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Mortgage Rates
- Thread starter ToSlow
- Start date
As an interesting point of trivia, there is a whole sub-culture of people who try to game the credit rating system.
Although the broad strokes are common knowledge for how credit ratings are established, the exact algorithm for how the number is actually calculated remains a bit of a mystery and the credit bureaus keep it a closely guarded secret.
I'm a member of RedFlagDeals, and there's a finance sub-forum on there with people who try to aim for a perfect FICO/Beacon/Vantage score as if it they were comparing high scores to a video game they're all playing.
So, through trial-and-error, these folks will figure out exactly how the algorithm works by playing around with their credit accounts: skip a payment here, pay the minimum there, apply for a whole bunch of credit cards then cancel the newest one, etc.
Apparently, the algos are a bit counter-intuitive to what is considered general wisdom, things like applying for too much credit at once, utilizing too much credit, shopping for credit, etc... those are not necessarily negative things according to the algorithm.
I can't remember the details, but what I found interesting is that if you're a straight-arrow: always pay your bills on time, never utilize more than 10% of your available credit, don't shop around for credit, don't churn credit cards.... you'll NEVER get a perfect credit score.
The algos seems to like comeback stories. These credit-gamers found out that if you skip a payment, then catch up over a period of x months, it actually *increases* your score vs just paying the credit back in full every month. Also, if you churn cards, apply for multiple cards, but then cancel the newer ones, your credit score *also* increases.
Very interesting stuff to read. But really... these people need to get a life. There's no difference between an 800 score and a 900 score. You get treated the same by banks and finance companies all the same.
Although the broad strokes are common knowledge for how credit ratings are established, the exact algorithm for how the number is actually calculated remains a bit of a mystery and the credit bureaus keep it a closely guarded secret.
I'm a member of RedFlagDeals, and there's a finance sub-forum on there with people who try to aim for a perfect FICO/Beacon/Vantage score as if it they were comparing high scores to a video game they're all playing.
So, through trial-and-error, these folks will figure out exactly how the algorithm works by playing around with their credit accounts: skip a payment here, pay the minimum there, apply for a whole bunch of credit cards then cancel the newest one, etc.
Apparently, the algos are a bit counter-intuitive to what is considered general wisdom, things like applying for too much credit at once, utilizing too much credit, shopping for credit, etc... those are not necessarily negative things according to the algorithm.
I can't remember the details, but what I found interesting is that if you're a straight-arrow: always pay your bills on time, never utilize more than 10% of your available credit, don't shop around for credit, don't churn credit cards.... you'll NEVER get a perfect credit score.
The algos seems to like comeback stories. These credit-gamers found out that if you skip a payment, then catch up over a period of x months, it actually *increases* your score vs just paying the credit back in full every month. Also, if you churn cards, apply for multiple cards, but then cancel the newer ones, your credit score *also* increases.
Very interesting stuff to read. But really... these people need to get a life. There's no difference between an 800 score and a 900 score. You get treated the same by banks and finance companies all the same.
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hmmm...my score is 728...says I've only had credit for 2 years, however, I've had my TD Visa since 1993...very strange...I'm kind of bummed out now
Don't worry about it. Anything over 700 is normal and you'll get approved for anything pretty much automatically.
Here's a chart to make you feel better:
There should be a section in your credit report that explains why you didn't achieve a higher score.
Again, sometimes it's counter-intuitive. I haven't had a mortgage in over 20 years, so my score got dinged for that because apparently I didn't have a good mix of credit types (card, car loan, line of credit, etc). My truck loan just got paid off this last summer, and I also lost points the following month because that credit line dried up. Just the weirdest non-intuitive criteria...
Some people with the best finances, ie. those with high net worth and little use for credit, actually have pretty average scores because the credit bureaus don't have a lot of historical information about them.
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ifiddles
Well-known member
@Lightcycle thanks again...I've only ever had one credit card which is always paid in full monthly...my last car loan was in 2007...I don't use by now pay later financing for anything...mortgages always paid on time...I'm boring...LMAO
Yeah, the credit card companies actually have a term for people who pay off their balance every month... they call them "deadbeats".
Obviously, they prefer their customers to carry a balance and pay tons of interest every month.
Mad Mike
Well-known member
Credit score is only one factor. If you're above 700, banks will let you borrow until your credit payments, rent, HLW reach 42% of your gross income. If you'd inside those limits, and you have no negative history with you bank - a computer will approve your credit. Most banks will pre-approve credit (meaning if you apply, you're already approved) for clients with credit scores 700+ after a year.Don't worry about it. Anything over 700 is normal and you'll get approved for anything pretty much automatically.
Here's a chart to make you feel better:
There should be a section in your credit report that explains why you didn't achieve a higher score.
Again, sometimes it's counter-intuitive. I haven't had a mortgage in over 20 years, so my score got dinged for that because apparently I didn't have a good mix of credit types (card, car loan, line of credit, etc).
Some people with the best finances, ie. those with high net worth and little use for credit, actually have pretty average scores because the credit bureaus don't have a lot of historical information about them.
Outside those parameters and your application gets sent to a person (underwriter) who evaluates your app and decides, and sets conditions. What's in your credit report and application matters more than the score to an underwriter..
Banks don't like credit scores under 650, that's usually high risk lender territory.
Mad Mike
Well-known member
That's a new term for me... and I taught thousands of credit card specialists, credit adjucators and collections officers at Canada's biggest credit card issuer.
I guess if it's on the internet, it must be true!
Strange when my score was 900 I paid everything and didn't carry a balance at all
Sent from the future
Sent from the future
Mad Mike
Well-known member
You likely have a thin crefit profile. When you don't use credit, it's hard to judge how you behave when you need credit.
Noting to worry about, you can stay above 700 by doing what you're doing, that will serve you well should you ever need to borrow.
Yeah... also the PBS... such an unreliable source:
48Connor
Well-known member
When my grandpa died, my dad took my grandma to get all the bank accounts changed over to her name and a new credit card, since the card she had been using basically all of her adult life was in my grandpa's name. The bank originally wouldn't give her one. At that point my grandma was 75, never had an actual job or any reportable income, her name was never on the mortgage, a car loan, credit card, cell phone, phone bill, nothing. Zero credit history.
Took some convincing by the bank manager to someone at Visa to get her a card - "She's got $xxxK sitting in her account, she'll pay it, don't worry!"
Took some convincing by the bank manager to someone at Visa to get her a card - "She's got $xxxK sitting in her account, she'll pay it, don't worry!"
Yeah, it's pretty scary how complicated modern life is, being so dependent on "big data" and "the algorithm".
Used to be the only thing you had to keep clean was your criminal record.
Now it's insurance history, credit history, medical history, employment history... Any lapses or blemishes on any of those records and it impacts your access to services and opportunities, how much you pay in fees, etc.
Unfortunately, it needs to be part of every young person's education to build a history with all these databases, lest they be disadvantaged later on in life.
Learn to swim, learn to ride a bicycle, learn to drive a car (and get insurance early), and also... get a credit card and learn how to use it responsibly so the Gods of Equifax will eventually bless you with good tidings at the big boy toy store...
Mad Mike
Well-known member
Not saying it isn't a thing, just that I never heard it before, and I spent a long time in the credit card side of banking.
Not really sure why banks would complain, the still get a decent transaction fee and reduced collection effort and risk.
I learned something new! Thanks!
Damn guess I’m a deadbeat. No debts but the mortgage and a small 7k for water tank and AC we installed last year. And paying that down as quick as I can.
Credit cards always get paid on time. I think I paid less than 300$ in credit card interest….and that’s because I forgot a due date and it added up.
Credit cards always get paid on time. I think I paid less than 300$ in credit card interest….and that’s because I forgot a due date and it added up.
The CC companies are vicious when it comes to applying interest.
I forgot to make a payment once and the interest that racked up the next statement seemed entirely out of line with the stated APR.
Called them up to complain, and instead, I got quite the education on how interest is calculated.
On the first day of a late payment, they calculate the average daily balance on your card for the *entire month*. It's not a single day's worth of interest. It's an entire month's worth of interest.
And on top of this, the interest is *compounded daily*!
If you miss a month, you could potentially be paying up to two months in interest charges, depending on when your purchases were made. My rate was 29%...
Never made that mistake again.
Yup! The interest isn't calculated from the 'Due Date'...it's calculated from the purchased item 'Posted Date' so in effect...if you buy Nov 1, with a due date of Dec 31...the interest gets calculated from Nov 1...not Dec 31.
Lot of people don't understand this concept...I didn't either. Then I learned.
I hate learning the hard way.
I know someone that did that in retirement. They called in the second day. I'm not coming back!
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