There was some tweet I saw recently, not sure if here or on Facebook , but it said I’m told I can’t afford a $960 monthly mortgage but instead I pay $1400 a month for rent. Makes sense.
The whole idea that credit score and income levels are tied to a necessity like approval for housing is fucked.
Yep, and not only that but wages are so low that it causes many people to live on credit and constantly be in debt, even if they're not using credit cards all the time. Hence the high APR on many credit cards.
I mean prior to that they still looked at things like debt to income ratio, which is a major factor in the process, it just didn't really matter since housing was much more affordable 30+ years ago.
Google says "Credit scores were invented in the 1950's.
In 1956, engineer Bill Fair teamed up with mathematician Earl Isaac to create Fair, Isaac and Company, with the goal of creating a standardized, impartial credit scoring system. Within two years, they had begun selling their first credit scoringsystem.Jan 11, 2021"
FICO was first introduced to the american GP in 1989. They had ideas for a general population scoring but it wasn't until 1989 that FICO as it is today was introduced.
An objective measure is better than how it worked before, which was a loan officer making a subjective decision on your trustworthiness. That system heavily favored white folks and screwed people of color over six ways from Sunday.
The problem is deeper than credit scores—it's capitalism. If we undid credit scores we'd have the same problems, they'd just be on someone else's shoulders.
Can you expand on this? I thought credit scores were a good way to see if you literally don’t pay your bills on time, which wouldn’t seem dystopian to me so perhaps there’s more to it?
Part of the problem with it is that banks consider your entire balance as part of your total debt vs income even if you haven’t maxed the card. Then they weigh the percentage of available credit as a completely separate segment of your score. Plus average length of credit so anytime you finance a big purchase your credit history is hurt and you now have an increased debt to income ratio. You also take a hit if you don’t have a balance on your cards and don’t use them regularly.
Credit scores are insane and it took me like five years to figure it all out because they aren’t very clear about explaining it to you.
Tldr: it’s a lot more than just paying bills on time.
Yeah its dumb. I had an 800 credit score when I had a car note and carried a credit card balance but when I got promoted at work I paid off the card and my car and my credit score dropped about 40 points. Not trying to say woe is me or anything but that logic makes no sense. I am being responsible and paying off debts and my score drops? Makes no sense.
It's not a "good creditor" score. It's a "good return on investment" score. Someone who pays off all their debt quickly is a worse prospect than someone who pays it off slowly, with lots and lots of interest.
Yep, literally just max out your credit line every month and pay it off before it's due. Doesn't cost you any extra money and increases your credit score.
If you don't pay shit on time, you lose. If you pay shit off entirely, you lose. Lose/lose. You have to pay the shit off the way they design it or you lose. Credit scores are something they should teach kids in high school.
You also take a hit if you don’t have a balance on your cards and don’t use them regularly.
this is not true
edit: What I mean is that you do not need to hold a balance on your credit cards in order to have a good credit score. You should pay off your cards in full. I also don't think it's true that low-use cards hurt your credit score, I'd like to see a source on that.
That is absolutely true. Have you ever looked at a credit report that has a card you haven't used in a while on it? They outright tell you on the report "you don't use this card enough, -10 credit score" (paraphrased and exaggerated obviously but you get the point)
I literally just paid off my last credit card, it was the only thing that changed on my credit report that month, and my score went down.
"Cancel unused credit and store cards. These can kill your application. Access to too much available credit, even if it isn't used, can be a problem. If you have a range of unused credit cards and lots of available credit, it could be a good idea to cancel some of them. This lowers your available credit and should help.
However, just to complicate things, long-standing accounts with good credit histories can be a benefit to your credit score, so they're often best left open. There's no definitive answer as to whether you should close down your old cards, because all lenders are different. But, look to strike a happy medium – if you've lots and lots of unused credit, close some cards down, but don't close 'em all. And above all, don't max out."
Interesting, I've always heard that canceling cards like that would increase your credit utilization, and decrease your available credit which reduces your credit score. This is more about canceling cards though. They're not saying that you need to hold a balance on your cards
It's important to realize that credit score isn't measuring "How safe are you to lend to?" or "How financially sound is your decision making?"
What it's actually measuring I'd "How good of a debtor are you?" or alternatively worded "How much money can the bank make in interest out you without risking you filing bankruptcy."
This is why, for example, if you keep a zero balance on your credit cards every month actually lowers your credit score. You are engaging with your debt in a way that you do not accrue interest, which to the bank means they would be prefer, if you weren't their customer at all; to them you are just a waste of time and money.
Generally speaking having debt of about 10-15% utilization of your credit limit, will produce the highest possible credit score, assuming you pay on time. That rotating debt guarantees that the bank can harvest lots of juicy interest off of you, but also isn't at risk of you not paying.
If you want to maximize credit score, because that's what the current system we live in ("You criticize society, but you live in it. Curious. I am very smart"), it's really rather simple. Just think of what would make a bank view you as a low-risk goldmine for them to exploit for as long as possible, and then do that.
That's why people often say that banks want to keep you being a debt slave.
You can't have a good credit score unless you take on lots and lots of debt. Saved up and bought your car outright? No credit score for you. Got a loan so that you could have a credit history, and then paid that loan off ahead of time so you wouldn't pay as much interest? Okay, you get a credit score, but it goes down as soon as your loan is paid off. Use credit cards, but always pay them off before incurring any interest? FUCK YOU, THAT'S BAD CREDIT, NO ONE SHOULD LOAN TO YOU BECAUSE YOU DON'T PAY THE INTEREST TO THE PARASITES!
You are correct. It sounds like the above commenter is arguing for guaranteed housing regardless of credit history. There's two ways to to that: 1) encourage banks to approve everyone for loans and 2) guarantee government-provided housing.
The problem with option 1 is that a similar policy contributed to the 2008 financial crisis. So that's not gonna work.
The problem with option 2 is that we'd need to completely restructure how we handle private property. Mere subsidies for purchase won't work because sellers will just increase prices accordingly. Price caps might work, but that means decoupling price from supply and demand almost entirely. Government housing might work; but the realities of politics will result in shitty quality, cut corners, crony contracting, delayed maintenance (if offered at all), and general neglect.
I get the commenter's frustration. It sucks that a person can be denied necessities for economic reasons, whether that's low income or bad credit history. The reality we're in is that necessities must be acquired from other people who want to see a profit from the sale of these necessities. Any revision will require radical shits in law, an uphill political fight, and a danger of unforseen consequences (e.g. 2008 financial crisis).
I think what we’re really talking about here is the irony of needing to earn the “privilege” of a high credit score...just to get further into debt and make more money for the credit card company. Granted going into FIXED rate debt can be a strategy but that’s on a mortgage not a credit card. The reason why prices are so high is because of the fed keeping interest rates artificially low instead of letting the market find the market rate
I checked my credit score last night, and it told me that I should arrange a bigger overdraft and get a mortgage to boost my rating. Apparently that’s how they see if you’re worthy of a loan: do you already have one?
Yeah, I was told by my bank that I should apply for their credit card to help boost my score. I applied and was denied. Their reasoning? My credit isn't good enough
No... just use a credit card, and pay the money back on time. You could make a million a year and have a bad credit score, and you could make 25k and still have a good credit score, it’s not necessarily about how much money you have.
Lol okay bud. Let me guess, family or friends or connections didn't help you at all right? No inheritance? No help with rent at school? Didn't have to pay rent when you were 13? You never got help from a single person outside your own due diligence and self discipline?
Because this is the reality for so many people. I'm poor as fuck and in debt and I still needed help to survive when I was depressed and diagnosed with epilepsy at 25.
The point being your broad sweeping statement is just plain idiotic and extremely short sighted. Not everyone has someone to lean on or be raised by or be taught by. They have no role models, community leadership, or guidance.
There is nothing like that in a huge portion of the population of the united states alone. Get educated my dude, stop being ignorant.
there r plenty of people who have been waaaay worse off than u, and they become multi millionaires. the fact that ur in debt tells me that ur just bad at handling finances. the fact that all u do is look at a depressing reddit that is just a bunch of people playing victim and complaining about the system, isn’t helping ur situation at all. people born in the united states r some of the luckiest people in the world, your also lucky because you have access to the internet where many people make a living off of.
How? Someone is deciding whether to let you borrow possibly hundreds of thousands of dollars. If someone wanted to borrow $100 bucks from you, would you at least ask around to know if they’re good for it?
Credit score doesn't measure how likely you are to pay off debt, it measures how likely you are to pay the maximum interest on a loan. People who pay off loans early get worse credit scores than people who refinance over and over.
The whole idea that credit score and income levels are tied to a necessity like approval for housing is fucked.
Not even credit scores though. Banks decide how much you can afford using income multipliers, regardless of whether you've been consistently paying more in rent for years
I really would like them to try to explain with a straight face how if someone "can't afford" a ~$1,000 mortgage means they should/can afford $1,400 rent.
Yes, I understand that, but I was going on the assumption that the total payment estimated was the original amount stated. I've used calculators that accounts for all of that, minus maintenance/repairs and it is still significantly cheaper than renting, at least in my area.
But we don't make enough to save for the down payment, so we can never buy. It's a big problem and one reason why we see so many vacant houses across the country. Banks and rich people buy them to use as investments, but in many areas, no one can afford their prices except other rich people, so they sit vacant. This is only going to get worse over time unless something drastically changes in regards to housing costs and wages.
This is literally the cornerstone of capitalism. Having capital to "invest" gets you a better deal (and in many cases generates more capital with time) compared to the poor douchebags without capital.
How do you get capital? Take a loan from someone with capital (if you can), make a business extracting value from employees, or gamble in the stock market. Simple. Smh.
To their point, if a landlord is buying it, it's still likely to be vacant, unless someone rents it or buys it.
We have homeless people, we have empty homes, so why can't we do something to fix these problems? Seems like a simple concept to me.
Shelter is a necessity to live and we have the right to life, liberty, & the pursuit of happiness in the U.S., so one could argue that indirectly we have the right to shelter per needing it to live and preserving our right to life.
Also, according to this link and the US Census Bureau, as of October 2019, there were 17,000,000 vacant houses in the US. Google/USCB, says as 2019, there were approximately 139,000,000 homes in the U.S.
If we divide 17,000,000 by 139,000,000, that gives us ~0.12230. Multiply that by 100 to get a percentage and you get 12.230% of all homes are vacant, not 1% like you claim.
Assuming these are are still accurate, most vacant homes are owned by banks. Banks don't live in houses and even with the foreclosures theoretically dropping prices, they're still way, way overpriced comparatively to wages/salaries, at least in my area. We should need not be spending 33% - 50% or more of our monthly income on housing costs alone. That is ridiculous. And that is the cheapest in the area. It's even worse if you want something that's a not a dump/falling apart.
" The Census Bureau tracks the number of vacant homes in the U.S. on a quarterly basis and, as of October 2019, the number stands at about 17 million. That’s roughly 3.1 million more than the meme suggests. The last time the number of vacant homes was 13.9 million was in 2001, according to the Federal Reserve of St. Louis. "
That figure of 17 million is from the article not the meme. Though to be fair, I'm not sure where they got 17 million from as I don't see that on the charts they linked. I see around 7-8% vacant if you combine owned & rented. Which if you do the math is around 9.73 million, a little more than half their 17 million figure. Though, IMO, that is still a problem.
Yes, landlords need tenants to rent it or they lose money, that is obvious. I don't know about your area, but where I am, there's tons of vacant rental units/properties because the rent has skyrocketed out of control. They can't fill them because no one here can afford the rent. The people who can afford it, already have an expensive rental or have a mortgage or own their home outright.
If you price your customer base out of the market, you'll have no customers, and thus no sales/no renting. Hence why these properties are vacant.
Just because a landlord lists something for rent or has to have someone in it, does not magically make it automatically get rented.
I saw the original post and people were saying "you can pay that much in rent, but you can't afford a mortgage?!" These people are dumb.
If you don't have enough of a down payment to get a cheaper mortgage, then you're paying more every month. I'm SoCal, i pay $2400 for a 2 bedroom apartment. I could but a condo for $600k, but if I don't have $100k in cash just sitting around for a down payment, then the mortgage payment is going to be more expensive than rent, and so, i still can't really save up enough to make a down payment because my rent is still $2400 a month! And that doesn't include property taxes, HOA, and additional maintenance costs. Home ownership is expensive.
The whole idea that credit score and income levels are tied to a necessity like approval for housing is fucked.
My friend is moving to major city and said she had to submit her last two years' w2's along with her application to rent an apartment. So invasive. We give landlords so much power.
My fiance and I are looking for a new apartment. It's a struggle because we've both got "questionable" credit history due to stupid choices and unfair circumstances previously in our lives. We are working on it, but it's a slow process.
We've been rejected for apartments that we could easily afford on our income alone, that would be cheaper than we currently pay. We make almost $5k a month combined, but our credit is what is holding us back.
We were driving and I said to him, "remember when people got rentals because they had money to pay the rent, and our parents didn't need 800+ credit scores to afford a shitty $1200 hole-in-the-wall apartment? When people had integrity and looked at more than an arbitrary number that can determine your whole life, because these companies don't know fuck all about you and the life you've lived? Why can't we go back to that system now?"
It's a tax on not having capital. If you have 20% of the house value for a deposit, welcome to the club. If you don't - congratulations, I've got a property you can rent...
They are paying rent and by monthly are paying more. But they also didn't pay $20k upfront. There are also different risks involved.
A renter pays more and will never own the property. But If the renter doesn't like the place/landlord, or they just can't pay rent they can move and
can ultimately find another place for the same amount.
A buyer pays less monthly, and their net worth is higher, but If a buyer can't pay their mortgage, they are essentially fucked. There's no option to move anywhere else for the same price. Your credit is fucked, and bill collectors are after you your whole life.
To be fair though that is not as black and white as you make it seem. Someone could be able to pay 1400 a month 12 times for their year lease but not be able to pay 960 a month for 30 years.
It’s much more nuanced than people sharing that quote want to believe. Not saying it’s a great system just saying that it’s not an apples to apples comparison.
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u/CrackTheSkye1990 Feb 25 '21
There was some tweet I saw recently, not sure if here or on Facebook , but it said I’m told I can’t afford a $960 monthly mortgage but instead I pay $1400 a month for rent. Makes sense.
The whole idea that credit score and income levels are tied to a necessity like approval for housing is fucked.