59

I think the heart of the matter is that you're misinterpreting both what comprises a credit score in the US, and how they are used. This is evident in your second to last paragraph: A "credit score" in my country limits the extra debt you can take if you are already in debt. In The U.S. though, it seems that the "credit score" allows you to get even more ...


42

Can somehow add a layman explanation on how Americans can be so much in debt but have good "credit score" that allows them to borrow even more? A credit score measures the risk of not making monthly payments. That's all. Nothing more. If a creditor thinks you're a larger risk, they'll likely just demand a higher interest rate, or some form of collateral ...


26

One aspect that may not be obvious from outside the US is the prevalence of medical debt. A quick Google shows that about 2/3rds of bankruptcies are due to medical issues. The easiest way to end up $100k in debt is to find out you have cancer. While putting people into crippling debt because of medical issues is messed up, denying life-saving care to people ...


20

How can you get more loans when the ones you already have are way over what you can ever pay back? Credit scores don't exist to help the consumer; the exist to help the lender. A person who will never pay back their loans can be a fantastic investment. The poor debtor still has to eat, so they will get a job. The court system will then let you garnish ...


14

In the U.S. though, I see people making 20K an year but have credit card debt of 90K. How is this possible? You don't see that. I don't know what sort of fear-mongering sympathy extracting nonsense you've seen on the internet, it is not common at all for someone earning $20k to have $90k of credit card debt. In fact, at $20k of income a normal limit would ...


9

One part of the reason is that bad credit scores do not stop people from getting loans, it just means that they'll pay higher interest rates. At the lower end, they may resort to predatory lenders. From the point of view of such a lender, having the loan repaid is almost the last thing they want. They'd much prefer you to just keep paying the (very high) ...


8

Shouldn't the “credit score” prevent Americans from going deeper and deeper into personal debt? The credit score is often used as a indicator of financial risk as @RonJohn stated. Here is where it gets perverted in US Financial... Banks know low income folks and others with low credit scores are riskier, so they still make the loans but at a higher rate. ...


3

You cannot directly check if a company reports to credit bureaus, though you can attempt to infer if they are likely to do so. In general, the more units the company manages, the more likely they are to report credit history. If an owner/manager has less than 100 units that they handle, it will generally not be automatic, as the credit bureaus tend to have ...


2

I have moved recently to the US from Europe. The simplest answer I can think of is the ability of the Credit companies to trap you further by giving loans at "higher interest" rate. For example, it is common to see Ads like "Have bad credit score? Don't worry! we have loan for you". Apparently such a loan is given at a significantly higher interest rate ...


2

Understanding that not everything mentioned might apply to you, here's what I'd do, in this order: Put $1000 in an 2% Savings Account Emergency Fund. Fund your 401(k) up to the Company Match. (Otherwise, you're cutting your pay.) Learn where all your money goes. (Not knowing this is how we slowly drowned in CC debt without buying lots of extravagant stuff....


2

Legally many things could happen, the lender could sue you, sell the debt to a collections agency (Possibly aggregated with many other small debts). They could call, mail or otherwise bother you to pay or they could report you to credit agencies. However all these actions cost the lender expenses which they may or may not be able to recover from you. In the ...


2

Utilization is a snapshot and has no memory. It does impact your credit score but your score only matters if you are shopping to get a loan or another credit card or line of credit, etc. If your credit limit is $2,000 and you spend $2,000 and it is reported that your credit is at 100%, that will have some impact on your score. If you then pay it off and ...


2

In the US, a car lease is pretty much the same as a car loan for credit scoring purposes. Since payment history is the largest contributing factor to your credit score, timely lease payments are important.


1

I personally am waiting for the "data breach of the data breach response" news to hit - I'm sure it will some day :) The first question is one of trust. Why would one trust companies, which are often hand-picked by companies that could not protect your data in the first place, to have access to more of your data than they would otherwise have (as with ...


1

My monthly minimum payment is under $200, and my employer contributes $200 on my loans each month. Is your employer contribution based upon your monthly minimum or will it always be $200 no matter what your monthly minimum is? How long do you plan to stay at your employer? Scenario 1 Employer contribution is always $200: I would just keep the student ...


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