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What's a scam that's so normalized that we don't even realize it's a scam anymore? (lemm.ee)
submitted 3 years ago by to c/asklemmy@lemmy.ml
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[–] 15 points 3 years ago (9 children)

Was coming here specifically to say credit scores. Oh what’s that you paid off your student loans? Here have a big credit hit as a treat. Oh you’re using your credit? Here have a credit hit even tho you’ve never missed a payment. How dare you use the credit you have??

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  • [–] 9 points 3 years ago* (last edited 3 years ago) (4 children)

    Why would paying off your student loans give you a credit hit?

    Edit: lol who is downvoting this I legitimately didn't know the answer

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  • [–] 6 points 3 years ago

    Credit scores are in part based on the oldest line of available credit, which for most people are their student loans. Pay those off, your oldest line of credit becomes something more recent, and your score goes down as a result

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  • [–] 5 points 3 years ago*

    Length of credit and credit utilization, you get points* for the length that each account has been open, so when you pay off your loan the account is closed and no longer counts. Also as you get to the end of the repayment it shows as a $30k account that you owe les than $10k on, you get points for using less than half or less than a third of the credit available to you.

    *You don't actually get points, that would be too easy to understand, you get factors that affect a complex equation in your favor.

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  • [–] 1 point 3 years ago (1 child)

    It decreases your overall available credit

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  • [–] 6 points 3 years ago

    Loans are different from lines of credit... loans don't have an "available credit" associated with them. The reason your score might go down when you pay off student loan is because you're reducing the number of open accounts you have, and also possibly reducing the diversity of accounts (lines of credit vs. installment loans).

    Disclaimer: I'm not saying this is a good system, just explaining how it works.

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  • [+] 3 points 3 years ago* (last edited 3 years ago) (2 children)
    [deleted]
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  • [–] 1 point 3 years ago

    It’s more the case that if you use more than 20% it is seen as negative. 0-10% is excellent, 10-20% is good, and it gets worse from there. Every year I request a credit increase despite my spending staying the same simply because it makes my utilization go down. But it’s dumb. I don’t need the extra credit. I’ll never use it. But have to have it to max my score.

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  • [–] 2 points 3 years ago

    Even better if you use Experian: give us access to all your spending data or else you'll never see a score increase again (source: been dealing with this for three years while Equifax continues to go up. I feel like they're doing something illegal, but they probably already were and nobody cares.)

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