Why does credit score go down when utilising your limit?

Desmond_Hume

Olinda99 said:

Yes it is interesting how AI works!

I think we all agree that for any given credit agency the credit score they produce is done on your credit file using their own internal algorithm and as such is just a number

I think we also all agree that lenders don't see that number they just see your credit file and can do the own analysis on it according to their own requirements

I think where I differ slightly is the notion that the credit score is meaningless. It depends on your definition of meaningless of course but it definitely means something!

What is your definition then?

To me - if something is not used, not consistent and frequently gives the opposite answer to reality, then it’s meaningless. Would you like to guess what I’m thinking about that fits that definition..?

HappyHarry

Olinda99 said:

I asked AI "is your credit score meaningless" ..

While a credit score doesn't define you as a person, it's not meaningless. It's a numerical representation of your creditworthiness, which lenders use to assess the risk of lending you money. A higher score means you're considered less risky, potentially leading to better interest rates and loan terms. 

Here's a more detailed look:

• What it is:

  A credit score is a number that summarizes your credit history, including payment history, the amount of credit you have, and the length of your credit history, according to Lloyds Bank. 
• Why it matters:

  Lenders use it to decide whether to grant you credit and on what terms. A higher score can mean better interest rates, higher loan amounts, and more favorable terms. 
• How it's used:

  It's not just about credit cards and loans. It can also affect your ability to rent an apartment, get certain insurance policies, or even get a job. 
• Is it perfect?

  No, credit scores are not a perfect measure of your financial health. They can be influenced by factors beyond your control, and they may not always accurately reflect your ability to repay a loan. 
• Is it always important?

  While it's generally important for borrowing money, there are situations where a credit score might be less relevant, such as when you're using debt to finance assets that are likely to appreciate in value. 
• How to improve it:

  You can improve your credit score by making regular payments, keeping your credit utilization low, and maintaining a good credit history. 

The response is using American spelling and it gives an answer suitable for Americans who do have an actual credit score, used by lenders and landlords and others.

In the UK, you have a number of credit files with agencies which lenders will look at which will help their decision as to whether to lend you money or not. Lenders do not see your "score", which is a number provided by the agencies only to you, and is solely for the purpose of selling you products to increase your "score". Some people believe this "score" is important, whilst other more sensible people recognise it is what is held on their credit files which is important.

Olinda99

not used - not used by lenders maybe but it certainly is used (by my bank for example - they show it to me regularly with suggestions)

not consistent - maybe not across different agencies but certainly within any given credit agency it is consistent if only because they use an algorithm to produce it

gives the opposite to reality - not sure what you mean by this it's a number and therefore reality.

I'm not trying to argue for or against a given agency's credit score I just disagree with the dogma that it is completely useless and should be totally ignored

And AI agrees with me.

Olinda99

HappyHarry said:

Olinda99 said:

I asked AI "is your credit score meaningless" ..

While a credit score doesn't define you as a person, it's not meaningless. It's a numerical representation of your creditworthiness, which lenders use to assess the risk of lending you money. A higher score means you're considered less risky, potentially leading to better interest rates and loan terms. 

Here's a more detailed look:

• What it is:

  A credit score is a number that summarizes your credit history, including payment history, the amount of credit you have, and the length of your credit history, according to Lloyds Bank. 
• Why it matters:

  Lenders use it to decide whether to grant you credit and on what terms. A higher score can mean better interest rates, higher loan amounts, and more favorable terms. 
• How it's used:

  It's not just about credit cards and loans. It can also affect your ability to rent an apartment, get certain insurance policies, or even get a job. 
• Is it perfect?

  No, credit scores are not a perfect measure of your financial health. They can be influenced by factors beyond your control, and they may not always accurately reflect your ability to repay a loan. 
• Is it always important?

  While it's generally important for borrowing money, there are situations where a credit score might be less relevant, such as when you're using debt to finance assets that are likely to appreciate in value. 
• How to improve it:

  You can improve your credit score by making regular payments, keeping your credit utilization low, and maintaining a good credit history. 

The response is using American spelling and it gives an answer suitable for Americans who do have an actual credit score, used by lenders and landlords and others.

In the UK, you have a number of credit files with agencies which lenders will look at which will help their decision as to whether to lend you money or not. Lenders do not see your "score", which is a number provided by the agencies only to you, and is solely for the purpose of selling you products to increase your "score". Some people believe this "score" is important, whilst other more sensible people recognise it is what is held on their credit files which is important.

Lloyds Bank are a UK bank, not American

HappyHarry

Olinda99 said:

HappyHarry said:

Olinda99 said:

I asked AI "is your credit score meaningless" ..

While a credit score doesn't define you as a person, it's not meaningless. It's a numerical representation of your creditworthiness, which lenders use to assess the risk of lending you money. A higher score means you're considered less risky, potentially leading to better interest rates and loan terms. 

Here's a more detailed look:

• What it is:

  A credit score is a number that summarizes your credit history, including payment history, the amount of credit you have, and the length of your credit history, according to Lloyds Bank. 
• Why it matters:

  Lenders use it to decide whether to grant you credit and on what terms. A higher score can mean better interest rates, higher loan amounts, and more favorable terms. 
• How it's used:

  It's not just about credit cards and loans. It can also affect your ability to rent an apartment, get certain insurance policies, or even get a job. 
• Is it perfect?

  No, credit scores are not a perfect measure of your financial health. They can be influenced by factors beyond your control, and they may not always accurately reflect your ability to repay a loan. 
• Is it always important?

  While it's generally important for borrowing money, there are situations where a credit score might be less relevant, such as when you're using debt to finance assets that are likely to appreciate in value. 
• How to improve it:

  You can improve your credit score by making regular payments, keeping your credit utilization low, and maintaining a good credit history. 

The response is using American spelling and it gives an answer suitable for Americans who do have an actual credit score, used by lenders and landlords and others.

In the UK, you have a number of credit files with agencies which lenders will look at which will help their decision as to whether to lend you money or not. Lenders do not see your "score", which is a number provided by the agencies only to you, and is solely for the purpose of selling you products to increase your "score". Some people believe this "score" is important, whilst other more sensible people recognise it is what is held on their credit files which is important.

Lloyds Bank are a UK bank, not American

Lloyds Bank are being very misleading. They certainly won't use the credit score generated in their lending decisions.

I appreciate that you believe otherwise.

MattMattMattUK

Olinda99 said:

HappyHarry said:

Olinda99 said:

I asked AI "is your credit score meaningless" ..

While a credit score doesn't define you as a person, it's not meaningless. It's a numerical representation of your creditworthiness, which lenders use to assess the risk of lending you money. A higher score means you're considered less risky, potentially leading to better interest rates and loan terms. 

Here's a more detailed look:

• What it is:

  A credit score is a number that summarizes your credit history, including payment history, the amount of credit you have, and the length of your credit history, according to Lloyds Bank. 
• Why it matters:

  Lenders use it to decide whether to grant you credit and on what terms. A higher score can mean better interest rates, higher loan amounts, and more favorable terms. 
• How it's used:

  It's not just about credit cards and loans. It can also affect your ability to rent an apartment, get certain insurance policies, or even get a job. 
• Is it perfect?

  No, credit scores are not a perfect measure of your financial health. They can be influenced by factors beyond your control, and they may not always accurately reflect your ability to repay a loan. 
• Is it always important?

  While it's generally important for borrowing money, there are situations where a credit score might be less relevant, such as when you're using debt to finance assets that are likely to appreciate in value. 
• How to improve it:

  You can improve your credit score by making regular payments, keeping your credit utilization low, and maintaining a good credit history. 

The response is using American spelling and it gives an answer suitable for Americans who do have an actual credit score, used by lenders and landlords and others.

In the UK, you have a number of credit files with agencies which lenders will look at which will help their decision as to whether to lend you money or not. Lenders do not see your "score", which is a number provided by the agencies only to you, and is solely for the purpose of selling you products to increase your "score". Some people believe this "score" is important, whilst other more sensible people recognise it is what is held on their credit files which is important.

Lloyds Bank are a UK bank, not American

The LLM the "AI" is using will scrape from the whole of the internet for it's understanding unless you tell it to be specific to the UK and even then it might still use information from the US. It links to different parts of websites as part of references, but the model is not going to specifically tailor it's answer to UK only unless it is asked to do so. Additionally with the way the LLM works it will also be taking onboard data from the CRAs and on some level will absorb and parrot their marketing pitches, especially as much of the UK media still talks about credit scores and ratings actually meaning something. 

Olinda99 said:

not used - not used by lenders maybe but it certainly is used (by my bank for example - they show it to me regularly with suggestions)

not consistent - maybe not across different agencies but certainly within any given credit agency it is consistent if only because they use an algorithm to produce it

gives the opposite to reality - not sure what you mean by this it's a number and therefore reality.

I'm not trying to argue for or against a given agency's credit score I just disagree with the dogma that it is completely useless and should be totally ignored

And AI agrees with me.

The LLM trawls the internet for it's training, it will absorb a lot of the marketing pitch and generic rubbish, even BBC articles incorrectly espouse that credit ratings are mean a lot more than they do. LLMs are trained on that erroneous data, so will happily repeat it.

grumpy_codger

born_again said:

Olinda99 said:

I asked AI "is your credit score meaningless" ..

While a credit score doesn't define you as a person, it's not meaningless. It's a numerical representation of your creditworthiness, which lenders use to assess the risk of lending you money. A higher score means you're considered less risky, potentially leading to better interest rates and loan terms. 

Here's a more detailed look:

• What it is:

  A credit score is a number that summarizes your credit history, including payment history, the amount of credit you have, and the length of your credit history, according to Lloyds Bank. 
• Why it matters:

  Lenders use it to decide whether to grant you credit and on what terms. A higher score can mean better interest rates, higher loan amounts, and more favorable terms. 
• How it's used:

  It's not just about credit cards and loans. It can also affect your ability to rent an apartment, get certain insurance policies, or even get a job. 
• Is it perfect?

  No, credit scores are not a perfect measure of your financial health. They can be influenced by factors beyond your control, and they may not always accurately reflect your ability to repay a loan. 
• Is it always important?

  While it's generally important for borrowing money, there are situations where a credit score might be less relevant, such as when you're using debt to finance assets that are likely to appreciate in value. 
• How to improve it:

  You can improve your credit score by making regular payments, keeping your credit utilization low, and maintaining a good credit history. 

& that just shows how poor & wrong AI can be. Bet it is scraping that info from the CRA's who want you to believe the 3 figures they publish...

Not just from CRAs. From other countries as well - where the system differs a lot from what we have here in UK. E.g. in Canada the lenders do use the SCORE provided by the CRA. I guess it's the same in USA.

Olinda99

HappyHarry said:

Olinda99 said:

HappyHarry said:

Olinda99 said:

I asked AI "is your credit score meaningless" ..

While a credit score doesn't define you as a person, it's not meaningless. It's a numerical representation of your creditworthiness, which lenders use to assess the risk of lending you money. A higher score means you're considered less risky, potentially leading to better interest rates and loan terms. 

Here's a more detailed look:

• What it is:

  A credit score is a number that summarizes your credit history, including payment history, the amount of credit you have, and the length of your credit history, according to Lloyds Bank. 
• Why it matters:

  Lenders use it to decide whether to grant you credit and on what terms. A higher score can mean better interest rates, higher loan amounts, and more favorable terms. 
• How it's used:

  It's not just about credit cards and loans. It can also affect your ability to rent an apartment, get certain insurance policies, or even get a job. 
• Is it perfect?

  No, credit scores are not a perfect measure of your financial health. They can be influenced by factors beyond your control, and they may not always accurately reflect your ability to repay a loan. 
• Is it always important?

  While it's generally important for borrowing money, there are situations where a credit score might be less relevant, such as when you're using debt to finance assets that are likely to appreciate in value. 
• How to improve it:

  You can improve your credit score by making regular payments, keeping your credit utilization low, and maintaining a good credit history. 

The response is using American spelling and it gives an answer suitable for Americans who do have an actual credit score, used by lenders and landlords and others.

In the UK, you have a number of credit files with agencies which lenders will look at which will help their decision as to whether to lend you money or not. Lenders do not see your "score", which is a number provided by the agencies only to you, and is solely for the purpose of selling you products to increase your "score". Some people believe this "score" is important, whilst other more sensible people recognise it is what is held on their credit files which is important.

Lloyds Bank are a UK bank, not American

Lloyds Bank are being very misleading. They certainly won't use the credit score generated in their lending decisions.

I appreciate that you believe otherwise.

I don't believe otherwise in fact I have no information on what they do in this regard

What I DO know however is that Lloyds Bank present me with my transunion credit score on a regular basis together with recommendations on how I can improve it.

If nothing else this proves that the mantra often quoted on this forum that lenders don't even see your credit score is untrue as clearly Lloyds do see it

I do not believe a bank would do this on a meaningless number though I suppose anything is possible.

Desmond_Hume

Recommendations like… take out this product with us to improve your score..? Oh…

born_again

Olinda99 said:

not used - not used by lenders maybe but it certainly is used (by my bank for example - they show it to me regularly with suggestions)

not consistent - maybe not across different agencies but certainly within any given credit agency it is consistent if only because they use an algorithm to produce it

gives the opposite to reality - not sure what you mean by this it's a number and therefore reality.

I'm not trying to argue for or against a given agency's credit score I just disagree with the dogma that it is completely useless and should be totally ignored

And AI agrees with me.

Yes Halifax show one, but it does not mean they use it to make lending decisions.

What is your definition then?

Meaningless as it is not used by lenders.