I always love how nonchalant they sound about wrecking their credit
I’ve never understood the whole US credit score system, it’s honestly pretty baffling. Don’t get me wrong, we have credit scores here too, but they’re something for experts doing risk assessment to do in bulk, not for individual consumers.
Eh… The US economy is practically driven by lending to the individual consumer. Banks created a system to identify risks to lending to individuals. Higher scores mean less risk of a bank losing money on an individual. So those high scores are presented with higher credit limits and lower interest rates.
The issue with the individual credit score is that it has become ingrained in society as a litmus test for trustworthiness and credibility. So low scores are rewarded with higher interest rates, lower credit limits, and hit with bigger deposit requirements. Background checks for employment and housing are probably the biggest issue in this regard. If there is a score-tanking event in your life (such as bankruptcy due to healthcare emergencies, for example), it becomes exponentially more difficult to bring yourself back to financial stability because your bankruptcy is reported to the credit bureaus, they tank your score, and you then struggle to find a good job to bring you up again.
A lot of people who happily get credit cards without knowing if they can pay do not fully understand the consequences of not paying. It goes far beyond a bank merely telling you “no”.
Yeah, I was freaked out when I saw I had a low credit score (because I never used credit) when I was looking at buying a house… Dozens of articles online about it, how to increase it and whatever… But then the bank just gave me a mortgage anyway. Didn’t make any difference. At least here in the UK the actual “score” doesn’t really matter unless you have missed payments.
I’ve never understood the whole US credit score system, it’s honestly pretty baffling. Don’t get me wrong, we have credit scores here too, but they’re something for experts doing risk assessment to do in bulk, not for individual consumers.
Eh… The US economy is practically driven by lending to the individual consumer. Banks created a system to identify risks to lending to individuals. Higher scores mean less risk of a bank losing money on an individual. So those high scores are presented with higher credit limits and lower interest rates.
The issue with the individual credit score is that it has become ingrained in society as a litmus test for trustworthiness and credibility. So low scores are rewarded with higher interest rates, lower credit limits, and hit with bigger deposit requirements. Background checks for employment and housing are probably the biggest issue in this regard. If there is a score-tanking event in your life (such as bankruptcy due to healthcare emergencies, for example), it becomes exponentially more difficult to bring yourself back to financial stability because your bankruptcy is reported to the credit bureaus, they tank your score, and you then struggle to find a good job to bring you up again.
A lot of people who happily get credit cards without knowing if they can pay do not fully understand the consequences of not paying. It goes far beyond a bank merely telling you “no”.
Yeah, I was freaked out when I saw I had a low credit score (because I never used credit) when I was looking at buying a house… Dozens of articles online about it, how to increase it and whatever… But then the bank just gave me a mortgage anyway. Didn’t make any difference. At least here in the UK the actual “score” doesn’t really matter unless you have missed payments.