Does high credit score mean financial discipline?
By Anish Asokan
@RevivedWarrior (3853)
India
September 26, 2024 12:25pm CST
Credit scores are used in most countries as a measure of individual’s past financial behaviour especially around the repaying the debts. It does give some insight to person’s past credit use.
However, I am not sure if credit score is reflecting the long-term financial behaviour accurately. Some of my friends do not own a credit card and often make payments in cash or debit card. Surprisingly, they have a low credit score although they are managing well within their means, at least financially. Credit scores also do not consider savings or assets of the individual.
I know a person who have a better credit score than me. Surprisingly, he is financially irresponsible but his payment history is good. He spends a lot and saves less. I do not believe credit score can be used a tool to determine the financial responsibility of a person.
Perhaps a more holistic view is required to understand the financial behaviour of a person. What do you think?
6 people like this
6 responses
@porwest (112717)
• United States
27 Sep 24
It means people can pay bills well. Not necessarily that they have good financial discipline. Of course, it is important to pay bills well, but even people with high balances can have a good credit score, and carrying a lot of debt is of course, not a sign of good financial discipline.
Consider this for a moment. If I had a million dollars in the bank and paid cash for everything and carried no debt at all, I'd have a HORRIBLE credit score. But I would still probably be more credit worthy than someone with a score of 800.
1 person likes this
@porwest (112717)
• United States
3 Oct 24
@RevivedWarrior It is still helpful to HAVE a good credit score. But most of it is really based on BS. It doesn't mean you have money. lol
1 person likes this
@RevivedWarrior (3853)
• India
27 Sep 24
Spot on- thats the challenge with current credit system. Some adjustments required. Thanks for sharing!
@Shavkat (141906)
• Philippines
28 Sep 24
@RevivedWarrior I agree with you. I have a friend who maxed out his credit crad and his mother paid them all for him. That is the sad part.
1 person likes this
@RevivedWarrior (3853)
• India
27 Sep 24
Holding a credit card and using it properly is really important. Thanks for sharing!
@snowy22315 (208746)
• United States
26 Sep 24
I think it means you pay your bills, not that you are necessarily fiscally responsible.
1 person likes this
@RevivedWarrior (3853)
• India
27 Sep 24
Exactly - you are paying what you owe but not financially wizard. Thanks for sharing!
@allknowing (153544)
• India
27 Sep 24
Th parameterss that lead to a credit score may not suit all specially those who make cash and debit card payments such as me. Anyway I am not someone who would take loans and I do not own a credit card
1 person likes this
@RevivedWarrior (3853)
• India
27 Sep 24
Well, the credit scoring needs to be adjusted to accomodate paymenst through cash and debit card. Thanks for sharing!
@kaylachan (84699)
• Daytona Beach, Florida
26 Sep 24
Depends on the person. Credit scores are used to determine how well a person manages their credit. Not just credit cards, but reoccouring payments such as rent, utilities phone (in some cases) credit cards, loans such as home, car, personal. When applying for a loan a credit score is used to help decide if the person is responsible enough to pay back the loan, and in some cases, what kind of interest rate. If you need a loan for any reason, it's benifical to have a healthy credit score.
1 person likes this
@RevivedWarrior (3853)
• India
27 Sep 24
Totally agreed, credit score is all about a person managing his credit and how he has dealth with debts. Thanks for sharing!
@kaylachan (84699)
• Daytona Beach, Florida
27 Sep 24
@RevivedWarrior Not a problem.
1 person likes this
@luisadannointed (11842)
• Philippines
30 Sep 24
To some banks they need it, credit score does not really reflecting on how they spend more, but how they can really handle their money more, specially on where you invest it. Through that banks will know if a person is credible to get a loan.
1 person likes this
@RevivedWarrior (3853)
• India
1 Oct 24
Exactly - it focuses on repayment behaviour and nothing more. Thanks for sharing!
