this post was submitted on 22 Sep 2023
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[–] Z3k3@lemmy.world 47 points 1 year ago (6 children)

The whole credit system is a scam.

I was lucky enough to pay off my mortgage a few months ago due to the money saved working from home going to that since the 1st lock downs

What happened my credit score instantly went down.

[–] return2ozma@lemmy.world 18 points 1 year ago (1 children)

Paid off a vehicle and my credit score DROPPED 40 points hah

[–] geosoco@kbin.social 7 points 1 year ago (1 children)

Same. Paid off loans, and mine dropped because I don't have any loans.

[–] potpotato@artemis.camp 6 points 1 year ago

Why would CC Companies want to borrow to people that don’t make them money?

You’re being penalized for not paying the banking industry interest.

I wish that was a joke.

[–] Chainweasel@lemmy.world 16 points 1 year ago

You're credit score isn't about how good you are at making payments, it's about how good you are at generating interest for your creditors.

[–] partial_accumen@lemmy.world 6 points 1 year ago (1 children)

What happened my credit score instantly went down.

Your credit score is just an up-to-date test of how good you are at servicing debt. If you paid off all your debt, then no one knows if you're still good at servicing debt. For all they know you could have a $2k/week cocaine habit after paying off your mortgage and all your cash flow goes up your nose.

Since you're not paying on any debt today you're not as good a credit risk.

[–] FlyingSquid@lemmy.world 3 points 1 year ago

Fine, but maybe we shouldn't base whether or not you can rent an apartment on that?

[–] SatanicNotMessianic@lemmy.ml 4 points 1 year ago (1 children)

Not justifying the algorithms or even the agencies, but in general your credit score reflects things like onetime payments and the balances you carry relative to your outstanding credit limits. Paying off a loan closes an account, so by the formula you’re changing your open accounts. This is going to result in a temporary dip.

It’s annoying, it’s stupid, it’s not reflective of someone’s ability to manage debt (which is what a credit score should reflect), and if anything should be positive. The two things to remember are that it’s a temporary dip and your score will go back up without you doing anything differently, and that you do not need an 850 to get the best deals. Anything above 750 or whatever their top tier starting point is gets the same rate.

[–] ShittyRedditWasBetter@lemmy.world -2 points 1 year ago* (last edited 1 year ago)

People bitching about this really just want to bitch and don't have any clue how lending actually works. My score dropped 1.5%? Literally slavery!!!

[–] ShittyRedditWasBetter@lemmy.world -3 points 1 year ago* (last edited 1 year ago)

🙄 nobody is changing your rates because your home is paid off and your score dropped 1.5%. It doesn't mean any fucks when it comes to a human looking at it.