Interesting credit score info....

Community Leader
Registered: 08-25-2006
Interesting credit score info....
4
Mon, 04-07-2014 - 1:38pm

For fun I attached a snip from Credit Karma.  Most of you probably already know this, but I found the grading scale interesting based on Percent of Credit utilized.  

Basically, I currently have a score of a D, as I pay it off it will go up to a B, then an A, and then from an A it will go down to a C.  No wonder people think it is okay to carry debt.  This grade is based only on credit utilization (not the entire score).  But still...geesh!

Serenity

Serenity
iVillage Member
Registered: 04-16-2008
Tue, 04-08-2014 - 3:03pm

No wonder people think it is okay to carry debt.  This grade is based only on credit utilization (not the entire score).  But still...geesh!

This is not at all true.  Credit Karma breaks down the credit utilization scores as follow:

60 - 100% - D

41 - 60% - C

21 - 40% - B

1 - 20% - A

0%  - C

Furthermore, credit utilization is not the same as debt.  It is a snap shot of the balance on your credit cards at a particular time. 

For example, if I charge $1000 for a plane ticket on my Visa today and immediately go to electronic bill pay at my bank and pay Visa $1000, and if Credit Karma were to look at my account today, it will show a credit utilization of 2% (because it takes a day or two for the funds from my bank to clear). 

I pay off the entire balance on my credit cards at each billing cycle and do not carry debt, but that does not mean I have 0% credit utilization.

Community Leader
Registered: 08-25-2006
Thu, 04-10-2014 - 11:58am

My example was based on my goal to pay off my CC and not use it.

Serenity

Serenity
iVillage Member
Registered: 04-16-2008
Thu, 04-10-2014 - 5:54pm

"My example was based on my goal to pay off my CC and not use it".

A personal preferencce, but that doesn't change the facts that:

1.  Credit utilization does not equal debt.

2.  A person can have no credit cards and still tons of debt, and vice versa.

3.  The credit rating system is not created for the benefit of the consumers, rather, for lenders to maximize return and minimize risks.  It is never a good idea to equate higher credit scores directly with one's financial health, or think "it is OK to carry debt".


Community Leader
Registered: 08-25-2006
Thu, 04-10-2014 - 7:21pm

Ummm...I get all of that and I agree.  I just thought the grading scale for utilization was interesting.  That's all.  

Kiss

Serenity