I have a few credit cards that I no longer use. If I cancel them my score would go down because the average age/length credit history would go down.

Not by that much, but it is surprising that leaving these cards open is incentivized whereas the more secure and less risky thing to do would be to close those accounts.

It make a a bit more sense when you think about it - Risk isn’t really the main thing incentivized here, making interest payments is haha. Risky lenders don’t make payments, but neither do people who never take on debt

Credit scores actually are designed to measure risk, not interest payments. Otherwise high credit utilization would be a positive:) There are certainly edge cases where the score has low predictive value, but overall the correlation between credit score and risk is quite large.

The closed card drops off your account history after ~10 years, so your score shouldn't immediately go down. Technically, I'm not sure that the credit scores can differentiate between you closing a card and the bank closing your card (the latter might be some sort of signal of potential change in creditworthiness)

In general, credit scores are optimized for the average consumer - and so behaviors around the edges don't always make sense in terms of your score going up or down. If you think about the system that was replaced by credit cards (i.e. keeping a tab open with many different stores), you'd be hard pressed to say that the amount of credit extended is lower now (overall), than under the old system. Whether that's a good thing or not is a different question.

In general, your score would immediately go down as your credit utilization would go up (outstanding balance over total available credit).

0/infinity is still zero

…depending on the languages used in their backend and the quality of their development efforts…

The balances are instantaneous balances, not ones that are being financed. So, if you use and pay off your card every month (as makes sense to me for points/cash back, ease of chargeback, and convenience), then your numerator won't be zero on most days. (For me, it's not $0 on any days, because of the timing of statements.)

You could theoretically pay off the card before the statement posts to keep the balance at zero. Usually not worth it, but if you want to boost your credit score before getting a mortgage, that trick usually works.

In Canada, Equifax et al tend to reduce score at each over 80% revolving credit account utilization.

Those are minor and often temporary dings compared to not paying back loans on time or at all. For example, if you don’t have a loan history, your score isn’t low enough that you can’t get an apartment or get a car loan. Then by doing those things you can build credit. The other things, open and closing accounts too quickly, or making lots of loan inquiries over a short period of time, lead to temporary dings that recover in a few months (they just throttle your credit). The rules are not explicit enough I agree, but it’s not like most of them couldn’t be covered in a high school financial literacy class.

Almost everyone significantly disenfranchised by bad credit are actually for things that would obviously lead to bad credit (to their fault or not; i.e. identity theft could be involved).

> if you don’t have a loan history, your score isn’t low enough that you can’t get an apartment

This is not true. Many places will deny an applicant for zero loan history, effectively forcing people to get a credit card in order to obtain housing.

Technically, people with no credit history aren't denied for having low score -- they're denied for not having a score at all.

That never happened to me when I came back from China (unable to get a credit card for 9 years because I didn’t have a Chinese ID card, so no credit history within the 10 year window they keep track), nor did it happen to my wife, who obviously didn’t have any history as a new immigrant. We didn’t have problem getting a rental with proof of job/income. And without the job/proof of income, even with 10 credit cards, many of these places won’t rent to you regardless of your credit rating given eviction laws.

I get it, there must be some place that denies rental based on lack of credit history, but I would guess it is so rare that you’d have to stretch really hard to find an example.

Correct, but a nitpick: it's not quite an issue (as the parent said) of the score being low per se. From my own experience, in the time when I had no credit history, when I went on annualcreditreport.com or the alternatives, it would happily tell me that I had a credit score of 720-740, but any time I would apply for an apartment, or even the most usurious credit department store credit card, I would get rejected.

So yes, the lack of a credit history makes you look artificially like a bad risk, leading to rejections, but not because the system reports you as "normal person with low credit score" -- that would actually be an improvement!

For those who want to know, I eventually got out of the catch-22 by following up with the service department of a financial-advisor-affiliated credit card, and answering some questions like about employment history.