I went down the rabbit hole on credit scores and the current way America handles credit for fun and curiosity. At no point have I found a explanation as to why a hard pull on my credit negatively effects it. I understand how it does lt but whats the WHY behind it? Why does a lender looking at my credit force it to go down? It dosent make sense to me. Again, I understand how it works just not why it works like that, what’s the justification?
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For the same reason everything that negatively effects your credit does; because statistically it creates risk.
Across hundreds of millions of consumers, and billions of data points, the credit agencies actually do a pretty good job at calculating which behaviors increase risk and which decrease risk (people with bad credit hate to hear that). They’re so good at it that they actually even find risk that is politically….undesirable. And have in some cases been prevented by law from using certain factors. That’s the main product credit rating agencies sell: a risk assessment.
If you were my friend and came to me and asked to borrow $1000 but said you’d pay me back in three months, but minutes before you got to my house four of my other friends sent me messages saying “hey Tom just asked me for $1000” it might make me rethink letting you borrow the money, because you sound desperate, and desperate is risky.
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