[codernyc16]

I had a recent 30 day delinquent payment reduce my credit score by 80 points. And this was because the letter in the mail was mid-delivered. Not that the credit card issuer, nor the credit agencies give two shits. This was after about 5 hours of calls ping-ponging between the two.

[throwawaycert]

Credit scores change constantly. What your 80 point drop told creditors is "This person might not have enough money to pay their bills, or is careless or forgetful.". You are perceived as higher risk because, statistically, you are a higher risk. Those of us who maintain excellent credit do it in part by making sure our money gets where it's supposed to. I check online to make sure payments post, or hand in payments in person, or call in the rare case these days when there's no other way to check.

Fortunately, credit scores usually recover rather quickly from one-off delinquencies if you stay current afterward. And I bet you'll be paying more attention to your bills now, won't you?

The credit score is doing exactly what it's supposed to.

[nostrademons]

I was surprised how much they change constantly, for silly things like how much balance you have on your credit cards.

My wife & I both have excellent credit scores, and we pay all of our bills in full every month. Nevertheless, I've noticed a ~50 point swing in credit scores from month-to-month, all dependent on whether airline tickets, furniture, or charitable contributions happened to make it onto this month's bill. Our debt-to-liquid-assets ratio is something like 0.1%, so there's never any real risk of not having money to pay it off, but of course the credit bureaus don't have information about our assets, so they evaluate us against what other people our age have, which (being Millenials) is not very much.

Knowing how the system works, we can take steps to game it, like not putting any major purchases on credit card in the 3-6 months before getting a mortgage. But still, it's slightly ridiculous that something that's supposed to measure your creditworthiness can swing so much over short time periods.

[throwawaycert]

It's not that weird. If your score is, say, 750, 50 points is about a 7 percent change. My finances very easily vary 7% from month to month!

50 points also isn't likely to make much difference, especially if your score is already good. Loans basically go off tables. Essentially if you're between A and B, you get this rate for this losan, C and D gets this rate, etc.

Once you're past 700, you're already getting good interest rates and banks will fall over themselves to loan you money if your income supports the loan size. When I was at 780, the loan officer couldn't give me a lower rate on a mortgage - I was already getting a fraction of a percent over prime.

[buttcoinslol]

You can eliminate credit score swings by never generating a credit card statement with a balance. You can do this by paying your card off prior to the statement date.

I spend between $1000-$2000 on credit cards a month and collectively I generate statements with less than $10 spread across 4 cards. My credit score is rock solid from month to month.

If you have six figures of liquid assets (what 0.1% debt vs liquid assets implies) this should be no problem at all.

[nostrademons]

We usually just set all our cards on autopay-in-full and forget about it. Is there a way to have them autopay before the statement date, or do you need to proactively check every month and make a payment right before the statement date?

[buttcoinslol]

Being proactive is the only way, unfortunately.

[lonelappde]

You also believe the stock market is nonsense, because valuations fluctuate?

[rootusrootus]

It's worth remembering that an important aspect of your score is your value as a customer. Risk is one element. Carrying a balance gives you more value than if you never carry a balance.

[nostrademons]

It's the other way around - your credit score is higher if you have a lower balance on your cards.

[rootusrootus]

That is not correct. A small balance raises your score more than a zero balance. But you want to keep it under a third.

[harryh]

This is an oft passed around urban legend, but it's not true. You can try for yourself by opening up a free CreditKarma account and seeing what happens if you zero out all your balances.

[robocat]

> we can take steps to game it, like not putting any major purchases on credit card in the 3-6 months before getting a mortgage

I wonder how much your ability to game it indicates whether you are likely to be a good or bad debtor?

[mikeash]

Foisting responsibility onto customers with more important things to worry about, rather than into organizations whose only purpose is to keep track of these things?

[throwawaycert]

It is not my job to go out and manage my customer's finances and take their credit cards or write myself checks from their accounts, and I'd be quite rightly arrested for theft if I tried.

[mikeash]

It is, or should be, your responsibility to notify them when payment it due.

[throwawaycert]

Ah, but there is no indication they didn't. What happened is that the check was sent, but did not arrive. In other words, the customer and his agent (the postal service, probably) in the exchange did not fulfill their job of getting the money to the business. That is not something the business can control, and if you try to make it their responsibility, they will simply start refusing payment by mail, since it would be a constant and high level source of fraud.

[mikeash]

But making it the customer’s responsibility is cool?

In any case, I read this as the notice that payment was required is what got lost, not the payment itself.

[kome]

> The credit score is doing exactly what it's supposed to.

policing people and make the poor to pay more.

[throwawaycert]

If you don't pay your bills, I think it's entirely reasonable for businesses to tell each other about that so you don't defraud them out of a lot of money.

[XaoDaoCaoCao]

>the entire banking system promotes systematic moral hazards and has lowered the purchasing power of stagnating wages for most people

"Why are people defaulting on their bills!?"

The whole notion of transfer of majority responsibility to an individual is one of the slimiest things in this society. We get monitored by an array of hidden surveillance measures and algorithimic judgement we have no way to properly counter or defend ourselves against. Meanwhile central credit gets to borrow money and get bailed out.

Give me a fudging break.

[throwawaycert]

This isn't complicated. You incur a debt, you pay it. If you can't, people aren't going to want to do business with you, and will quite reasonably refuse.

You are trying to make everyone else responsible for my finances and I'd damn well thank you to stop, since they're mine.

[XaoDaoCaoCao]

I understand that clearly. But clearly there are classes of institutions and people who...

1. Make a mockery of prudent allocation of money and get bailed out when their games get messed up

2. Mess up the purchasing power of any money you possess far more than any individual defaults or even class of individual defaults

3. Impose grave and hidden responsibilities on individual borrowers and mass surveillance...

They are messing up your finances far more than the most reckless individual borrowers ever could. *

PS - How is finance going to deal with the multitrillion dollar pension bomb? With prudence or with a combination of a game of musical chairs and chickens until stuff gets serious? How is your financial discipline, as an individual, going to protect you from manmade tsnumais?

[lonelappde]

> statistically, you

Is an oxymoron. Statistics exist when "you" is unknown.

[throwawaycert]

"You" have statistics attached to you. Default rates, lifespan, cancer risk. Given people A and B in similar life and financial situations, A or B might defy the statistics that say they'll both pay or default, but they probably won't. The only way a bank or anyone can predict this is statistically.

[billh]

I've had credit card companies call me and straight up say "If you pay this right now over the phone with me and pay the $15 telephone transaction fee, this won't hit your credit report"

Between the "Pay for Delete" scams and the gamifying of your credit score through services like CreditKarma I really questions how close these scores are hitting anymore in relation to relative credit risk.

[mehrdadn]

> I've had credit card companies call me and straight up say "If you pay this right now over the phone with me and pay the $15 telephone transaction fee, this won't hit your credit report"

Does that not qualify as extortion?

[throwawaycert]

The contract you agree to for credit cards or other forms of debt you choose to take on will specify things like late fees and that it's up to the company's discretion whether they report you a late payment to the agencies. If they didn't have this clause, you'd just be complaining that they report everyone indiscriminately rather than giving people a break when it seems appropriate.

[mehrdadn]

> The contract you agree to for credit cards or other forms of debt you choose to take on will specify things like late fees and that it's up to the company's discretion whether they report you a late payment to the agencies. If they didn't have this clause, you'd just be complaining that they report everyone indiscriminately rather than giving people a break when it seems appropriate.

Thanks for making ridiculous assumptions and putting nonsense in my mouth. Nobody opined on anything in the first place. I was merely asking a legal question, because calling someone to demand an immediate payment to avoid direct harm to them sounds an awful lot like extortion, whether I like the approach or not.

If you want to know whether I'm impossible to satisfy or whether I think the company could in fact cut people slack while getting their $15 and avoiding potential extortion, you could just ask me. Yes, I think that's perfectly possible. Call the person up, tell them you'll waive the credit report if they make a payment by the end of the day, and optionally remind them that according to their contract, there is a $15 fee if they pay by phone. There. Now the person gets to spend more than 5 seconds thinking about it to make an informed decision. No need to put nonsense in my mouth.

[throwawaycert]

But you're putting nonsense in the creditor's mouth. You don't know what the conversation was like, you only have the summary of one person who feels wronged.

[mehrdadn]

All I did was I took the story at face value and asked a legal question without saying anything else about anyone. You felt I was somehow "putting nonsense in the creditor's mouth". OK, so why make a ridiculous response instead of just telling me I should wait to hear the other side's story? Or even better, maybe asking what I was thinking in the first place instead of putting your own nonsense in my mouth?

[mehrdadn]

This doesn't solve the problem that already happened, but I would take this as a sign that it might not be a bad idea to just opt into e-statements and avoid snail mail. The world is electronic now. If nothing else, you'll at least save some carbon, paper, etc. from being consumed along the way.

[ryanmercer]

I have autopay set up on my Google store Synchrony account, this last bill, for whatever reason, it did not attempt to withdrawal the money then sent me an email saying I was overdue and I now had to pay DOUBLE so I did manually, two days later I get an email saying my adjusted auto-pay had applied.

Guess what popped up on my report this week?

A late payment.

It does not let you pick the autopay date, and instead puts it on the date the bill is due, otherwise I'd have it auto pay at the first of the month weeks before it was due. However, it is not worth my time to call and probably have to deal with a call center for an hour before I get someone that will promise to remove it and then have to write three letters to send off to the CRBs to dispute it and wait another couple of months for it to possibly get removed.

[harryh]

Your anecdote is interesting but does not constitute data on the overall predictive powers of credit scores.

[zonidjan]

It does when millions of people have similar anecdotes, and when the system is literally set up for it.

Places can report whatever they want to. And you can dispute it, but the person who report it will just say "no, we're right" and it'll stay up.

[nudiustertian]

This

I've been fighting with Equifax and TransUnion for 5 years to remove 30 year old reports on my credit history (which are clearly not me because im less than 25 years old)

[mehrdadn]

This is amazing. How are you running into trouble with this for 5 years? What is their counterargument?

[adrr]

If you could build a better algorithm to do underwriting, you could make billions. Companies try all the time like zest finance.

[munk-a]

Not being the worst is not the same as succeeding.

Following that logic the Burj Khalifa is a space elevator because no one has been able to build a better space elevator than that.

I have general objections to this sort of underwriting assessment being an ethical business for a private organization to begin with due to the immense amount of possibility for discrimination it opens up.

[harryh]

On the contrary, the modern credit scoring system has been a huge success when it comes to fighting discrimination. Previously banks left underwriting decisions to the whims of individual bankers. Unsurprisingly, many of these whims were based on things like the color of an applicants skin.

While there are certainly some arguments to be made about disparate impact under our current system basically everyone agrees that access to credit for minorities is much much better than it used to be.

[salawat]

Why? Why feed into it? This is the mentality that kills me.

Why double down and try to make something that is already being gamed? The very definition of insanity is doing The same thing over and over again and expecting a different result.

There is no right to operate a business that exposes everyone to risk they have no choice in whether to accept or not. Centralizing excessive amounts of data with obtuse and dubious control mechanisms/capacity for redress is a disaster waiting to happen.

Publicizing the risk, and privatizing the profits at it's finest.

[minton]

It wouldn’t put anyone at risk if we held lenders to a legal standard of proof that YOU signed a contract asking for money. It might be inconvenient but not compared to being stuck with debts you never agreed to.

[salawat]

The problem with that, is the story doesn't stop at "You" when another person can get enough information to act as you in a legal sense.

To me, this entire industry reeks of people engaging in risky behavior, but trying to externalize the costs/risks of said risky behavior, and consequemces be damned. Furthermore, they want the agency that gets externalized to "make money", something which encourages the minimum amount of investment humanly possible in making sure they are actually solving the problem in a way that doesn't merely create new ones.

Furthermore, it seems to me that the financial sector is eating the bloody world; as the metrics they gather are being gleefully used as discriminators in far more than just loan granting.

The system is either so critical to the way the economy works, that we should be willing to "sink" money in the interests of making the system as effective as possible (I.e. no dark pattern B.S., easy to use controls, easy to manage all interactions with, and maintained to the highest degree of security), or it isn't, and a discussion needs to be had whether having such valuable pots of exploitable data is something we should even tolerate as an acceptable exercise.

To be quite honest, I've seen more harm than good come out of the system given the ubiquity of the Credit history "bootstrap" problem, and now the compromise of a huge portion of the American population's personal data.

Trying to couch this as merely a case of "oh, we just need more contracts" without addressing the central problem of your identity essentially being hijacked by a bunch of for profit involuntary surveillance companies operating under an incentive structure pushing minimum viable effort in protecting your data, ensuring it's correctness, and restricting access to only appropriate reasons.

Throw in the failure of the FTC to clearly levy a strong enough penalty leaves me feeling this industry is a social liability in it's current form.

[mikeash]

Better for whom?

I’m sure the existing credit bureaus are great for the people who give them money. They sure suck for the rest of us, though. Fortunately for them, we get zero say.

[adrr]

Market is efficient. If underwriting wasn’t efficient, a company could utilize better algorithms and offer better rates and better determine risk to minimize default. This a multi billion dollar opportunity. People don’t care about who is underwriting their car or home loan, they care about rates.

[mikeash]

Equifax and their brother businesses give us low rates in exchange for exposing us to fraud risks whose monetary value is probably literally incalculable.

The thing is, we don’t get to choose whether we’re exposed to those risks. It happens whether we like it or not.

So let’s say I start a company that offers better TCO: my rates are a bit higher but this is more than made up for by a much lower fraud risk. Do I win the market? No, because Equifax’s fraud risk hits my customers just as much, so I’m not competitive.

Credit bureaus give us low rates because they externalize the costs. Since the costs are externalities, competition can’t beat them. It’s the financial equivalent of making cheap electricity by poisoning the community with emissions.