Confused and dissapointed. FICO is a scam for working class

[light_in_Spanish]

So Here I am being responsible paying off my balances and cleaning my credit. Bad news is my score got lower because my balanced Decreased. So I owe less money, so my credit score got lower. This is designed to keep working class in debt and I am frustrated. How can my score get lower because I owe less on my CC's? I am paying evething off and closing everything!. I am not going to keep this game with credit bureus companies.

[redbeard]

If I'm reading your statement correct, the closing the accounts is what is lowering your score. Pay them off, but if they don't cost money, leave them open. It helps with several factors on your overall credit score.

Trust me though, you are far better off out of debt then worrying about your credit score.

Dan

[Gunnar419]

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@light_in_Spanish wrote:

So Here I am being responsible paying off my balances and cleaning my credit. Bad news is my score got lower because my balanced Decreased. So I owe less money, so my credit score got lower. This is designed to keep working class in debt and I am frustrated. How can my score get lower because I owe less on my CC's? I am paying evething off and closing everything!. I am not going to keep this game with credit bureus companies.

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You're wrong that FICO scoring is a means of keeping working class people in debt. I'm working class, lower working class even. I'm not in debt. My FICO scores are all oer 800.

Yes, they do ding people for paying off installment loans and for having zero balances on all their credit cards. But you can have excellent credit with no loans and all and simply by letting as little as 1% report on one credit card every month. That 1% doesn't have to be interest bearing debt, either. You can just let it report, then pay it off.

Being mad at FICO to the point where you give up credit entirely will hurt your chances at getting a mortgage or a car loan later. If you expect to spend the rest of your life using cash only, fine, otherwise you're just hurting yourself.

Don't give up credit. LEARN to understand credit.

[MidnightVoice]

Credit scoring is like a game.  Learn to play it, have fun and reap the benefits

[Anonymous]

^^^^ +1 Exactly.

I always like to say, don't try to understand the FICO scoring system, just learn the rules so you can play the game to your advantage!

[cashnocredit]

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@light_in_Spanish wrote:

So Here I am being responsible paying off my balances and cleaning my credit. Bad news is my score got lower because my balanced Decreased. So I owe less money, so my credit score got lower. This is designed to keep working class in debt and I am frustrated. How can my score get lower because I owe less on my CC's? I am paying evething off and closing everything!. I am not going to keep this game with credit bureus companies.

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Well, it either isn't working or you aren't a member of the working class.

Seriously, I agree with the other commenter. It's better to have less debt than a higher credit score though in the majority of cases they occur together.  You're problem is that closing credit accounts ca increase your utilization and that can hurt scores even though you are financially better off.  It's one of the odd, corner cases of credit scoring.

[Anonymous]

Don't quit the game !!!!! Trust me, you'll regret it, big time. I'm speaking from experience. I quit 8 year's ago. I was sick of it. I got prepaid and debit cards. Besides cash, that's all I used. I wanted nothing to do with lenders, CC's, scores, etc... My motto was "if I can't pay cash for it, I don't need/want it".
My wife was the one who finally convinced me to get out of this mind-set. She was actually talking divorce as I wanted nothing to do with buying a house. She finally convinced me to take charge of my credit in January, and I thank her everyday. My entire attitude has changed and my self esteem has grown. I use to feel ashamed breaking out my prepaid card, in front of my coworkers, and inside, I was jealous watching someone open up their wallet and seeing all their plastic. Anyway, please don't give up. You'll regret it. My scores are only now starting to get above 720 from the mid 500's 6 months ago. I could've been so much further ahead had I chose not to buried my head in the sand and give up. Don't be a quitter like me.

[NRB525]

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@light_in_Spanish wrote:

So Here I am being responsible paying off my balances and cleaning my credit. Bad news is my score got lower because my balanced Decreased. So I owe less money, so my credit score got lower. This is designed to keep working class in debt and I am frustrated. How can my score get lower because I owe less on my CC's? I am paying evething off and closing everything!. I am not going to keep this game with credit bureus companies.

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Sorry to hear about the frustrations, it can take some time to understand how the game works.

If you list out the credit cards you have, which ones they are, their credit limit, and whether you owe any interest amounts on them, then you will get some good advice here. Regarding using your cards, as others have implied, you can use a credit card for daily spend items like groceries and gas, pay the amount on the statement in full by the due date, never pay any interest cost, and build a very good FICO score by doing that consitently for a few years. You are going to spend that money anyway, all you have to do is get on a card that is not carrying a balance that costs interest.

[tufa4311]

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@cashnocredit wrote:

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@light_in_Spanish wrote:

So Here I am being responsible paying off my balances and cleaning my credit. Bad news is my score got lower because my balanced Decreased. So I owe less money, so my credit score got lower. This is designed to keep working class in debt and I am frustrated. How can my score get lower because I owe less on my CC's? I am paying evething off and closing everything!. I am not going to keep this game with credit bureus companies.

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You're problem is that closing credit accounts ca increase your utilization and that can hurt scores even though you are financially better off.  It's one of the odd, corner cases of credit scoring.

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I'd like to suggest that it is actually not odd at all. We have to remember what the purpose of a credit score is, or at least what the party line is. The purpose of a credit score, we're told, is to assess the likelihood that a person will become more thah 90 days late on a payment. So, while we understand the process of the specific siutation here - the closing of an account, which leads to less avaialble credit, which in turn leads to any balance you may be carrying at the time to become at higher %age of the overall credit available to you, which then lowers your score becuase if you are using a high %age of your overall credit well then something financially must be wrong otherwise you wouldn't be using all or close to all your credit, and since "something" is "wrong" then the risk increases that you will become delinquent in your payments - full stop.

Now, that all sounds perfectly acceptable. But I'd like to explore it a bit more. So, the first question is - is there really only one reason for a credit score? Simply to assess the risk of a 90-Day late payment. If yes, then why is it that if one has no installment accounts their score is lowered? How does not having an installment account, for example, lead to a higher risk of becoming 90+ days late on an account, esp. if you have had installment accounts in the past and have showed that you are completely responsible by never having a late payment and abiding by your agreements? If you have never had an installment account well ok, then I'll agree that with less data on your abiity to pay come higher risk, but for those of us who have taken 7 years and paid off an auto loan, for ex., and then having paid it off in full last month, and having no other installment accounts, our scores drops. Again, how does the fact that we just paid off an account in full lead to a higher risk of a 90+ day late in the future?

Or, perhaps, my entire line is moot as maybe the party line is incorrect and the reason for a credit score serves a number of purposes.

Now, take it away...