I’ve got to tell you, folks, there’s got to be something seriously wrong with a system where a person who
a) defaulted on a card;
b) has a history of missing 1-2 payments in a row;
c) is very much into the concept of minimum payment;
d) is genetically predisposed to be irresponsible with money;
e) is a wastrel of major proportions
has a higher credit rating a person who
a) never defaulted;
b) never missed a payment;
c) has always paid every single balance in full;
d) is extremely responsible and careful with money;
e) embraces a Spartan lifestyle.
It is obvious that the system that calculates these ratings is primitive, doesn’t take into account some pretty obvious variables, and is going to make a wrong judgment more often than a correct one. So the events of 2007-8 are not at all surprising.
Clarissa's Blog 
They might have already told you this. But paying off every balance in full doesn’t help your credit score. (Which is weird.) Leave a small balance on the card–$100.00 or so on a card with a larger balance–or maybe even $20-00- $40.00 on a card with a smaller balance. I started doing that and my credit score jumped about 100 points in a few months/
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P.S. The reason I started leaving a small balance was on the advice of a mortgage banker who is giving me tips on how to raise my credit score quickly and easily. (I was thinking about buying a house but decided to hold off for a while.) But his advice did work.
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My powers of persuasion will never be enough to convince N to carry a balance. š
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There are a lot of urban legends about what events will have what effects on credit scores. There’s also a lot of conventional wisdom on how credit scores affect non-credit phenomena such as employability. One common saying is “Bad credit is better than no credit.” The credit bureaus are on record concerning some but not all policies, and at any rate reserve the right to treat the actual formula or algorithm as a proprietary trade secret. As far as I know, there is no way to empirically test hypotheses about what events have what effects. It’s a black box.
One business practice of the credit bureau industry that is pretty well documented, and somewhat acknowledged by the industry, is that the scoring system is indeed designed to punish the “debt shy,” the worst “offenders” being those who will go out of their way to avoid borrowing money, and the second worst being those who place a high priority on repaying debts sooner rather than later. To me it all seems very reminiscent of the business model of the waterfront, especially in a world in which HR types claim a legitimate interest in this type of informaiton.
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I declared bankruptcy in 2001 and have not borrowed any money since then. Although for much of that time I have lived in cash only societies like Kyrgyzstan and Ghana. I probably could never get a mortgage in the US. But, since I can’t get a job paying more than minimum wage there anyways it does not much matter.
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Indeed. The process here is beyond weird.
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Is it that they want to know they will make interest on you?
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If the virtuous one is N., he had an employment gap, right? Don’t know if this matters, but… Also, he may lack credit history in US, they may dislike this.
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Yes, the reason my credit is better is that I’ve been borrowing for longer.
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I don’t think primitive is the right word for it. The problem with the system that calculates these ratings is that it’s secretive and unaccountable. Individuals are the object, not the subject, of this industry’s activities. The amount of information dispensed to an individual consists of a “free credit report” metered out one per year, plus three “credit scores” to those who pay for the privilege of knowing an interesting “fact” about themselves. The amount of information dispensed to various commercial enterprises about individuals amounts to a detailed and somewhat comprehensive dossier.
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How is one is genetically predisposed to be irresponsible with money?
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