Equifax refused to restore his credit score or explain why it dropped to zero, until Go Public started asking questions.
Only then did the company point to its little-known policy: If a credit file sits inactive, the consumer may be labelled “unscoreable” and their score reset to zero. Tregear says the last time he checked, before it disappeared, his score was around a more respectable 700.
Go Public has since found a major flaw in consumer protection rules — that there are no laws or oversight on how credit scores are calculated, leaving credit bureaus to do what they want.
Consumer advocate Geoff White says that gives credit bureaus too much power, with no transparency.
How so? It seems to be exactly what lenders want to know before lending. Are you judging a system by its exceptions?
It’s moreso a rating of how much potential cash they can extract from you over a lifetime in the form of interest.
That’s why, if you always pay off your debt balance before interest accrues, it actually lowers your score.
It does not lower your credit score to pay debt off early, where did you get that idea from?
Over time if you show that you aren’t delinquent on payments your score goes up. That’s the vast majority of how a FICO score is calculated.
Other things that impact your credit score are the LENGTH of time you have established credit (aka don’t close your oldest credit card for most people, even if it sits unused), the total amount of available unused credit compared to your income (ie if you have a ton of high credit availability cards sitting there - you could run up hundreds of thousands of dollars of debt and disappear to a non extradition country being a risk), and lastly your overall utilization of your available credit (ie you want to be using 10-20% of both your available credit both on individual cards (“revolving credit”) and your overall total revolving credit across all your cards together).
The last one is a bit harder to explain, so here’s an example:
-you have three lines of revolving credit (credit cards)
-one card has a 1000 limit, one has a 5000 limit, and one has a 10,000 limit
-ideally you’re posting a balance of 200, 1000, and 1500. That’s between 10-20% on each card, and it’s between 10-20% of all cards in total.
Other things that impact your score (negatively) are bankruptcies, late bill payments, things in collections, and having a high debt to income ratio.
At no point will you be penalized for paying debt off early. The only thing that can possibly affect your score in that sense is if you ONLY have a loan, no revolving credit, and you pay it off - now you have no credit utilization at all, which potentially could ding you a bit, but not much. That’s also not very common - most people have several credit cards and few loans, if any.
Ah, that would happen to be my exact experience, oddly enough. I don’t have any credit cards and payed off my car loan early because the bank was playing games with automatic payments.
You know what’s funny? Credit scores are a fairly new thing. If you wanted to rent an apartment, all you needed were good references. You couldn’t be denied based off some obscure score that a couple of companies have a monopoly over and can wreck your whole life if THEY mess up with no chance of recovering.
In a world where everything works on debt now, these companies have too much power over people.