@Anonymous wrote:
@SouthJamaica wrote:What I did say is that having paid off all one's debts should not be a barrier to a perfect score.
E.g. a person who's used credit cards, car loans, and mortgages.... paid off everything very satisfactorily.... should not be barred from a perfect score by having his credit cards at zero and his installment loans all paid off.
And what I said and many others have echoed in this thread is that essentially anything above a 760-780 is considered to be a perfect score. So someone that drops from an 840 score to an 815 because they paid off an installment loan isn't any "less perfect" than they were prior. It doesn't mean that FICO scoring likes to see someone in debt, it means that they are getting the additional points by showing that they are currently responsible and able to pay a current installment loan.
Just because someone successfully paid off a couple of installment loans in the past doesn't mean they are going to today. Loss of job, divorce, or any lifestyle changes really can result in different financial actions and/or an inability to pay successfully currently. As also stated previously, the simple Share Secure loan technique easily overcomes this with essentially no investment of time or money, so complaining about FICO docking someone points for not having an open installment loan (especially when their credit score is still "perfect" in the eyes of lenders) doesn't in my opinion hold much water.
So it's your opinion that all other things being equal, a person who owes money is more reliable than one who does not.
The logic of that escapes me but you're certainly entitled to your opinion.
@Anonymous wrote:
@SouthJamaica wrote:So it's your opinion that all other things being equal, a person who owes money is more reliable than one who does not.
The logic of that escapes me but you're certainly entitled to your opinion.
I think you're looking at the "logic" incorrectly. The argument is that a person that's CURRENTLY meeting the terms of an installment loan has PROVEN to be more reliable than someone that doesn't currently have an installment loan, thus not having the ability to show whether or not the can or are able to meet the terms. Just because they've met installment loan terms in the past doesn't mean that today they are able to.
Look at it this way. You have 2 people each that have a ~800 credit score. One has a current auto loan that's say 2/3 of the way into it's term and has been meeting the terms of the loan agreement. The other paid off an auto loan a year ago, meeting the loan terms, but doesn't currently have an installment loan. Which one is more reliable? The answer is that based on the provided information above, we really don't know. What we do know is that based on the most current information, the first person today is able to successfully meet the terms of an installment loan. What if within the last year of the second person paying off their auto loan they've gone through a divorce, gotten a DWI, lost their job, is currently unemployed etc. but has been just getting by off of savings which are just about depleted. FICO doesn't know about any of these things that have gone on with the second person... but knowing that information would you then say that he is still "more reliable" than the other guy just because he's successfully paid off an installment loan in the past? You don't think that the first guy that's got 1/3 of the term left on his loan without incident is today showing greater signs of creditworthiness?
The fact that a person currently has a debt is not a greater sign of creditworthiness than that he has paid off all his debts.
It is only a sign of his being a better money-making opportunity for banks.
@Anonymous wrote:It's a sign that the person with the current debt that's in good standing, is willing, capable and responsible when it comes to paying back an installment loan. An individual that does not have a current installment loan has no way of proving that they are willing, capable and responsible TODAY to do the same thing without actually doing it. For that reason, it can be understood why FICO gives more points to one that currently is showing the ability to manage an installment loan. As illustrated in my example above, to which you ignored, just because someone has successfully met the terms of an installement loan in the PAST doesn't mean they are able to do so TODAY so they aren't going to get extra points in that department with respect to their FICO score.
And again, you continue to make generalizations that can't be made without more facts. You say that someone with a current debt is not displaying greater creditworthiness than someone that has paid off all his debts. What if the person that's paid off his debt has derogs on his accounts but has still made good on them? Is it still a greater sign of creditworthiness in your eyes since he has no current debts? Just trying to understand your logic here.
Having current debt is not a sign of greater creditworthiness than not having current debt.
@SouthJamaica wrote:Having current debt is not a sign of greater creditworthiness than not having current debt.
Based on what?
FICO's analysis is based on a non-trivial percentage of the tens of millions of credit files; for whatever the reason, it showed that people with some amount of debt were less likely to miss payments or default than those with zero debt.
That's all there is to it, no feeling, no opinion, just data. I conjectured above given that humans are absolutely creatures of habit, that someone who is paying on various debits is more likely to continue paying on current and new debts, than someone who has none.... but again that's just a random theory unsupported by any real evidence.
I don't know how we can resolve this particular debate, without access to the data we can't do the similar analysis that FICO did.
Also, Vantage seems to be similar, I got serious points for obtaining a mortgage... i.e. going further into debt, so it's not just FICO.
@Revelate wrote:
@SouthJamaica wrote:Having current debt is not a sign of greater creditworthiness than not having current debt.
Based on what?
FICO's analysis is based on a non-trivial percentage of the tens of millions of credit files; for whatever the reason, it showed that people with some amount of debt were less likely to miss payments or default than those with zero debt.
That's all there is to it, no feeling, no opinion, just data. I conjectured above given that humans are absolutely creatures of habit, that someone who is paying on various debits is more likely to continue paying on current and new debts, than someone who has none.... but again that's just a random theory unsupported by any real evidence.
I don't know how we can resolve this particular debate, without access to the data we can't do the similar analysis that FICO did.
Also, Vantage seems to be similar, I got serious points for obtaining a mortgage... i.e. going further into debt, so it's not just FICO.
Common sense.
@Anonymous wrote:
@SouthJamaica wrote:Having current debt is not a sign of greater creditworthiness than not having current debt.
You're doing an excellent job of avoiding any questions posed to you and answering with generalized one-liners.
Using your generalized criteria, a 7 year old has superior creditworthiness to an adult with a 12+ year AAoA of flawless accounts and an 800+ credit score so long as the adult has an open installment loan or a penny+ balance on a credit card as the adult has "debt" and the 7 year old doesn't.
Come on, man.
You keep twisting what I said.
All other things being equal, having current debt is not a sign of greater creditworthiness than not having current debt.