credit score things I have learned

[ironymaiden]

(I wouldn’t normally talk about money stuff publicly, but other people should know, so feel free to share. This is in the US.)

• your bank or credit card shows you a free FICO credit score; there’s at least four different formulas and the one used for mortgages is not the same as the one the bank shows you

• I ignored getting and reviewing my annual free credit report because that score looked so good. It’s not a substitute, I apparently have a small medical debt on my report that I wasn’t aware of that I could have researched and handled a couple years ago

• we’re debt-free. It was a lot of work, I’m proud of it, and it lowers my credit score. i knew about this bullshit “problem” but I learned from a Slack comm today that it’s possible to take out a small installment loan (under $1000) every so often and pay it off to improve your credit (this is a thing you can still get with bad or no credit)

these three things added about 0.25% to my mortgage pre-approval interest rate. fortunately it’s not make or break for us, but over 30 years that will add up, please learn from my mistake

anyway, still got approved, interviewing a realtor on Monday. Excelsior!

Comments

[annofowlshire]

Congrats on the pre-approval! Boo to the varying complexitites.

I have no credit score in the UK. That's a potential future problem I should probably be working on.

[sleepybadger]

Congratulations! Also, I 100% agree about being debt free lowering your credit score. Last time I needed to get financing on something they were like oh, there's a ding on your credit score, and then said it was because I didn't have any long-term debts that I was making payments on. Yeah, I paid off all my shit, it was a lot of work and I'm so happy it's done, and this should be a positive, not a negative! Gah.

[flexagon]

I'm a huge fan of normalizing money talk. How are people supposed to learn, if it's not "supposed to" be part of the discourse?? These weird taboos just serve to keep the existing financial hierarchy in place, IMO. So I appreciate your post.

My credit was good enough to help me co-sign on a mortgage lately, but it's "just okay" and I'm sure that having been debt-free for years is a huge part of why. I could be following up with Expedia to fix things, but right now that's pretty far down my list of things to do. (I thought for ages that I'd basically never need a big loan again, but now that I'm considering getting into real estate that becomes less clearly true.)

[varina8]

Congrats on getting debt-free! You should be proud of it. Kudos too on your pre-approval. The penalty for being debt-free always grinds my teeth.

In a similar vein, most people don't realize credit is often a matter of use it or lose it. A few years ago, my credit union threatened to take away my credit card for a year of inactivity (it's my backup card for use only if the main card is shutdown for some reason, like fraud). I ended up moving my car share account there so it gets some activity during the year and that's kept them happy.

Kudos on your pre-approval and good luck with the realtor interviews on Monday!

[yourlibrarian]

That is crazy that you have to spend money on interest in order to improve your credit. I know that there are odd ways that credit cards factor into it, but can you just use them and pay off the balance each month as a substitute?

[ironymaiden]

Nope. Credit cards are not an "installment loan" where you pay a consistent amount each month, so they don't count as much. I do keep a set of regular charges that I pay off each month on my card, which you are also supposed to do