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New Member
Duality240
Posts: 15
Registered: ‎09-03-2011
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Re: College essay on interest rates


haulingthescoreup wrote:

Hi Duality, welcome to the forums!

 

It's possible (and very useful) to quote the post that you're replying to. When you hit "reply" to a specific post, and the text box opens up, you'll see a button above on the right that says "quote." Hit that, and the original post appears in your text box. Before you start to enter your reply, make sure that your cursor is out of the quoted area and back on the left-hand margin, either above or below the quote.

 

It sounds like you're getting some useful help, and so I'll only comment that most CCC's (credit card companies) use more than just a credit score of whatever type. They typically will also look at your internal history with that company --if you've ever "burned" them, for instance, and they'll look at your underlying credit report to see what created your score. For instance a 720 FICO score can mean someone with 6 years of history, one 30-day late four years ago, and very few balances reporting (= a good customer), or it can mean someone who had a 795 three days ago, and a collection just hit the report. :smileysurprised:

 

I realize that this is an assignment for an English class, not a finance class, but if only for your own future info, you should be aware of the above.  :smileywink:


Thank you for the welcome and the great tips! And yes, it definitely helps to have a better understanding of the topic I am covering.  I just wanted to make sure everyone understood that I am trying to impress upon an English professor and not a Finance professor.  I could probably fudge some of the facts on my essay without hurting my grade as long as I follow the proper formula for a persuasive essay.

New Member
Duality240
Posts: 15
Registered: ‎09-03-2011
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Re: College essay on interest rates

I think your right, I did misunderstand.  I have never "shopped" in the sense that you talk about.  I have always researched the creditor and looked for the "average" rate of interest that they charge.  With this information in mind, I limit the amount of credit I apply for, therefore avoiding multiple "hard" pulls of my credit report.


snowangel wrote:

Duality - i think you misunderstood my last point.

 

When someone is shopping around for a mortgage or car loan, they often have their credit pulled mulitple times by different lenders, these hard pulls often get consolidated by CRAs so that they don't end up with a ton of hard pulls on their report just for trying to find the best financing deal.

 

When they are shpping around for credit cards, they might apply for cards with several different companies and see what they are approved for (different APR or product type) but not necessarily open up each  account that they applied for.   Each hard pull remains on that person's report and is factored into their score regardless of whether or not they open the accounts or not or were even approved.  

 

The preapproved/prescreened offers that you receive in the mail come from that CRAs give to credit card/insurance companies.  A CCC probably pays the CRA for a list of people who meet certain requirements (ex, credit score of 700 and no collection accounts).  That's why they're not a guaranteed approval since other factors are often considered.  Many people, like myself, don't want the constant junk mail and have opted out so whether they qualify or not,, they'll never receive those offers in the mail.

 


 

New Member
Duality240
Posts: 15
Registered: ‎09-03-2011
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Re: College essay on interest rates


LynetteM wrote:

Duality240 wrote:

Well, obviously I would be writing from the point of view of a consumer as opposed to a credit card company exec. or financial genius.  It woud be easier to explain why using a credit score is the only fair way to determine risk factor but where's the fun in that?

 

1.  Credit card scores vary based on the reporting agency and consumers have no control over which agency credit card companies get their score from.

2.  There is no leniency (I.E. the difference between a credit score of 759 and 760 can be thousands of dollars in interest)

3.  Credit scores remove the human element.  A credit score does not care if you broke your foot and was out of work for six weeks.

4.  Being 30 days late on a payment can affect your credit score for years.  It takes years to get a good credit score but only one month to ruin it.

 

These are just a few of the arguments I plan to use in my essay.  I would like to hear more for/against using credit scores as the single determining factor for evaluating risk.  I haven't written my opening statement yet but I plan to compare using credit scores to racial profiling in airports!  That should get the readers attention!!!


Are you sure that using the example of racial profiling in airports is the way to go for comparison? I travel a lot, and in my opinion racial profiling in airports is avoided as much as possible. When there is an example of racial profiling these days, it makes headlines. I don't think it's happening as much as you think. I'm sure it did in the past, but it's being avoided today. I'm a 61-year-old Caucasian female...not even 4' 11" tall. I am very often the one chosen for body scanning. I'm about as far from the racial profile as you can get. Most of this is randon these days. Last time we flew overseas my husband was chosen randomly. If I read your opinion containing "racial profiling in airports," I would think you were out of touch with today's reality, and I would not give much weight to the rest of your arguments.

 

Just my opinion on your original premise....

 

As for the rest of your argument, credit scores are only one factor in setting interest rates. I believe income plays an important part. When you apply for a credit card, they ask for your income. I know you have to stick to the premise you chose, but I don't believe the original premise is totally accurate to begin with.


I guess I need to clarify a little on this obviously inflammatory subject.  As far as I know, racial profiling never occurs at airports.  At least, it isn't supposed to.  I am just trying to point out that judging a persons character based on a number (because thats what a CCC would be doing if it were to charge a higher interest rate based solely on ones credit score while ignoring all other factors) makes about as much sense as an airport policemen detaining someone for no other reason than their race.  Does it happen at airports?  Probably, but I no longer fly and I don't personally know anyone that has ever encountered profiling, so I can't speak with any authority on the subject.

 

As for the premise of the essay, you may be right but facts aren't the most important part of this assignment.  I have to follow the correct format of a persuasive essay to get a good grade and if I fudge on the facts a little, my English professor probably wouldn't understand or care.  I'm not being graded on financial accuracy.  If I was, my introduction would need to grab the readers attention because I would only be writing to an audience of people interested in finance.  As it is, I have one chance (my introductory sentence) to grab the readers attention (through the use of quotes, opinions, or personal observations) and then I have to follow a formula for the rest of the essay that is at least loosely based on fact.

Senior Contributor
Wolf3
Posts: 3,197
Registered: ‎01-24-2010
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Re: College essay on interest rates


LynetteM wrote:

Duality240 wrote:

Well, obviously I would be writing from the point of view of a consumer as opposed to a credit card company exec. or financial genius.  It woud be easier to explain why using a credit score is the only fair way to determine risk factor but where's the fun in that?

 

1.  Credit card scores vary based on the reporting agency and consumers have no control over which agency credit card companies get their score from.

2.  There is no leniency (I.E. the difference between a credit score of 759 and 760 can be thousands of dollars in interest)

3.  Credit scores remove the human element.  A credit score does not care if you broke your foot and was out of work for six weeks.

4.  Being 30 days late on a payment can affect your credit score for years.  It takes years to get a good credit score but only one month to ruin it.

 

These are just a few of the arguments I plan to use in my essay.  I would like to hear more for/against using credit scores as the single determining factor for evaluating risk.  I haven't written my opening statement yet but I plan to compare using credit scores to racial profiling in airports!  That should get the readers attention!!!


Are you sure that using the example of racial profiling in airports is the way to go for comparison? I travel a lot, and in my opinion racial profiling in airports is avoided as much as possible. When there is an example of racial profiling these days, it makes headlines. I don't think it's happening as much as you think. I'm sure it did in the past, but it's being avoided today. I'm a 61-year-old Caucasian female...not even 4' 11" tall. I am very often the one chosen for body scanning. I'm about as far from the racial profile as you can get. Most of this is randon these days. Last time we flew overseas my husband was chosen randomly. If I read your opinion containing "racial profiling in airports," I would think you were out of touch with today's reality, and I would not give much weight to the rest of your arguments.

 

Just my opinion on your original premise....

 

As for the rest of your argument, credit scores are only one factor in setting interest rates. I believe income plays an important part. When you apply for a credit card, they ask for your income. I know you have to stick to the premise you chose, but I don't believe the original premise is totally accurate to begin with.



One problem with using the racial profiling example is that it is a much bigger issue than interest rates. At best it looks like an extreme exageration, at worst it looks like you are belittling the racial problems.   Unfortunalely, there are a significant number of people who believe racial profiling is justified.  

 

 

 

Senior Contributor
Wolf3
Posts: 3,197
Registered: ‎01-24-2010
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Re: College essay on interest rates

I suggest you go through the education section of this site and learn the basics of FICO score.

 

As mentioned earlier, Utilization is a huge part of your score.    It is meant to be an indicator of risk based on how much debt you are carrying w.r.t. you credit availability.   I am sure it is meaningful for people carrying debt from month to month and paying interest.  

 

It does not account for people who pay in full each month and don't pay interest.  It treats them the same.   It can be manipulated by those who pay in full, by paying early and timing it so the utilization score is maximum.   

 

People who understand this,  use it to get a higher score than they would normally get, either continuously or when they need it.

 

I think if you show the big flaw in the FICO score, then you have the reason to say it is not fair.

 

 

New Member
Duality240
Posts: 15
Registered: ‎09-03-2011
0

Re: College essay on interest rates

Perfect.  That is exactly what I needed.  I will read the education section now that I know what I am looking for.  Thanks!

Valued Contributor
ptr2593
Posts: 1,486
Registered: ‎08-14-2011
0

I'd like to help but I don't support the statement that &...

[ Edited ]

I'd like to help but I don't support the statement that "A consumer’s interest rate for credit card debt should not be based on their credit score."   Your credit score, at least somewhat, indicates how credit worthy and low-interest-deserving an individual is.  Sure being out of work for 6 months can sometimes be out of your control, but that doesn't mean the bank or CC should take the hit by not receiving the payments that you owe them.  Yes, it sucks to not have a job and to have debt piling up, but, again, you still have a responsibility to repay your lender(s).

 

It's been a few years since my introductory college english class, but iirc, part of a persuasive argument (probably the most important part) is proposing an alternative.  So, I challenge you to come up with a better way to judge what interest rate someone should get.  The current way, mind you, is a completely unbiased system that is solely based on a borrowers ability to manage their debt.  

 

Also, to chime in on the possible comparison with racial profiling, you are not born into your credit score.  You earn your score (good or bad) based on your actions and as is the case for so many of us here you have the ability to change your score just by learning and improving your credit practices.  Race is inherited, you can't change your race and you certainly will never hear someone say "You're (insert race here) so you cannot fly on our airlines."  However, there is transparency with interest rates and you know what you'll get based on your score/report.  Lenders will flatout tell you why you didn't get the best rate.  Not to mention "Score profiling" is not illegal :smileyhappy:.

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Moderator Emeritus
tinuviel
Posts: 4,875
Registered: ‎11-02-2010
0

Re: College essay on interest rates


Duality240 wrote:

LynetteM wrote:

Duality240 wrote:

Well, obviously I would be writing from the point of view of a consumer as opposed to a credit card company exec. or financial genius.  It woud be easier to explain why using a credit score is the only fair way to determine risk factor but where's the fun in that?

 

1.  Credit card scores vary based on the reporting agency and consumers have no control over which agency credit card companies get their score from.

2.  There is no leniency (I.E. the difference between a credit score of 759 and 760 can be thousands of dollars in interest)

3.  Credit scores remove the human element.  A credit score does not care if you broke your foot and was out of work for six weeks.

4.  Being 30 days late on a payment can affect your credit score for years.  It takes years to get a good credit score but only one month to ruin it.

 

These are just a few of the arguments I plan to use in my essay.  I would like to hear more for/against using credit scores as the single determining factor for evaluating risk.  I haven't written my opening statement yet but I plan to compare using credit scores to racial profiling in airports!  That should get the readers attention!!!


Are you sure that using the example of racial profiling in airports is the way to go for comparison? I travel a lot, and in my opinion racial profiling in airports is avoided as much as possible. When there is an example of racial profiling these days, it makes headlines. I don't think it's happening as much as you think. I'm sure it did in the past, but it's being avoided today. I'm a 61-year-old Caucasian female...not even 4' 11" tall. I am very often the one chosen for body scanning. I'm about as far from the racial profile as you can get. Most of this is randon these days. Last time we flew overseas my husband was chosen randomly. If I read your opinion containing "racial profiling in airports," I would think you were out of touch with today's reality, and I would not give much weight to the rest of your arguments.

 

Just my opinion on your original premise....

 

As for the rest of your argument, credit scores are only one factor in setting interest rates. I believe income plays an important part. When you apply for a credit card, they ask for your income. I know you have to stick to the premise you chose, but I don't believe the original premise is totally accurate to begin with.


I guess I need to clarify a little on this obviously inflammatory subject.  As far as I know, racial profiling never occurs at airports.  At least, it isn't supposed to.  I am just trying to point out that judging a persons character based on a number (because thats what a CCC would be doing if it were to charge a higher interest rate based solely on ones credit score while ignoring all other factors) makes about as much sense as an airport policemen detaining someone for no other reason than their race.  Does it happen at airports?  Probably, but I no longer fly and I don't personally know anyone that has ever encountered profiling, so I can't speak with any authority on the subject.

 

As for the premise of the essay, you may be right but facts aren't the most important part of this assignment.  I have to follow the correct format of a persuasive essay to get a good grade and if I fudge on the facts a little, my English professor probably wouldn't understand or care.  I'm not being graded on financial accuracy.  If I was, my introduction would need to grab the readers attention because I would only be writing to an audience of people interested in finance.  As it is, I have one chance (my introductory sentence) to grab the readers attention (through the use of quotes, opinions, or personal observations) and then I have to follow a formula for the rest of the essay that is at least loosely based on fact.



I remember having to write persuasive arguments for my English Comp class, so I understand what you're trying to accomplish. But, I would suggest that you don't "fudge" the facts; instead, you can select the facts that you choose to present, and downplay facts that don't support your thesis statement.

 

One fact that you can use to further your argument is that charged-off accounts (COs) are scored the same whether they have been paid or not. Let's say, for example, that an individual becomes unemployed and doesn't pay his account for an extended period of time. Eventually, the account becomes charged-off. Later, that individual finds the means to pay the account, either from becoming employed, borrowing money from friends, or the like. The account is updated with the credit bureaus to reflect that it has been paid. But, it still remains flagged as a charge-off and is scored the same as if the account had never been paid. It can be argued that this scoring metric fails to predict with accuracy whether or not a person will pay his debts.

 

Good luck with your assignment! :smileyhappy:


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Walt_K
Posts: 3,065
Registered: ‎11-02-2009
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Re: College essay on interest rates

[ Edited ]

A couple other points to note.  Taking the stance that basing info on a credit score is unfair/ill advised because it is a single data point soft-pedals the fact that a credit score is a conglomerate of several pieces of data about a person's financial history.  

 

Additionally, with respect to the racial profiling analogy, one of the benefits of using objective criteria like credit scores is it prevents biased judgments against people.  I  would imagine that score-based models have increased access to credit by groups that have traditionally been discriminated against. 

 

[edited to fix spelling]


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tinuviel
Posts: 4,875
Registered: ‎11-02-2010
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Re: College essay on interest rates


ptr2593 wrote:

I'd like to help but I don't support the statement that "A consumer’s interest rate for credit card debt should not be based on their credit score."   Your credit score, at least somewhat, indicates how credit worthy and low-interest-deserving an individual is.  Sure being out of work for 6 months can sometimes be out of your control, but that doesn't mean the bank or CC should take the hit by not receiving the payments that you owe them.  Yes, it sucks to not have a job and to have debt piling up, but, again, you still have a responsibility to repay your lender(s).

 

It's been a few years since my introductory college english class, but iirc, part of a persuasive argument (probably the most important part) is proposing an alternative.  So, I challenge you to come up with a better way to judge what interest rate someone should get.  The current way, mind you, is a completely unbiased system that is solely based on a borrowers ability to manage their debt.  



I remember from my class that we had to learn to make a case for both sides of an argument. In one assignment, half of the class was to research and present a case in favor of the argument, while the other half had to research and make a case against the same argument. I'm not certain if the OP was assigned to take the position presented, but if so, then the OP needs to find facts to support the statement and arrange them in such a way so as to persuade the reader to agree.


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