debt to income, which we base off of your current loans and lines of credit on your credit report.  Anything above 40% is going to draw extra scrutiny.  For what it's worth I think it's crazy that people would pay 40% of their gross income towards loans, but that's just me.
For reference... debt to income is based on ...minimum payments? I'm just thinking that a mortgage is usually more than 1 year's salary, so if it's total amount versus annual salary, that'd get weird with anyone who has a mortgage.

Correct, it would be minimal payments.  We look at it on a monthly basis, so if you pull in $5,000 gross per month and have loan payments of 1,000 on your mortgage, $500 on your car, and $500 on your student loans, you'd be looking at a DTI of 40% (2,000/5,000).  I should note that if you're renting we would include that in your DTI.  In a perfect world, we'd probably factor in other fixed monthly costs as well.

nobodyspecial

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Re: "What is wrong with millennial credit scores"
« Reply #43 on: September 30, 2015, 02:17:31 PM »
Yes, minimum monthly payments divided by monthly income. Some calculations use gross, some use net.
Remember those crazy years in the last century when you could only borrow 2.5x your salary, or 3x your household income if you were a really good risk ?

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Re: "What is wrong with millennial credit scores"
« Reply #44 on: September 30, 2015, 02:46:56 PM »

As a side note.... I've seen reports before that they can lower your cc limit if you change the types of stores you shop at. If you go from shopping at expensive stores to shopping at discount stores/dollar stores, then they assume you've hit hard times and adjust your limit.

This sounds really weird. Can they lower it without your consent, after you signed something they proposed to have a higher limit?
Also, I changed my shopping habits from 'normal' retail stores to charity thrift store, and by bank keeps trying to raise my cc limit.

Yes, they can lower it without your consent. This doesn't always happen when you switch shopping habits, but it does happen.

Do you pay off your balance every month? They are more picky on the shopping habits of those who have revolving credit balances. There are several different factors.

Actually my limit went down without my consent when the stock market went down in 2008/2009. Just prior to that, they had recently raised it a great deal. After they took it down for a few months, they bumped it back up to where it was before. I guess they were waiting to see if the stock market crash had impacted my ability to pay them.


Also, you shouldn't ask to lower your limit. Someone I know asked to lower his limit because he thought it was way too high and he didn't want to be tempted to spend so much. It really hurt his credit score.

deathpanels

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Re: "What is wrong with millennial credit scores"
« Reply #45 on: September 30, 2015, 06:45:28 PM »
Your credit score isn't determined by how much you use your credit card. That's a bunch of mumbo-jumbo. You just won't have as much credit history if you don't use a credit card. But that's not a big deal, banks aren't going to refuse a loan to someone with excellent credit. Banks are in the business of making low-risk loans they don't want to loan money to someone with no assets who buys everything on credit.

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Re: "What is wrong with millennial credit scores"
« Reply #46 on: October 01, 2015, 11:59:28 AM »
Remember those crazy years in the last century when you could only borrow 2.5x your salary, or 3x your household income if you were a really good risk ?
Those pansies.
Our mortgage is about 80% of combined annual wages... lol

nobodyspecial

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Re: "What is wrong with millennial credit scores"
« Reply #47 on: October 01, 2015, 03:38:04 PM »
Remember those crazy years in the last century when you could only borrow 2.5x your salary, or 3x your household income if you were a really good risk ?
Those pansies.
Our mortgage is about 80% of combined annual wages... lol
Why not just put the payments on a credit card?

zephyr911

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Re: "What is wrong with millennial credit scores"
« Reply #48 on: October 09, 2015, 08:56:16 PM »
Remember those crazy years in the last century when you could only borrow 2.5x your salary, or 3x your household income if you were a really good risk ?
Those pansies.
Our mortgage is about 80% of combined annual wages... lol
Why not just put the payments on a credit card?
Hmm... once we've beaten it down to about $25K that might be an option... only 80 grand to go :/