Personal Finance

Good Credit: How It Really Works & What They Never Tell You

  • Last Updated:
  • Feb 21st, 2010 4:21 pm
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[OP]
Jr. Member
Oct 15, 2008
166 posts
3 upvotes
Vancouver
Jungle wrote:
Jan 12th, 2010 10:21 pm
Government jobs are doing it a lot now, especially if you are in a position of trust.
Security jobs, bank jobs, BCAA and even the customer service rep jobs at Shaw have to through a credit check. Personally I think it's too invasive but what do you do?
Deal Expert
Aug 2, 2004
30467 posts
5010 upvotes
East Gwillimbury
Those that are high risk (credit) tend to need more money and in jobs where there are opportunities for theft, they will consider you a bad candidate.
Deal Addict
Aug 1, 2008
1554 posts
74 upvotes
Ottawa
Markenstein wrote:
Jan 13th, 2010 2:31 pm
Security jobs, bank jobs, BCAA and even the customer service rep jobs at Shaw have to through a credit check. Personally I think it's too invasive but what do you do?
Gorvernment of Canada security clearances too. The reasoning is that if
you are heavily in debt it might be due to a gambling problem. If you get
a clearance somebody you owe money can use it as leverage to obtain
classified information. They care more about gambling problems than
doing recreational drugs even.
Deal Addict
May 31, 2007
4996 posts
2109 upvotes
Markenstein wrote:
Jan 13th, 2010 2:31 pm
Security jobs, bank jobs, BCAA and even the customer service rep jobs at Shaw have to through a credit check. Personally I think it's too invasive but what do you do?
Hey if you can't manage your own credit, what does that show of your character? Are you more risk?

Now, it could be an unfair judgement, if something were to happen out of your control (beyond being responsible for actions you can control), that makes your credit score go down, because you lost your legs and cant work, or something.
Deal Addict
May 31, 2007
4996 posts
2109 upvotes
Markenstein wrote:
Jan 12th, 2010 3:45 pm
Our credit score is becoming more and more important in other aspects of our life, even if it has nothing to do with our finance. For example, potential employers and landlords will use it to gauge your character. That is why it's important to know exactly how it works.

I just wrote a piece explaining what you need to know about credit ratings and how you can manage it. Hopefully you can use this information to your advantage.
Good Credit: How It Really Works & What They Will Never Tell You
The only thing I don't agree with is when you said that your score goes down when you change your address. If this is the pie chart, please explain how your score goes down when you move:

Image
Sr. Member
User avatar
Dec 10, 2006
744 posts
155 upvotes
Japan
I've been reading a lot on these credit articles and I really appreciate them. One thing that I see throughout all the articles is that they all mention "debt" or "loan", as part of the credit calculation.

What if someone has 2 5 years old credit cards, $2500 limit each, no mortgage, no loans, no debt, lots in savings, and pays all credit card bills the moment it arrives? Doesn't that mean a perfect credit?
Deal Addict
May 31, 2007
4996 posts
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rageguy wrote:
Jan 15th, 2010 10:41 pm
What if someone has 2 5 years old credit cards, $2500 limit each, no mortgage, no loans, no debt, lots in savings, and pays all credit card bills the moment it arrives? Doesn't that mean a perfect credit?
Pretty much. The FICO system does not care about your savings. They care about everything you do in the pie chart I posted above.
Jr. Member
Nov 12, 2009
164 posts
5 upvotes
Jungle wrote:
Jan 16th, 2010 12:23 am
Pretty much. The FICO system does not care about your savings. They care about everything you do in the pie chart I posted above.
Yes. It does care about types of credit as per the pie chart. It is better to have installment loans etc etc as compared to just credit card revolving debt. At least that's my understanding.
[OP]
Jr. Member
Oct 15, 2008
166 posts
3 upvotes
Vancouver
Jungle wrote:
Jan 15th, 2010 10:40 pm
The only thing I don't agree with is when you said that your score goes down when you change your address. If this is the pie chart, please explain how your score goes down when you move:

Image
I'm not a credit ratings specialist but I am pretty sure job and residential instability is a factor in scores, they keep that info. Maybe it doesn't have any affect until you reach some threshold, like moved 3 times in 2 years or something.

It's not in the pie chart because the credit agencies don't tell you everything (and they won't tell you what I've told you). If you look at the chart you can see that credit checks also doesn't "appear" to be a factor but you know it is.
Deal Expert
Aug 2, 2001
15570 posts
5809 upvotes
I'll be honest, I think it's extremely poor advice to advise people to open up as much credit as they can in an attempt to make their credit score higher. This is exactly the sort of behaviour that creditors would want, individuals to open up credit they aren't planning to use in the hopes that one day the individual will encounter a situation whereby they need it. And unfortunately, this is the message that the article conveys, which is truly sad because it is attempting to influence those people in society that don't quite grasp basic financial reality.

"Good" credit can come from just paying all your bills (including a CC) every month in their entirety. It's not rocket science. No bank will turn down someone who has a steady job and no/little history of debt for a loan that is within their income range. The score is a tool that the banks use, and is not the sole determining factor.


If we are to discuss a credit score having impact in other lending institutions, such as Wells Fargo, MBNA, etc... then I would think the real discussion is why are we encouraging people to take out the 30% interest rate loans, and focusing on solving the real issue rather than just keep extending them credit they can't afford.
Deal Addict
Dec 13, 2007
1489 posts
47 upvotes
Toronto
TrevorK wrote:
Jan 16th, 2010 11:46 am
I'll be honest, I think it's extremely poor advice to advise people to open up as much credit as they can in an attempt to make their credit score higher. This is exactly the sort of behaviour that creditors would want, individuals to open up credit they aren't planning to use in the hopes that one day the individual will encounter a situation whereby they need it. And unfortunately, this is the message that the article conveys, which is truly sad because it is attempting to influence those people in society that don't quite grasp basic financial reality.

"Good" credit can come from just paying all your bills (including a CC) every month in their entirety. It's not rocket science. No bank will turn down someone who has a steady job and no/little history of debt for a loan that is within their income range. The score is a tool that the banks use, and is not the sole determining factor.
+1

I too find it it bad to teach people tricks and stuff on how to manipulate credit score. And no need to drag potential employers into the subject. If you pay bills on time it will be enough for the potential employer to know. They don't care about your FICO score. And you should not be also.

Canadians are in debt upto their eyeballs as it is. It is much better to learn how to live without borrowing, really.
Deal Addict
Feb 20, 2006
1171 posts
42 upvotes
Vancouver
Markenstein wrote:
Jan 16th, 2010 11:03 am
I'm not a credit ratings specialist but I am pretty sure job and residential instability is a factor in scores, they keep that info. Maybe it doesn't have any affect until you reach some threshold, like moved 3 times in 2 years or something.

It's not in the pie chart because the credit agencies don't tell you everything (and they won't tell you what I've told you). If you look at the chart you can see that credit checks also doesn't "appear" to be a factor but you know it is.
I'm pretty sure you are wrong about this one. For one, the address and especially the employment information on your report is often wrong. If it were a factor, I'd expect to see much more advice around the impact of accurate data. Second, your credit score is intended to be based on credit history (applications for credit, repayment history, limits and so on), and not on tangentally related factors like how often you move.

Individual credit granting institutuions may take this into account (e.g. many ask if you own your own home) and may have even more detailed criteria, such as usuing your address to predict the possibility of default, but I've never seen any evidence that the credit bureaus take this into account.

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