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Early_To_Risa@sh.itjust.works

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Anon tries to understand credit scores (sh.itjust.works)

submitted 1 day ago by Early_To_Risa@sh.itjust.works to c/greentext@sh.itjust.works

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[–] phoenixz@lemmy.ca 5 points 12 hours ago (2 children)

Great write-up, thanks!

Having said that, it's hard not to feel that these rules have been semi purposefully left vague so that people take the wrong actions that will cost them extra money

To add on-top of that, I feel like this system, and most systems around this, are all setup to work great for the rich and the "providers" and just plain less good for us. It's almost like a casino in that the house always wins

[–] partial_accumen@lemmy.world 2 points 9 hours ago

Having said that, it’s hard not to feel that these rules have been semi purposefully left vague so that people take the wrong actions that will cost them extra money

This sounds like perhaps you believe this is an intentionally convoluted process designed to trap people. Like it is a set of financial gymnastics that borrowers must learn and perform before getting a loan.

I don't think thats the case or the origin. I think its much more likely that, prior to FICO scores, lenders went looking at people that successfully pay on debt and then started analyzing those borrowers choices. They found those that were successfully followed a set of behaviors, and then Fair Isaac (the company behind FICO) created a FICO score (there are actually a whole bunch of different FICO scores) baking in those behaviors.

I will admit that companies that have no business using credit scores are now using them for various other aspects of life, but that wasn't the intent for FICO scores to begin with from the outset.

To add on-top of that, I feel like this system, and most systems around this, are all setup to work great for the rich and the “providers” and just plain less good for us. It’s almost like a casino in that the house always wins

The truly rich likely don't have to deal with FICO scores as the lending products they're using are asset based anyway. I will say that this system is NOT designed to help borrowers. Its not meant to hurt them, but its certainly to let lenders know who has a better chance of servicing a loan or not.

[–] ricecake@sh.itjust.works 1 points 11 hours ago

I mean, the rule is to not carry a balance, make payments on time, and don't borrow more than you can pay back. They aren't very cagey about those rules. The exact ways particular actions impact your score isn't relevant to the best practices.

There's a lot wrong with the credit industry, but being upfront about payment practices really isn't a problem.