Debt Score

Old Jun 11th 2019, 6:18 pm
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Default Debt Score

I have noticed a pattern of people asking how to raise their credit score in order to purchase a car, in the US at least. I am not posting this comment in the original thread as it is completely unhelpful, but I wonder at what point in time money lenders brainwashed people into borrowing money in order to buy things like cars. What happened to the notion of saving up money in order to buy something? What credit is required next - the RV . . . the Boat . . . the small Airplane?
I think that the use of the word "credit" is a deliberate misnomer. It makes it sound like one has won some sort of award for borrowing. The correct terms should be Debt Card and Debt Score.

This credit notion is certainly common. My own children are also afflicted with the credit brainwashing.


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Old Jun 11th 2019, 6:32 pm
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Default Re: Debt Score

Debt and credit are the opposite sides of the same coin.

If you, the borrower, calculated a score then it would be a "debt score", but as it is the lenders that are providing the data for the score then it is a credit score.
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Old Jun 11th 2019, 6:49 pm
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Default Re: Debt Score

Originally Posted by sid nv View Post
I have noticed a pattern of people asking how to raise their credit score in order to purchase a car, in the US at least. I am not posting this comment in the original thread as it is completely unhelpful, but I wonder at what point in time money lenders brainwashed people into borrowing money in order to buy things like cars. What happened to the notion of saving up money in order to buy something? What credit is required next - the RV . . . the Boat . . . the small Airplane?
I think that the use of the word "credit" is a deliberate misnomer. It makes it sound like one has won some sort of award for borrowing. The correct terms should be Debt Card and Debt Score.

This credit notion is certainly common. My own children are also afflicted with the credit brainwashing.
It's only debt if you use it. Credit score has a knock on effect on a few bills such as insurance and whether you have to put a deposit on items such as utilities etc which could mean you end up paying more for items simply by not having a credit score. As for credit cards they pay me rewards to use them to pay bills and buy groceries so I have no issue with them and so long as I pay the balance off I don't get charged interest. Credit is all a game and you can be a winner if you play it right. For example if you can buy something for 0% interest even if you have the cash available you'd be better off investing the money or putting it in a bank account that pays interest than you would paying for the item in cash.
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Old Jun 11th 2019, 7:03 pm
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Default Re: Debt Score

I hate the credit score thing as low score is associated with being not responsible or having bad credit/not paying bills when its perfectly possible to have a low score and but still be responsible and paying bills on-time but simply lacking any type of credit and thus a low score.

Low scores can affect more then just credit, housing can be denied because of a low score, employers use credit scores at times and deny employment due to a low score, and list goes on.
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Old Jun 11th 2019, 7:20 pm
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Default Re: Debt Score

If you invest in the stock market, then you should hope any company you are investing in is making use of debt. Sensible use of debt can accelerate activities. The same can be reflected in your personal lives. Note the key word there is sensible. That’s what a credit score is measuring. Looking to have no debt and never use it is, by default, an extreme position - you can’t go beyond that. Trying to live with everything on credit would be the other extreme. Being somewhere on the spectrum in between this, and your ability to manage that, is what the credit score measures. It also accelerates your ability to do certain things. You’re on this planet for a finite time, you’re free to try to play the game your own way. But generally speaking extreme positions don’t lead to the optimum answer.
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Old Jun 11th 2019, 7:22 pm
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Default Re: Debt Score

Originally Posted by Mr Weeze View Post
…. You’re on this planet for a finite time, you’re free to try to play the game your own way. But generally speaking extreme positions don’t lead to the optimum answer.

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Old Jun 11th 2019, 7:37 pm
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Default Re: Debt Score

Originally Posted by Jsmth321 View Post
I hate the credit score thing as low score is associated with being not responsible or having bad credit/not paying bills when its perfectly possible to have a low score and but still be responsible and paying bills on-time but simply lacking any type of credit and thus a low score. …..
Please can you explain that, as I don't believe that it to be true as you describe it.

From what I have seen on line, Canadian credit scores are calculated in a very similar way to those in the US. The make up (in both countries) is as follows: 1) 35% – Payment History, 2) 30% – Credit Utilization Ratio, 3) 15% – Length of History, 4) 10% – New Credit, and 5) 10% – Type of Credit Being Used.

Of the five factors above, if you have some debt, and use credit it responsibly, then 1) is likely to be close to perfect, 2) is likely to be good or better, assuming you pay off your credit cards before the balance is reported (not before it is due*), 3) is what it is, but if you have had a credit history of ten or more years then this element will be high (positive), 4) if you apply for very little credit then this should also be high/ very high, and 5) I am not sure how this might affect your score if you're using very little credit, i.e. have no mortgage and no installment loans, such as a car loan, it might be negative so you might not have access to most of this 10% of your score.

So of the five factors, anyone should able to score highly on all of 1) - 4) which covers 90% of the score. So if you have a very good history of paying your debts on time, what is it that is driving down your credit score?

There are of course other legitimate reasons why people are denied credit, so just because you have a high score you doesn't mean you are guaranteed to be offered credit. And some sorts of credit are easier to obtain, such as a car loan, because if you default on the loan there is a good chance that the lender can get a good part of the debt back be seizing the vehicle and selling it.

* If you have a single credit card with a $500 limit, and spend $400 then that will be reported as 80% usage of revolving credit as at the statement date, which is fairly high. If you pay off the balance before the due date and don't use the card again the next month, then the following month the statement, and reported usage will be 0%, which is very good.

Last edited by Pulaski; Jun 11th 2019 at 8:35 pm.
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Old Jun 11th 2019, 7:58 pm
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Default Re: Debt Score

Must be just me then but I have always paid cash for cars, starting with a 1950's Morris Minor for £20.

My eldest son cleverly used me as money lender when he wanted to buy a car he had previously leased. An Alfa Romeo for God's sake. Later on he needed expensive dental work, so of course I had to waive the car loan in order to pay for his dental work.


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Old Jun 11th 2019, 7:59 pm
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Default Re: Debt Score

Originally Posted by Pulaski View Post
So of the five factors, you should able to score highly on all of 1) - 4) irrespective of your income, which covers 90% of the score. Where does having low income significantly impact your score?
You really are confused because Jsmth321 doesn't mention low income!
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Old Jun 11th 2019, 8:39 pm
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Default Re: Debt Score

Originally Posted by sid nv View Post
Must be just me then but I have always paid cash for cars, starting with a 1950's Morris Minor for £20.

My eldest son cleverly used me as money lender when he wanted to buy a car he had previously leased. An Alfa Romeo for God's sake. Later on he needed expensive dental work, so of course I had to waive the car loan in order to pay for his dental work.
Well bank of mom/dad is always going to make more sense than actually paying yourself.
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Old Jun 11th 2019, 8:54 pm
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Default Re: Debt Score

Originally Posted by SpoogleDrummer View Post
Well bank of mom/dad is always going to make more sense than actually paying yourself.
Bloody millennials!

I did once borrow £2,000 from my mother (and paid it back within a few months) to buy an Alfa 164. It was very nice, a great drive, and got close to 30mpg despite being a 3.0 V6. Because it was an Alfa, and therefore depreciated like a rock, I had picked it up for only £2,600 despite having had £3,000 spent just six months earlier on an engine rebuild. Receipts were provided and I checked it all out with the dealer who had rebuilt it - actually a well known Alfa dealer who was running Alfas in the BTC at that time. All was above board and it was a totally stock rebuild, with nothing that would concern my insurance company. Some while later, a couple of years or so, while my mother was a passenger, I had mentioned what a great deal it was, having only cost me £2,600, and my mother expressed some shock that she had paid for most of the purchase price when she though she had lent me a little "top up money". The problem she had was that my father only ever bought pokey little hatchbacks, with 1.3 or 1.4 engines, so they were noisy and cramped, and she was wondering why they were paying in the £10k range for a used Astra when I had a much larger, quieter, and generally more comfortable car for a fraction of the price!
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Old Jun 11th 2019, 11:53 pm
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Default Re: Debt Score

Originally Posted by sid nv View Post
My eldest son cleverly used me as money lender when he wanted to buy a car he had previously leased. An Alfa Romeo for God's sake. Later on he needed expensive dental work, so of course I had to waive the car loan in order to pay for his dental work.
Generally, if the bank wishes to discourage borrowing, it charges a high interest rate.
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Old Jun 12th 2019, 1:05 am
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Default Re: Debt Score

Originally Posted by Jsmth321 View Post
I hate the credit score thing as low score is associated with being not responsible or having bad credit/not paying bills when its perfectly possible to have a low score and but still be responsible and paying bills on-time but simply lacking any type of credit and thus a low score.

Low scores can affect more then just credit, housing can be denied because of a low score, employers use credit scores at times and deny employment due to a low score, and list goes on.
I agree. The system is crazy.
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Old Jun 12th 2019, 1:15 am
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Default Re: Debt Score

I don't ask the bank of mom and dad for much unless an extreme emergency like when I needed a tooth pulled due to being in horrendous pain.

I wont even come close to earning in my lifetime what my dad did in his lifetime, he was making 50k in the 1990's, I can only dream of making that kind of wage in 2019. I have a bit more education as well, but eh wages just suck these days and cost of living is too high.

Without bank of mom and dad my step sister and her kids would be homeless.
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Old Jun 12th 2019, 1:35 am
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Default Re: Debt Score

Originally Posted by Jsmth321 View Post
I hate the credit score thing as low score is associated with being not responsible or having bad credit/not paying bills when its perfectly possible to have a low score and but still be responsible and paying bills on-time but simply lacking any type of credit and thus a low score.

Low scores can affect more then just credit, housing can be denied because of a low score, employers use credit scores at times and deny employment due to a low score, and list goes on.
Originally Posted by Sugarmooma View Post
I agree. The system is crazy.
I agree. I find it a most odd . It all seems back to front in a way.

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