Credit Score Drops after getting Credit Card

Helvetica_Van_Buren

jamesd wrote: »

Among other thing they determine the interest rate and credit limit that will be offered by cards that rate for risk when the internal scores used for that are calculated.

I keep reading this one because I can't believe how wrong you are. How can you be so sure of your position when you couldn't be more wrong?

How does a number that nobody sees effect an interest rate or a lending decision?
"OK Mr Smith, I can see that you've got a credit score of five so that equals an interest rate of 28.8%" - said no lender ever.

Do you actually check the things you write?

Helvetica_Van_Buren

jamesd wrote: »

Please stop lying to people by falsely claiming that credit scores are meaningless. As this site says "Everyone should take time to manage and boost their credit score."

Among other thing they determine the interest rate and credit limit that will be offered by cards that rate for risk when the internal scores used for that are calculated.

The consumer scores from credit reference agencies are not necessarily good predictors of how those internal scoring methods will rate an application because they only use the information in the credit record and don't reflect things like income or the customer preferences of a particular lender. Yet as this site says, those are still "a decent indication of your rough creditworthiness".

That still doesn't mean that it's worthwhile paying for scores from a credit reference agency. It isn't. While the scores are of use those services are primarily offered to make money for the CRA. Do try not to let your dislike for these services cause you to lie about the potential value of the numbers provided.

Item No.1 on your link: "You DON'T have a universal credit rating".

Are you getting this yet?

There are currently three credit main agencies that sell their score services. If there were a hundred would we be meant to follow your terrible advice and constantly try to improve 100 different (and worthless) opinions of our finances?

Item No.6: "Your credit file dictates product and the rate you'll get."
Exactly what I was saying - not a mention of a "score" in site.

Do you understand the difference between a credit score and credit file? Maybe that's the source of all your terrible advice.

Item No.9 "Credit reference companies will try to sell you a credit score

Don't take it too seriously. Your credit reference agency credit file is important. Its credit score isn't.

Credit score vs. Credit file
Credit reference agencies used to make all their money from selling data to lenders. The idea was to help lenders predict your behaviour, which allowed them to assess whether or not you were a good person to lend to.

Then some bright spark at the credit reference agencies realised they could generate a business called "consumer credit management". It meant they could start to sell you all the other sorts of data and monitoring products for the first time. Why do they sell it to you? Well, it makes them money.

Part of this is selling people a "credit score". Yet that isn't a true indication because, as we've stressed, each lender scores you differently and they have far more information than just what's on your credit file. For more on this read what the Equifax or Experian credit score really means (and why it's not important)."

Did you even read the link? It backs up my position, not yours.

jamesd

Helvetica_Van_Buren wrote: »

jamesd wrote: »

Among other thing they determine the interest rate and credit limit that will be offered by cards that rate for risk when the internal scores used for that are calculated.

No they don't.

Kindly learn something about risk-based pricing which uses the credit scores generated by the lenders to set their rates and limits. Maybe you don't know that exists but I do and you'll find it mentioned also in the MSE card lists. If you apply for a card or other credit product that uses rate for risk the credit rating will affect the terms offered.

Helvetica_Van_Buren wrote: »

Read the link you posted. The headline is misleading because the body of the article then goes on to describe why you shouldn;t worry about your score.

I read it before posting the link. That wasn't the headline and it goes on to say for example "this is a guide to everything you need to know about credit checks and crucially, how to boost your credit score – so you're likely to be accepted for products & get the best rates too." Notice the bit about it being crucial to boost your credit score?

One of the ten points there discusses the credit scores from credit reference agencies and it links to that other article which says of the scores issued by credit reference agencies:

"Does that mean it's completely worthless and I should ignore it? No, I wouldn't go that far. It's a decent indication of your rough creditworthiness, and certainly it's worth looking at the things they say are blemishes to see what you can do to improve your credit. "

Helvetica_Van_Buren wrote: »

What good is it to 'boost' a score that nobody sees?

The score is based on the credit record. Lenders also use the credit record. As Martin says, that makes it a decent indication, even though it's an incomplete one.

Helvetica_Van_Buren wrote: »

I haven't read that link but if it says what you say it says (you were wrong about your other link) then the article is wrong, it's as simple as that.

Neither is wrong, you just don't know as much about the subject as you think you do. Maybe you're on a crusade of some sort not trying to spread accurate information? If the crusade is don't buy scores of credit reference agencies, we agree.

Helvetica_Van_Buren wrote: »

Correct - because they're worthless whether you pay money for them or not

As MSE says, they aren't worthless, they are just incomplete.

Helvetica_Van_Buren wrote: »

Credit reference agencies don't make lending decisions. Lenders don't see the score.

I never wrote that lenders see or use the credit scores sold by credit reference agencies. They use their own. You seem to be confusing several different things so maybe a few definitions would help:

Credit rating: the thing used to rate credit applications, either all of it or just the credit reference agency portion.
Credit sore: a numerical representation of one or more parts of a credit rating, if it's a lender's score it'll probably also include salary and job information and maybe also details of income and expenses.
Credit score sold by credit reference agencies: one form of credit score, one not used by prospective lenders.

So when Martin and I write that credit ratings are worth improving and that credit scores matter we're both right. We're also both right if we write that it's not worth paying a credit reference agency for their score.

Helvetica_Van_Buren wrote: »

How does a number that nobody sees effect an interest rate or a lending decision?

It doesn't and I never wrote that the credit reference agency credit score does. Rating for risk uses the score generated by the lender using its own rules, some of which use the information held by the credit reference agencies.

Helvetica_Van_Buren wrote: »

"OK Mr Smith, I can see that you've got a credit score of five so that equals an interest rate of 28.8%" - said no lender ever.

Rate for risk systems are normally used in automated acceptance or decline decisions, not for human decisions, though there are often visible internal credit scores maintained by say banks that are visible to customer service staff. If you do a search you'll find some possible educational to you discussion about the NatWest internal credit scores and what effect they have on products that will be available, with the interest rates offered depending on the products offered.

Helvetica_Van_Buren wrote: »

Do you actually check the things you write?

Of course. And I also provided links to references normally considered reliable, like Martin's MSE articles on the subject that disagree with your assertion.

Helvetica_Van_Buren wrote: »

Item No.1 on your link: "You DON'T have a universal credit rating". ... Are you getting this yet?

I knew that, at least in the UK, before your first post. In the US there is a very widely used credit score, though, so the UK situation isn't really universal, just UK. I bolded the words score and rating because you seem to be mixing up the two things, unlike Martin's article and me, and the difference matters.

Helvetica_Van_Buren wrote: »

There are currently three credit main agencies that sell their score services. If there were a hundred would we be meant to follow your terrible advice and constantly try to improve 100 different (and worthless) opinions of our finances?

Nope, I'd suggest trying to improve credit ratings instead, with scores a handy proxy for part of that. Which is what I actually did do.

Helvetica_Van_Buren wrote: »

Item No.6: "Your credit file dictates product and the rate you'll get."
Exactly what I was saying - not a mention of a "score" in site.

Point six is fine and I hope that you read the rest of it about rate for risk pricing. It's the credit score generated from the credit reference agency data and the other information collected at the time of application that is used in a rate for risk system. That's why the rest of the article is about improving credit ratings that are key part in calculating the score. This score is not the same as the score given away or sold by credit reference agencies.

Helvetica_Van_Buren wrote: »

Did you even read the link? It backs up my position, not yours.

Of course I read them and of course they don't support your position. As Martin wrote "Everyone should take time to manage and boost their credit score ... This is a guide to everything you need to know about credit checks and crucially, how to boost your credit score".

That's not the one sold by credit reference agencies, though.

You seem very confused about the differences between credit ratings and the various credit scores and how they are used. Best to read both of the articles I linked to, the Wikipedia page and the credit card tables page to get a better understanding of how the various pieces fit together.

Then just maybe we'll end up agreeing that it's not worth paying CRAs for their scores and discussing the uses that can be made of them because they are calculated based on the credit records they hold.

Helvetica_Van_Buren

The articles you link to a contain many contradictions. The author goes from this:
"Actually, you don't have a credit score in the UK, you don’t have a credit rating, and there’s no such thing as a credit blacklist."

To this:

"It's a decent indication of your rough creditworthiness"
What is? The credit rating that you've just told us we DON'T have?

The articles you cite aren't good examples for your argument and I'd gladly point out to the author their mistakes and where they start playing fast and loose with certain terminology,

But, I've already spent way too much time on this. You keep on telling people those credit scores have any meaning, Champ.