im embarrassed to admit that my knowledge of how credit works is slim. so i have a few questions:
1. why do credit scores only go up a certain amount at a time, but if you don’t make a payment on time, it can plummet 50 points? (just an example)
2. What is a “credit line for cash”, and how does that work?
3. What deeply impacts your credit?
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Credit scores are a numerical value given to the general concept of “How likely is this person to successfully pay you back if you loan them money?”. As a result, they’re necessarily always an estimate. There is no single Credit Score that you have; anyone could assign a value to that concept. There are three organizations that happen to be very popular and influential in terms of evaluating “how likely are people to pay you back?”, so those three scores are the widely used ones. When people talk about a singular Credit Score, they usually mean the average of those three scores.
The formulas are not public information but the general factors are somewhat known. Basically, if you ever miss any payments, you are much more likely to miss at least one more payment in future. That’s why a single missed payment drops your score. Whereas someone who’s paid on time for 2 years is only slightly more likely to keep paying compared to someone who’s paid on time for 1.9 years; that’s why adding just one more on-time payment doesn’t do much.
Credit for cash *likely* refers to a credit line that allows you to take a cash advance. It’s pretty much a direct loan. Notably this is usually at fairly high interest rates – because cash advances have a relatively high rate of default (people not paying them back).
The things that deeply impact your credit are – roughly in order – completely failing to pay a debt (eg bankruptcy), missing payments on a debt, and having a lot more debt than income.
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