Not so much weird as crooked. How and why and all is this big 600 page thing I’ll try and keep to like 2-3 posts tops. Swearsies. Credit like we have in America isn’t about responsibility. A good credit standing is basically a report card from credit companies saying how much confidence they have that you will behave the way they and their conglomerates want and make them lots of money in your life.
Life long renters are far less likely to fit those criteria, and by not offering credit to renters, it serves to incentivize those renters able to go take out large loans for property and enter the general cycle of credit/loans/major purchases that come along with property ownership.
Remember that these systems are all interlinked- credit card executives aren’t sitting around going: “how do we separate people into rich and poor?” In those terms. They aren’t largely cartoon villains who just like creating wealth and opportunity disparity.
Their complimentary systems. Without major purchases like consumer electronics, cars, student loans, vacations, etc. credit companies don’t make much money. If consumer credit is only used for buying things we can afford we don’t really need credit and a whole lot of people in credit don’t get paid. If it’s only groceries here or a night out there- credit companies make very little profit if any since you don’t carry the balance and pay it without major interest. So there are relationships between credit and other businesses- without new cars to drive regular spending one of the largest common consumer credit lines and profit sources doesn’t exist for creditors. Without credit the sale of new cars plummets and so does profit for car makers. Without skilled professionals who often require expensive degrees or training etc. people don’t have the money to buy these things or other luxuries that drive those industries and drive credit. Creditors will take money where they can get it-
But their current business model is most profitable when a society has great wealth disparity, and by no coincidence helps create a society of wealth disparity. In a group of 100 people, if 90 all make $40k a year and 10 make $200k a year, those who make the $200k will likely exhibit spending on larger items and more luxury goods rights? Their profitability will outstrip the 90 making $40k.
In a group of 100 where we divide income equally- all 100 people make $56,000 a year. The top earners are no longer buying $100k cars and all the other things they felt they could afford at $200k, and all 100 people will now have spending habits not far off from those 90 people making $40k.
In other words- the total wealth of all 100 people stayed the same but because it is more equal, any one person has less to spend and likely will spend less. This means that any one person is less likely to make major credit purchases.
Keep in mind that the availability of credit drives price increases too.
That's fascinating. The swedish version of credit score is basically your annual level of taxed income, any loans and if you have unpayed debt in the last three years. The unpayed debt is very specific to us. Basically Kronofogden is the branch of government making sure everyone pays their debts, if you don't pay after numerous reminders and options to make a payment plan they can legally move to seize pay or property but they're not allowed to seize more than than leaving you enough to pay your basic needs. When that happens you get a "mark" on your credit that stays for three years, that mark is what credit companies look at to determine if you're likely to pay your debts.
That’s just awesome. Germany has a pretty decent credit system too. The US credit system is a bit complex. Credit can be given by any corporation at their discretion but there are 3 major companies that provide credit scores that are used for most credit checks from homes and cars to credit cards and being able to rent things or get certain jobs etc.
They can use any, all, or some average of those scores and you can have three different scores for each company but generally they will be close to each other. On larger loans especially this can matter since a small variance can equal large sums on a large loan. Your limit is…. It’s based on a bunch of complex things and you can even deposit money to “secure” a limit up to the deposit to build credit or negotiate by calling the company and haggling for higher limits etc.
your score is a major factor on credit limits, how much you make factors in but isn’t quite as important as your ratio of utilized credit to available credit.
Having credit up to or more than your yearly income on a single card is possible and having more than your yearly or even theoretical lifetime income across cards and loans is very possible. The “safety” is just that if you try to use all that credit, your rating will fall and you’ll likely be demoed and your limit lowered once you approach or cross a point you can’t pay your monthly minimums. When you die your creditors can collect from your estate, and internet and penalties provide huge profits so lenders usually profit even if you default on a loan in most cases. Lenders also usually can take various government subsidization from tax write offs or insurance so that if there is a default they still get money back from the government. Most people will good credit will use less than 30% of their total limit and carry debt over years or decades so that they are either never free if debt or only become free in their twilight years.
It’s a confusing mess and more complicated than I describe here lol. That said if one knows the rules and follows them it can be relatively simple to keep and maintain good credit- but the entire system is built on generating massive profits and ensnaring as many people as possible.
Separate from my other comments on the training of credit- as a fun fact there are some start ups and ventures that are seeking to create ways that people can build credit by paying rent. That is exciting in a way but will likely have its own issues since businesses do tend to be ran for profits. You can also lobby and advocate for legal changes that would require timely and regular rent to be counted towards credit scores- but for various reasons that is probably a long shot lol.
A couple months ago, I charged a large purchase to my credit card, which put me at my limit. Despite the fact that paid that balance within the week I charged it, my score dropped 17 points.
Paying your bills on time is one of the three biggest factors in your credit score. It is good to use a credit card and pay it off every month. Never being late is what makes your score high, NOT the amount of interest paid.
Also, charging close to your limit may lower your score temporarily because of a high credit utilization, but it should return a couple weeks after you've paid the bill.
Life long renters are far less likely to fit those criteria, and by not offering credit to renters, it serves to incentivize those renters able to go take out large loans for property and enter the general cycle of credit/loans/major purchases that come along with property ownership.
Remember that these systems are all interlinked- credit card executives aren’t sitting around going: “how do we separate people into rich and poor?” In those terms. They aren’t largely cartoon villains who just like creating wealth and opportunity disparity.
In a group of 100 where we divide income equally- all 100 people make $56,000 a year. The top earners are no longer buying $100k cars and all the other things they felt they could afford at $200k, and all 100 people will now have spending habits not far off from those 90 people making $40k.
In other words- the total wealth of all 100 people stayed the same but because it is more equal, any one person has less to spend and likely will spend less. This means that any one person is less likely to make major credit purchases.
Keep in mind that the availability of credit drives price increases too.
They can use any, all, or some average of those scores and you can have three different scores for each company but generally they will be close to each other. On larger loans especially this can matter since a small variance can equal large sums on a large loan. Your limit is…. It’s based on a bunch of complex things and you can even deposit money to “secure” a limit up to the deposit to build credit or negotiate by calling the company and haggling for higher limits etc.
your score is a major factor on credit limits, how much you make factors in but isn’t quite as important as your ratio of utilized credit to available credit.
Also, charging close to your limit may lower your score temporarily because of a high credit utilization, but it should return a couple weeks after you've paid the bill.