WriteAndLeft said:
My finances are a mess, but my credit rating is 800. I'm not sure what I am doing right or wrong. I think it is so high because I got a student loan and it automatically is deducted from my bank account, so it is never late and always gets paid regularly.
Timely payments of your debt / credit is a large part, but the amount of debt you have relative to your credit limit, and your performance or history at paying it off, as in reducing the amount, are two other large parts. To me 800+ would seem to make sense. You've got a large debt, the student loan, which is likely substantially less the original amount, which means you are actually eliminating it over time, coupled with a lengthy amount of on time never late payments. It's pretty much everything a creditor would ever want to see.
I can see my credit score swing in the neighborhood of 70-100+ points in a month based on payments and proximity to my limit. If I'm 90% of my credit limit and only making minimum payment (which I setup so I never *miss* a payment) then for the month my score will be borderline between top 600's and basement 700's -- maybe 702 or 698. But if I make a payment significantly reducing or eliminating that debt it'll bounce to 770+ or 800+ the next month. I don't always want to entirely pay off the balance because maintaining on time servicing of debt is a good. Not that a $0 balance every month is a bad thing. It's a **very good** thing. But, instantaneously pay off your debt doesn't establish long term on time payments. A bank might want a downpayment from you first, before extending favorable terms, in that case. Where has a history of on time payments of reducing large debt to $0 might allow for financing the whole amount. (More likely to happen in car financing)
The US has never defaulted on it's debt, as far as I understand, -ever-. Such a ridiculously long term on time repayment history, I would assume, is what allows them to float the trillions of that they do. But, the recent spike to the debt that occurred from assuming the responsibility of all those bad mortgage loans got at least one credit agency to downgrade USA debt from AAA+ to AA+. Ostensibly, meaning they're concerned a bit about the amount of debt in total. But, of course, there is
*a lot*. Let me repeat that,
A lot of politics that goes into the credit rating of entire countries by agencies. Which you can read as, "Maybe these rating that are being given aren't entirely accurate. They likely have been pushed higher or lower due to the aforementioned politics." But, more or less the same basic principles apply. Missing payments or defaulting is very bad.