FixMyCredit1992 wrote:
I remember as a kid watching on "The Simpsons" where Homer wanted to buy something on credit, so the clerk typed his info into the computer, and either a red sad face, or a yellow smiley face told if he could or not.
- All that this is, is available funds or not. Same thing for an "approved" when swiping a card. Cute reference though.
It used to be, many years ago (before my time but people older than me still say this), that if you wanted credit, it was done SOLELY on a manual basis.
An underwriter would look over things such as your income, health, previous loans, etc.
Instead, all this info in put into a computer which generates a 3 digit score.
That idea sounds good on paper, but in reality, it's horrible. Computers can only look at the information given to them, they do not have artificial intelligence, so they cannot "think" about anything more than what was fed to them.
There are so many things that can change in a human's life, the possibilities are infinite.
It would be like giving a computer score to your health, which doesn't realize you are going to get lung cancer in 15 years.
Or your car giving a "maintenance score", then crashing into a pole 3 days later.
Computer scoring is a horribly stupid idea, invented by someone who wanted to relieve the burden of having to personally evaluate each person's credit.
Computer scoring has no place in real life.
In fact, here are some real life examples:
1. Joe is 85 years old, and has a Fico score of 800. He is dying of a terminal illness, and takes out a loan for 200,000 dollars. He goes on a shopping spree, buys a new BMW, and dies 3 months later, sticking to bill to the creditors.
2. Frank just lost his job, but the credit companies don't know that (just yet). So he [with his very good score], maxes out his credit cards, then files Bankruptcy.
I could list tons more examples. but lets move forward..
- The issue here is that you're wrong in the sense of "no place for it in real life". The scoring system currently is done to save man power and time. There used to be a time when people had to crank their engines to get them started... Or they had put a record on a player to listen to music. Times and technology change to make our lives easier. So instead of a bank employing 100 people they can hire 10 people to do the manual under writing. The scoring system is sound in the fact that it's pro bank. They're not going to give money or credit to people that are risky. Like in your below examples. Yes they'll give grandpa a 200k loan... As long as his house is worth 500k. So even if he does die in 3 months they're covered.
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1. If you don't have credit, you can't get credit.
What a novel concept. If you just turned 18, you start off with a blank slate. However people with blank slates have no score., and guess what? They are lumped into the same boat of people with a BAD score.
Used to be, that often you could be given a small loan by a bank if you had no credit.
Today? Without piggbacking off your parents credit card as an authorized user (which places are starting to put a stop to) , or forking over money to get a secured loan, just TRY to get a loan.
There is no "Everyone who is new should be given a chance" in the credit industry.
- I never piggy backed on anybody to get my credit. I held a job down for 2 years from 16-18 and got an unsecured cap 1 card at a $200 limit. I was able to prove myself to them and they raised my limits.
2. People in debt, can have more debt, but people with no debt, can't have debt.
Again, what a wonderfuly STUPID IDEA.
I know someone who is 30,000 dollars in debt, and has a 795 Credit Score. He barely makes enough to pay the minimum payments.
But guess what? Every time I'm over to his house, there is tons of credit card offers sitting on his table.
Even though he is knee deep in debt, he is satisfying the creditor's minimum payments, so they don't mind tanking his debt even further if they can give him the chance.
Getting back to number one, even though this person has a "debt problem", someone who is just starting out cannot be given a simple credit card with a $1000 limit.
Why should someone who is neutral (has never had credit given to them, but has never defaulted on their obligations), not be allowed credit, but someone who clearly has a problem allowed to have more? To me, this isn't fair.
1. Your friend has acceptance letters. That doesn't mean they'll be accepted. All it is is that they showed they could handle debt. They aren't defaulting on their payments or in collections so they're current.
2. Credit isn't a right, it's a privilege. Just because you turn 18 and become an "adult" doesn't mean you can handle it. Same goes for driving... That's why you have to pass a driving test. It's a privilege to drive, not a right.
3. People still don't understand how credit cards work.
When people log into a website, they see they have "$5,000 in available credit", problem is, many people fail to realize that money does NOT belong to them, and unless they pay the balance owed every month in full, they are being charged for this money.
Right. This I can back you on. I know so many people that still don't understand it, my family included. They have to go seek the answers, take a class or have motivation to learn about it.
4. People get into trouble with them.
Credit card debt has been a problem ever since their inception, in fact it's so bad, people have taken their own life from it. While some people are good at finances, the majority are not, and these companies prey on it.
Now, with what you just read, you probably think I hate credit, and just cut up my cards.
I think credit cards DO serve a place in life, but I think much needs to be done.
This is a responsibility and knowledge thing.
1. Fico scoring needs to improve their algorithm's.
The simple fact that people who are in debt way more than they can afford is very alarming. Income in relation to debt needs to be examined more carefully.
The income to debt ratio maybe. I know (seen posts about) a few people on this board that are making 40k a year and have 80k in credit. How?... Magic.
If someone is in more debt than they can pay back, then they need to be "Shut off" from getting more credit.
To me, when someone is in debt, more than they can reasonably afford to pay, credit card companies should NOT be extending them credit. It's no worse than handing a beer to a recovery alcoholic!
Also things like health should be taken into the score. If someone is about ready to die, or has a higher chance of dying, they should be given less credit.
Responsible adults. If they have a problem paying it back they should cut themselves off. The bank are not our parents and we shouldn't ask them to be. It would be the same issue of blaming the people that make Rum for an alcoholic’s issues.
2. Everyone should be given a chance.
It is very hard for millennials to obtain credit, especially after the "crunch". I think every person turning 18 should be given a credit card with a 500 to 1000 dollar limit to help build credit.
Couldn't disagree more. If you can prove you can hold down a job (to pay back debt) you should be extended a small amount, say $100 or $200 as a secured card. For a couple reasons:
1. You have skin in the game. You default? Well your $200 is now gone.
2. It proves you're responsable on a small scale.
3. it’s a privalage, not a right.
3. People need to be more educated about credit.
In the world of information, I'm amazed at the sheer number of people who easily screw up their credit, however I think it's not entirely their fault.
I work in IT. I'm amazed that people don't understand computers better... It's all about what's important to people and what they want to fill their head with.
I graduated in 2010, and credit was not even brought up in school.
Everyone should be given more education about credit. Creditors should be more inclined to educate people when they get a credit card. (Though I'm sure they don't on purpose to trap people).
I agree that basic money management should be taught in schools. I missed out on it myself and had to figure it out. With that being said, it comes from experience and learning. However the banks shouldn't educate anybody. That's like asking a used car sales man what car to buy.
To be honest, I don't agree with a lot of what you suggest though I don't have time to write a particularly useful response.
That said, I think your comment regarding credit education is a legitimate one, but college isn't the place for that. There are certain things which parents can / should be teaching, but if that's not happening currently there's not a lot to be done. Maybe a modern "home economics / life skills" class in HS would be appropriate.
The other major problem I have with the system is that as another poster suggested, it is guilty until proven innocent when it comes to one's credit report: CA's and others can simply toss up information without substantial repercussions even if it is wrong; also, the sheer number of reporting errors is staggering in these day and age - banks and others both have to keep meticulous records, but the CRA's aren't held to the same standard and that is all sorts of fustruating for the consumer.
Anyway, the FICO algorithm is a predictor of a consumer's default risk within 2 years. That's it, nothing more. Everything else, such as the difficulty of getting credit if you don't have any (unless you're a student) to the use of computers for underwriting decisions (which look at a lot more than FICO, I have lots of first hand experience supporting loan origination platforms) should be squarely laid at the feet of the lenders: FICO doesn't extend credit, the lenders do, and to be honest, if someone is so financially strapped they can't come up with the minimum $49 deposit on a Cap 1 secured card, why should a lender extend them unsecured credit if they have essentially no assets and likely no cash flow to begin with?
@FixMyCredit1992 wrote:I'm getting to the point where I hate credit, well what credit currently is anyway.
I remember as a kid watching on "The Simpsons" where Homer wanted to buy something on credit, so the clerk typed his info into the computer, and either a red sad face, or a yellow smiley face told if he could or not.
It used to be, many years ago (before my time but people older than me still say this), that if you wanted credit, it was done SOLELY on a manual basis.
An underwriter would look over things such as your income, health, previous loans, etc.
Instead, all this info in put into a computer which generates a 3 digit score.
I'm pretty sure companies put more into account other things such as your credit report (baddies if any, AAoA), income, etc. A score is just a number.
I"m not sure why health would take a part? Unless you're talking about someone who is very sick defaulting on loans (which would have collateral anyway so the bank wouldn't really be out)?
That idea sounds good on paper, but in reality, it's horrible. Computers can only look at the information given to them, they do not have artificial intelligence, so they cannot "think" about anything more than what was fed to them.
There are so many things that can change in a human's life, the possibilities are infinite.
It would be like giving a computer score to your health, which doesn't realize you are going to get lung cancer in 15 years.
I kind of get this analogy...
Or your car giving a "maintenance score", then crashing into a pole 3 days later.
I kind of don't get this one...
Computer scoring is a horribly stupid idea, invented by someone who wanted to relieve the burden of having to personally evaluate each person's credit.
Computer scoring has no place in real life.
Not necessarily true. Computers do come up with algorythms on risk, but of course it's not perfect and that's why there's recon and manual underwriters.
In fact, here are some real life examples:
1. Joe is 85 years old, and has a Fico score of 800. He is dying of a terminal illness, and takes out a loan for 200,000 dollars. He goes on a shopping spree, buys a new BMW, and dies 3 months later, sticking to bill to the creditors.
2. Frank just lost his job, but the credit companies don't know that (just yet). So he [with his very good score], maxes out his credit cards, then files Bankruptcy.
I think another poster mentioned number one already (Joe would've needed to put up his house for that loan; good credit would only get him a good interest rate). As for number two, it's possible but it seems like people really get into debt over medical bills or careless spending or divorce (evil ex). I feel like most people would pay if they could. Sure, there are people who take advantage of declaring bankruptcy but I think the average person would do everything to pay first and use bankruptcy as a last resort.
I could list tons more examples. but lets move forward..
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1. If you don't have credit, you can't get credit.
What a novel concept. If you just turned 18, you start off with a blank slate. However people with blank slates have no score., and guess what? They are lumped into the same boat of people with a BAD score.
Used to be, that often you could be given a small loan by a bank if you had no credit.
Today? Without piggbacking off your parents credit card as an authorized user (which places are starting to put a stop to) , or forking over money to get a secured loan, just TRY to get a loan.
There is no "Everyone who is new should be given a chance" in the credit industry.
Credit is a Catch 22. I didn't piggyback off my parents either (no AU credit). I got a car loan (yes, my dad is the cosigner but I have paid EVERY single payment and it is my sole responsibility. Perfect payments have led to me being able to get other cards.
2. People in debt, can have more debt, but people with no debt, can't have debt.
Again, what a wonderfuly STUPID IDEA.
I know someone who is 30,000 dollars in debt, and has a 795 Credit Score. He barely makes enough to pay the minimum payments.
But guess what? Every time I'm over to his house, there is tons of credit card offers sitting on his table.
Even though he is knee deep in debt, he is satisfying the creditor's minimum payments, so they don't mind tanking his debt even further if they can give him the chance.
Getting back to number one, even though this person has a "debt problem", someone who is just starting out cannot be given a simple credit card with a $1000 limit.
Why should someone who is neutral (has never had credit given to them, but has never defaulted on their obligations), not be allowed credit, but someone who clearly has a problem allowed to have more? To me, this isn't fair.
Offers =/= approved applications.
3. People still don't understand how credit cards work.
When people log into a website, they see they have "$5,000 in available credit", problem is, many people fail to realize that money does NOT belong to them, and unless they pay the balance owed every month in full, they are being charged for this money.
This is definitely a problem. Maybe to me it's common sense that it's the bank's money and you have to pay them back but for some reason a lot of people don't understand that. I think a class in high school would be great. Of course I wonder if there's some sort of weird liability issues with teaching credit to 18 and soon to be 18 year olds. Too bad because it would've been so more useful in my life now than AP Calc.
4. People get into trouble with them.
Credit card debt has been a problem ever since their inception, in fact it's so bad, people have taken their own life from it. While some people are good at finances, the majority are not, and these companies prey on it.
Now, with what you just read, you probably think I hate credit, and just cut up my cards.
I think credit cards DO serve a place in life, but I think much needs to be done.
1. Fico scoring needs to improve their algorithm's.
The simple fact that people who are in debt way more than they can afford is very alarming. Income in relation to debt needs to be examined more carefully.
Maybe...although most CC apps only allow one to include's one income (I think Amex is an exception) even if people can get money from other sources (parents, spouse, etc).
If someone is in more debt than they can pay back, then they need to be "Shut off" from getting more credit.
To me, when someone is in debt, more than they can reasonably afford to pay, credit card companies should NOT be extending them credit. It's no worse than handing a beer to a recovery alcoholic!
Also things like health should be taken into the score. If someone is about ready to die, or has a higher chance of dying, they should be given less credit.
2. Everyone should be given a chance.
It is very hard for millennials to obtain credit, especially after the "crunch". I think every person turning 18 should be given a credit card with a 500 to 1000 dollar limit to help build credit.
$500 or $1000 is a lot..I think everyone with a blank slate should be able to get a secured CC (with the possibility of graduation after perfect payment history for a year or so) to prove credit worthiness.
3. People need to be more educated about credit.
In the world of information, I'm amazed at the sheer number of people who easily screw up their credit, however I think it's not entirely their fault.
I graduated in 2010, and credit was not even brought up in school.
Everyone should be given more education about credit. Creditors should be more inclined to educate people when they get a credit card. (Though I'm sure they don't on purpose to trap people).
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