Both of these things were made much more difficult, even with just a 50 point ding. The score recovered quickly and I learned my lesson. It was somewhat eye opening for me. One thing I do wish: after tons of research and discussion with "experts" it seems pretty difficult for the average American to predict a rise in their credit score once it takes a hit.
Sure, paying bills on time and carrying low or no balances help, but at the same time, paying off a loan can either help or hurt you, being added as an authorized user to a partner's card can be beneficial or not even acknowledged. I wish the algorithm for determining this was a bit more transparent, i.e. What are the mechanisms at work behind that credit report? Not some vague "your score may have fallen because of..." Or "doing this might help your credit..." I feel like the lack of transparency makes people fear credit to a degree.
It's like that story about robbing the bank. First, we get jobs at the bank. Then we go in and work the jobs every day... (spoiler: we never actually rob the bank, because we get cushy jobs with benefits, and retirement plans. That's brilliant!)
Anyone with a good credit score can decide to burn their credit at any time. Loss prevention can also step in and cancel your cards at any time if they decide that you've gone off the deep end. They probably won't... but they could.
Imagine Google made its own credit score, based on your searches, social contacts, etc. It turns out that someone clicking on ads for product X have a very high likelihood of repaying their debt. This information ends up publicly leaked.
What do people start doing? How does this affect the quality of Google's credit algorithm?
A reliable indicator of whether you will pay your bills in the future might be whether you paid your bills in the past. There is no way to game this metric, other than by paying your bills.
You just chose a metric that would be easily gamed and said that any metric is gameable.
Except the exact situation outlined above, in which a person generated bills that they otherwise wouldn't have needed, for the sole sake of having more bills "paid on time".
It shows that the person is planning ahead, is careful with not overspending even if they have cash available, is organized enough to make all the monthly payments on time. To me that seems like a better signal than someone who does need the loan.
How would a person who takes out the same loan, but actually spends the money be a better credit risk?
This leads people to do something they don't want to do, and is no more informative than paying all those other bills would have been, merely to increase their score. That's a kind of gaming.
If the way they have allowed you to "game" this metric results in you signing up for some credit in order to improve your credit score, that's nothing but a net win for them. They got you some credit, that's definitely a score for them.
(I'm not saying that credit card companies would prefer all of their customers to default, they would never be able to buy insurance again... I just want to put it out there that maybe the system works exactly this way, 100% deliberately, because it benefits them too.)
Eh, this can get overstated on all those guides to hack your score.
My wife and I are both, to put it mildly, debt averse. When it came time to buy a house the lenders cared far more about debt to income ratio than scores, which we never built up through artificial debt, but turned out fine anyway.
Lenders deal with enough people that they quickly realized we were the sort of weirdos who would pay early and competed for our business. I suppose they could have wondered if we would be so confused by how debt works that we'd just skip random payments because we are bad at monthly responsibilities. Somehow they ruled that out by talking to us and looking at information about our lives. Makes sense, that's basically their job. Otherwise they're leaving money on the table.
So sure, definitely watch for errors. Don't take something on then default. But otherwise a light history is not going to sink you, at least not on its own.
Having said that, I'm tentatively going to disagree.
I made a conscious, somewhat coerced choice in my early 20s never to rely on revolving credit. A combination of random course-of-business (of course resolved) delinquencies and no history of revolving credit resulted in my having relatively poor credit. Compounding this, my disinvestment from my own credit score has led to a new dispute resolution strategy for e.g. medical billing mistakes, which is "ignore mistakes and disputes forever" --- you can imagine the resulting impact on my credit score.
The net effect on my life has been minimal.
It was comically difficult for me to obtain an actual bona fide credit card (which I wanted in order to broaden my choice of car rental agencies --- a problem that has become less important over time as more and more rental agencies accept debit cards). A few weeks after I got the first wire transfer from the sale of Matasano, calling Chase with a checking account balance that could fairly be called "moronic", I had to argue for about 30 minutes for them to issue me a credit card with an extremely minimal monthly balance.
That's about the extent of my problems.
Every landlord I've rented from has pulled my credit. My credit has always been bad. But my landlord references were spotless, and that's what landlords seemed to care about.
It's more than likely that if I was in a different career, and particularly if that career was in a lower-paying sector where workers have less leverage, my credit score would be a real concern in finding a job. But in this industry, my general response to being declined for a job as an adverse decision relating to my credit score would be to do to the reputation of the hiring firm on Twitter approximately what the lawyers at the Bank of Bigness believe their regulators will do over an FCRA violation.
I would almost certainly have a hard time getting a loan for a car. But then, see "revolving credit". Don't get a loan for a car. I had one once in my 20s and remember it being a pretty miserable experience. Until very recently, every other car I'd driven since was (a) worse than that car and (b) on balance a more pleasant experience for not coming with a Significant Monthly Bill. Obviously, in this industry, you will eventually reach a point in your career and your personal financial maturity where "obtaining what you believe to be a car commensurate with your status" will stop being an interesting problem.
Which, I think, leaves us with home ownership. I don't have a good answer here. I bought my house in 2005, weeks after starting Matasano, a company which for all the intents and purposes of my mortgage lender did not exist. Suffice it to say I was not able to push that lender around with the contents of my bank account, which were in 2005 also "moronic", but in the other direction. I probably got a worse rate. And it was 2005, so it's possible that my only effective qualification for buying a house was "50.0001% likelihood of currently having a pulse".
My tl;dr here though is, at least in my case: if you don't use credit cards ever, your credit score doesn't much matter, and as it turns out credit cards don't much matter either.
You once mentioned you paid out of pocket to get your family member some kind of medical procedure. I think it was a CT scan? Anyone who can do that isn't really in the same class.
Here's one way it matters: every year, your entire well-being is determined solely by your landlord. You can be an excellent tenant and they'll decide not to renew your lease because reasons. Now you need to move your whole apartment in like three months, which means finding a new place. In some cases this requires a credit check. Not all, but that still limits your options in a tricky situation. Imagine if the place you lived was determined solely by that number you didn't pay attention to.
Want a nice car? Better have cash. Laptop? Cash. $3k to drop on a new laptop isn't feasible for the vast majority of people who aren't affluent.
I know you mean well, and I share your "fuck this broken system" feeling, but it can get you into trouble. Rebellion only works if you have the means.
Here's a concrete question: you need a laptop to do your job. How do you get one without credit? A second hand MacBook still costs >$1k. And yeah, we're talking sums of money that are tiny in comparison to what you're used to. It might be hard to believe that not everybody has $1k laying around. But paying $100/mo is far more pleasant, to say the least.
Here's another anecdote: new apartment in a new city. I was about 21 and had no credit history (bad or otherwise). I'm settling into my new apartment and call around to find out who the ISP is. It's AT&T. Call them up, ask for Internet. "No." "What do you mean 'no?'" "The system says 'unknown risk'. Our policy is to not do business in this situation."
I'm not exaggerating or making it up. There was no alternative, and I was completely screwed. There was no other ISP! We ended up using a family member to establish the account. But most people don't have anybody to fall back on. I don't know if AT&T still has that ridiculous policy, but there are other situations just like that.
1. You're right, in the sense that most people on HN with an established career in technology are, relatively speaking, "rich". That was my point: if you're stably employed in technology, your credit score might matter less than you think it does.
2. You're wrong, in the sense that with the exception of the credit card anecdote, which I related as a way of demonstrating that I had in fact had some interaction with my credit score, all of that post concerned stuff that happened long before we sold Matasano. By the standards of HN in 2017, in the mid-00's, I was most assuredly not rich (the way you mean it; I'm just stipulating your term). I've had terrible credit the whole time.
A big part of my point is that "just use cash" worked out much better for me than attempting to rely on credit. Obviously, if I worked as a retail clerk, that would a very problematic strategy. But I don't. If I had been able to resolve "need a new laptop" with credit instead of cash, I'd have been worse off.
I get that the rules are different for tech workers. Part of the point of saying this is to remind people that the rules may be more different for us than we think, which should have moral implications for us as well.
The credit system just sucks. It's a historical accident. But it's also not really realistic to say "In some cases you can get away with not worrying about your credit score if you're a tech worker."
As for "windfall vs. 9-5", I spent ~20 years in the latter category, a category which I'm not unlikely to end up in again, and I simply don't agree with you.
Maybe another way to put it is this: for all the problems you've had with personal finances, I assert that acquiring revolving credit is a good solution to none of them.
Finally: since litigating this further is inevitably going to involve getting into pretty squicky financial details and debates over personal financial decision-making, I'm going to stop here. Since I think you'll probably disagree with me, I want to be clear that I expect and will read any rebuttal to this that you write, but I'm not going to continue the debate.
It would be delightful to find an answer to some of the problems of bad credit. But it kind of matters.
To be clear: everyone should understand that it's MORE expensive to be poor than to be rich. The key is a BUFFER, just like the buffer loading a streaming video. Someone with a $2k buffer can weather most common issues that come up as long as they can fill the buffer up again each time it gets used. Someone with a $2k buffer is not a truly poor person who is in debt and gets payday loans or worries about whether they will eat, but a buffer like can be had WAY before you can be called "rich" (and some rich folks can be incompetent and not keep a good buffer).
The vast majority of people are in a position where they could keep some buffer if they learn to. The class difference here is whether or not someone gets the financial education to care about keeping a buffer.
But obviously, some items can come up and kill any normal person's modest buffer, and then things get painful. And the rest of your points about how the system works are valid.
That surprises me. I have relatives who have TERRIBLE credit. Reposessed cars, unemployed, a lifetime of poor financial decisions. They have had no trouble getting utilities or e.g. DirecTV service. They typically have to pay several months in advance as a "deposit" but they are not turned down flat.
Even "unknown risk" would be in the worst case approximately that. Doesn't seem to make sense.
Were you trying to rent in a tight housing market? In Vancouver, it's common for landlords to (completely illegally) weed out the tenants they don't want -- in particular, single parents, certain ethnic minorities, and people in low-class occupations -- via the excuse of credit scores (even though they accept childfree white professional-class tenants who have those same scores).
I suspect that maintaining a good credit score is far more useful for people who will encounter landlords which are looking for an excuse to reject them.
There is also a separate tenant screening for real estate that, at least for me, seems to be more reliable as an indicator for trust than the financial credit report. It is possible your landlords are doing the same? Perhaps that’s what you mean by reference checks?
> It's more than likely that if I was in a different career, and particularly if that career was in a lower-paying sector where workers have less leverage, my credit score would be a real concern in finding a job.
I’d point out poor credit is also problematic in high-paying professional fields, e.g. in a sector requiring clearance, or perhaps in a sector requiring licensure. As I understand it even public trust clearance would be problematic with poor credit.
It’s great your strategy has worked out well for you, but it seems a required part of your strategy is to be remarkably lucky.
I'd like you tell me more about how you think I've been lucky with respect to my disregard for my credit score. I don't think I have.
I don't understand what this contributes. I guess it's great that won't work for the feds but that's hardly a generalizable position. Are you suggesting that passing the background check for a major exchange informs on the outcome of a public trust clearance or a professional license? Criminal background check portion perhaps, but not character and fitness—I would SWAG you'd need to correct your report before you could proceed.
> I'd like you tell me more about how you think I've been lucky with respect to my disregard for my credit score. I don't think I have.
Your tl;dr sums it up, your strategy works for you, but how it at generalizable even for a limited definition for “tech workers”? Partly I think you’re neglecting the advantage in being established in life before the Great Recession, which is part of why I say you are remarkably lucky. Does your strategy work for the younger cohort who would purchase a home post-2008? Does your strategy help for people who experience a significant adverse life event like divorce or a natural disaster?
That part of your "dispute resolution strategy" is to "ignore mistakes and disputes forever" and live unimpeded, when there are so many who could not do the same (myself included, it'd be a career-ender), leaves me slack-jawed with amazement. My congratulations to you, but I hope you see that few can get away with that.
It seems to me you are simply gloating in your ability to avoid credit. Those who are able to avoid credit have little interesting to add to the conversation about credit reporting agencies.
It is irrelevant whether you have any credit cards, or whether you have a bad credit rating, or whether you care. If you have a mortgage in the US, then Equifax, Experian, and TransUnion have your number. They have your number, they have mine, and they have brownbat's.
Now, other people have my number. And the only way I could have avoided that was to have paid cash for my house and/or had a fairly limited set of landlords forever. So the OP's point still stands, but I strongly agree with patio11's comment that my credit rating cares about me irrespective of how I care about it.
EDIT: sp
(Not a problem since I built up history using a credit card but pretty kafkaesque.)
I have a car which I own completely (no loan) and I pay the absolute minimum amount of insurance required in California, which amounts to about $264/year.
I'm not saying credit doesn't matter, but the more you can do to limit your attack surface, the less likely you are to be harmed. The absolute best way to protect yourself is to not need to play along in the credit rat race.
I keep a security freeze on my credit reports, and never lose sleep. I can safely publish my SSN without giving one single fuck.
You should do so right here.
Used to be pretty common to have SSN pre-printed on personal checks, also. It wasn't until the rise of online fraud that SSN became such a sensitive piece of information.
EDIT: Though it looks like it didn't necessarily turn out so great for him.
Do you want to rent an apartment in the United States? You will, in many geographical markets, expect to have credit pulled as a matter of course. This is partly to determine ability to pay and partly to determine whether you are socially established; "I have mountains of money, why would I need credit?" is something which is often said by people who operate meth labs.
Do you want to work in a job which requires a background investigation? Expect a credit pull.
Do you want certain varieties of insurance policies?
Expect this list to get longer as time goes on, because "credit" encodes a lot of things which are stupefyingly useful in predicting outcomes in advance. Like any bit of code which is stupefyingly useful, get_fico_score() is going to find its way in all sorts of places you'd never naively expect to see it.
Additionally, if someone comes to the mistaken conclusion that you owe them money, the harassment which likely accompanies that is a nuisance even if the dings to your credit score are not.