I’ve been reading lately both about American history and the establishment of the National Bank, and the loans tried to be negotiated with the Dutch banks during the Independence War. At the same time, I’ve read a lot of folks having their Credit score lowered because of paying off either their cars or their student loans. Shouldn’t it be better if you didn’t ave any loans at all?
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So in a modern sense fundamentally one of the core functions of credit is the ability to produce money without causing inflation. If a government just prints money the result is rapid inflation but if you create debt then the net amount of money added to the economy is technically 0.
More historically and for the individual person the advantage of debt is the ability to immediately gain access to funds without having to go through the trouble of directly raising those funds. For many nations raising taxes was a risky prospect that could lead to rebellions or otherwise so if you suddenly needed a large volume of cash such as for war that was a much easier and safer bet.
Credit score on the other hand is simply a measure of the likelihood of you being able to manage payments on debt. The reason it gets weird is because credit score focusses very very heavily on pure Data in bulk. So any sign or behaviour or variable that suggests you might be more reliable at paying off debt will results in a higher credit score and vice versa. Any more immediate logic isn’t particularly important ie the average age of credit accounts you have correlates strongly with reliability, so if you close a really old credit card and this lowers your average age it will cause your score to drop even though it doesn’t seem like getting rid of an unused card should have any impact.
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