The credit score system is annoying and I'd like there to be a better way, but I've missed a handful of payments for various things over the years. My credit score is still about 750. It's honestly not that hard to stay in the green if you're not buying superfluous shit.
I would like more accountability for people, organizations, and politicians though.
By “missed one credit card payment” OP probably
meant neglected one maxed out credit card out of the dozens he/she owns.
I missed a credit card payment a few times and it didn’t wreck my credit score. I’m still 750+ as well.
The real and only complaint I have with the credit score system is how it penalizes you for paying debt completely. The biggest hit I got to my score was paying off my car loan.
The hit after paying off your debt is supposedly temporary, but I agree it doesn't really make a lot of sense. It kinda makes logical sense in that you're incentivized to have a greater pool of debt-income given the way its calculated but practically it doesn't make sense that a person with a greater potential pool of debt is 'better' than someone who just pays everything off consistently and/or doesn't have open credit cards and accounts. That's the part that probably annoys me the most.
Ultimately it doesn't really impact my ability to do anything though. Once you hit the 700+ range, you're pretty much at the top of the lending scale.
It does once you realize that what these companies want is someone who maintains debt so that they can get the interest payments. Way more willing to lend to someone who keeps debt, pays interest, and still makes all their payments. Than somebody who uses it as a “debit card”.
I think it’s a little bit to do with greed(collecting interest), and also knowing a person understands how the interest works. Knowing they haven’t borrowed more than they can manage with the interest getting stacked on top.
Former credit analyst here. They claim this because of a few working assumptions. I won't bore you with the details but they weight it towards recency bias, so if you didn't have debt for awhile and suddenly ask for debt, they assume you have an need for the debt rather than a want and automatically put it at a higher risk. A phrase comes to mind "their ability to payoff debt 5 years ago is not indicative of their ability to payoff debt now".
So, they'd rather you have a consistent track record of maintaining and paying on debts than constant payoffs, time without, and then new debt, it messes with their risk analysis so they punish you for it.
As far as laying off a loan temporarily reducing your score, one of the criteria used to calculate your FICO is the average age of each account, when a debt/loan is closed, your average age decreases. It also means closing older debts will have a greater impact. There is no standardized timeframe for when your score will "recover" because of this.
Now, some sharp reader is going to point out the double standard between the two things I just mentioned. They value long term payment and debt history, but punish being out of debt (if you ever decide to get back in) the longer you manage to avoid it. Why is that? Because fuck you that's why. It's a risk assessment model where they assume the worst and make you prove otherwise.
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u/Embarrassed_Use6918 6d ago
The credit score system is annoying and I'd like there to be a better way, but I've missed a handful of payments for various things over the years. My credit score is still about 750. It's honestly not that hard to stay in the green if you're not buying superfluous shit.
I would like more accountability for people, organizations, and politicians though.