Credit score doesn’t determine how much you can borrow, the lender’s interpretation of the score does. They can literally just do this, with no changes to any laws.
Now, if that’s true…
Then excluding medical debt doesn’t do anything because credit score doesn’t matter…
Credit scores are just a metric used by lenders.
A metric to…
Determine how much to loan someone
They decide what it means to them, and the whole point is to avoid offering loans to people who are likely to default on them.
No, the goal is to make money. As much money as possible. You do that by loaning as much as possible. If they default, the lender gets the house and what you paid, an even bigger profit because they can sell the house again.
No don’t just think of it as a single home, approving people for higher mortgages raises the entire housing market, we all pay more, and that makes lenders hundreds of millions of dollars more in interest…
Like, c’mon man, can you really not get this?
I legitimately can’t spell it out any better, I’m sorry, but that was my last hailmary
I legitimately can’t spell it out any better, I’m sorry, but that was my last hailmary
Then you really should take some more classes 🤪
A lender only has so much money, and they can lend that money to anyone. If someone defaults on a loan, the lender experiences a relatively large opportunity cost, as additional funds, effort, and time are required for any repo or garnishing - and in the end, it’s quite rare to actually recoup it all. If they had lent that money to someone else, they could have gotten all the money without any additional cost.
It gets more complicated in the middle - someone who pays extra and on time won’t make nearly as much as someone paying minimums.
As a spectator to this, I have to say I find it pretty amusing how confidently incorrect you are.
Your link is talking about banks having cash on hand, but the person you’re trying to argue with was talking about accounting practices.
A lender has a finite amount of money it can lend. Whether that money is transferred electronically or physically is irrelevant.
A lender uses a credit score as a tool to see whether the person can be trusted to pay back the loan, because people who default usually end up costing the company money.
It’s more of a metric to see if a person has a history of making poor financial decisions rather than a way to see what someone’s disposable income is.
This is why medical debt is a bad metric. It doesn’t give any insight into an individuals financial decisions, because the individual almost never chooses to go into debt.
Even if a person paid off their medical debt through a collections agency, it can still be on their report up to 7 years later.
Now, if that’s true…
Then excluding medical debt doesn’t do anything because credit score doesn’t matter…
A metric to…
Determine how much to loan someone
No, the goal is to make money. As much money as possible. You do that by loaning as much as possible. If they default, the lender gets the house and what you paid, an even bigger profit because they can sell the house again.
No don’t just think of it as a single home, approving people for higher mortgages raises the entire housing market, we all pay more, and that makes lenders hundreds of millions of dollars more in interest…
Like, c’mon man, can you really not get this?
I legitimately can’t spell it out any better, I’m sorry, but that was my last hailmary
Then you really should take some more classes 🤪
A lender only has so much money, and they can lend that money to anyone. If someone defaults on a loan, the lender experiences a relatively large opportunity cost, as additional funds, effort, and time are required for any repo or garnishing - and in the end, it’s quite rare to actually recoup it all. If they had lent that money to someone else, they could have gotten all the money without any additional cost.
It gets more complicated in the middle - someone who pays extra and on time won’t make nearly as much as someone paying minimums.
https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp No they don’t.
Yes, they do. That’s how solvency works.
As a spectator to this, I have to say I find it pretty amusing how confidently incorrect you are.
Your link is talking about banks having cash on hand, but the person you’re trying to argue with was talking about accounting practices.
A lender has a finite amount of money it can lend. Whether that money is transferred electronically or physically is irrelevant.
A lender uses a credit score as a tool to see whether the person can be trusted to pay back the loan, because people who default usually end up costing the company money.
It’s more of a metric to see if a person has a history of making poor financial decisions rather than a way to see what someone’s disposable income is.
This is why medical debt is a bad metric. It doesn’t give any insight into an individuals financial decisions, because the individual almost never chooses to go into debt.
Even if a person paid off their medical debt through a collections agency, it can still be on their report up to 7 years later.