deeprlyeh@lemmus.org 1 week ago
It isn’t really buying small things either. It’s buying homes or cars. While small purchases do affect it, they want long term loans.
Your credit score is your willingness to pay interest. While not using too much of your available credit, which is utilization.
Mostly your willingness to pay interest monthly. (Your score does sink when you pay off a loan, by a lot.)
This is completely wrong. Your credit score is NOT how much interest you pay. It’s how likely you are to repay your debts. You need to show that you will always pay, and never skip a payment.
My credit score for years was absolutely amazing, entirely on credit cards, and without paying a single penny of interest, ever. Instead, I paid in full every single month on every account.
XeroxCool@lemmy.world 1 week ago
You do not need to pay interest. You need to let statements close out monthly with a balance. Interest on that balance will not accrue until the next cycle closes.
Say your statement closes on the 1st of the month. Buy something on Jan 15th. Let the statement close Feb 1st. Pay it off any time before Mar 1st. You get a benefit to your score by showing utilization without accruing any interest.
Paying off a loan hurts your score because of other things like reducing borrowing power, messing with utilization, and usually lowering the average age of all accounts. Nothing to do with paying interest.
If you can’t jump straight to a car or home loan, collect credit cards if you have the willpower to avoid debt. That’s how I built it up. I got a new card annually for several years. I’d take advantage of intro promos, but once those were up, I’d just assign some small monthly subscription to a card. Gotta spend and close with a balance to look good on paper, but also need to occasionally spend to keep them from canceling the card, too. At peak, my combined credit limit was more than my income, spread across 8 cards. That was double an average car msrp. It worked perfectly fine for a mortgage application despite driving older cars bought with cash.
deeprlyeh@lemmus.org 1 week ago
When my credit score was 725 to 775, I would get daily credit applications. At times when it was 850, I would barely get any.
They target people with just enough credit they assume they will be paying interest.
XeroxCool@lemmy.world 1 week ago
That’s soliciting. I didn’t get any mortgage solicitation until I started applying. I will now be getting unsolicited refinance offers until the end of time.
They hope you’ll pay interest on credit. They do not require you to pay interest and do not have any way to see if you’ve paid interest with other creditors. They know people only have to slip once before it becomes a profitable spiral for them.
Credit offers target lower scores too, just with more predatory things like higher interest rates or requiring secured deposits. Everyone will have different credit limits, too. While the credit card companies enjoy when you overspend and have to pay interest, they do want you to actually pay it back, so there’s a limit to how much they’ll extend to you. Plus, limits change over time. All but one of my cards has increased over time as they “trust” me (read: they wish I’d use their card more than the others by not worrying about utilization). One card went down due to underutilization, which I found odd, but I guess they were more worried about controlling their own lending promises than enticing their customer.