707
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
this post was submitted on 20 Aug 2023
707 points (96.8% liked)
Asklemmy
43394 readers
1308 users here now
A loosely moderated place to ask open-ended questions
If your post meets the following criteria, it's welcome here!
- Open-ended question
- Not offensive: at this point, we do not have the bandwidth to moderate overtly political discussions. Assume best intent and be excellent to each other.
- Not regarding using or support for Lemmy: context, see the list of support communities and tools for finding communities below
- Not ad nauseam inducing: please make sure it is a question that would be new to most members
- An actual topic of discussion
Looking for support?
Looking for a community?
- Lemmyverse: community search
- sub.rehab: maps old subreddits to fediverse options, marks official as such
- !lemmy411@lemmy.ca: a community for finding communities
~Icon~ ~by~ ~@Double_A@discuss.tchncs.de~
founded 5 years ago
MODERATORS
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??
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
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
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.
It decreases your overall available credit
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.
In Germany taking out a small loan even tho you don't need it can help massively boost your credit score.
That only works because here no credit history is worse than a bad credit history.
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.
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.)