The comment reflects a widely shared misconception about the true objective of “risk-based pricing”. The system actually requires creating the misinformation that allows for making borrowers who should get lower rates agree to pay the higher rates that cover the losses of those that should not have been given credit… at least at the higher rates.

John, Paul and Peter, because of FICO have to pay high interest. John, though he might have been able to do so at lower rates, is not able to service the debt and loses. Paul, utterly responsible, services it, barely, and Peter who is in this group because no ones no why meets the payments with ease. Question: Any winners?

John should for a starter not have been given the credit, at least not at the high rate, and both Paul and Peter, having been able to service the debt at high rates evidenced de facto they merited lower rates. Answer: No winners! Except of course those who are not to be named!

How libertarians can shut up about the financial information cartels that chain the markets to neo-non-transparent-regulations, I have never understood.

How progressives can shut up about the discrimination implicit in the system and that surely introduces more inequality in the societies than what they love to attribute to globalization, I have never understood.

But it can indeed be arbitrarily decided by FICO and given that they are many more banks than one FICO, the arbitrary decision of the banks mights be preferable than the one single decision of a FICO.

What amazes me is that among so many intelligent people discussing the deregulated financial markets there is so little discussion on how information cartels like the credit rating agencies have de-facto encroached on such liberty.

I will now commence rioting.

Posted by: Methinks | Aug 15, 2008 2:08:18 PM

No thanks, we had enough of that with those WTO freaks in 1999.

Are you calling my claim that I pay off my credit card balances monthly "satire"?

I will now commence rioting.

That would be fantastic, but that's not what happens. Credit, and financial services in general, is so heavily regulated that fully informed open choice almost never happens. This is also true in the mortgage area, with massive rules & regs which distort incentives and can actually lead to less disclosure.

Of course, it also helps to be well-connected Democrat fundraisers…

The credit card companies must hate that. They hate it so much that they hired computer programmers to write a tool so I could sign up and automatically pay them in full every month with an EFT from my bank account. I don't have to do anything, they get paid in full, just in time, every month and they accept full responsibility in case they don't get the EFT on time any month due to a programming error on their part [which has happened once].

Their tool offers three options: minimum payment, minimum + an amount you specify [but never more than the balance, of course] or full payment.

-dk

Like some of the other posters, I also pay my balances in full every month and have a very high FICO score. I also haven't seen any additional charges. The competition for credit card customers is pretty heated. Also, they do make money even if you pay off your balances in fully every month. They make money from your purchases because they charge the retailer a convenience fee for every purchase.

Like some of the other posters, I also pay my balances in full every month and have a very high FICO score. I also haven't seen any additional charges. The competition for credit card customers is pretty heated. Also, they do make money even if you pay off your balances in fully every month. They make money from your purchases because they charge the retailer a convenience fee for every purchase.

So you’re in favor of regulated credit. Period. I don’t care what your conditions and stipulations are, you invalidated yourself with this statement, which was your opening salvo.

You still have no clue whatsoever about economics.
Posted by: Mesa Econoguy

OK let's get rid of the requirement for a a big red stamp. They can still use the big red stamp if they think it will help them but it will be optional. Everyone will recognize them by the lack of a big blue stamp required of the regulated credit lenders. But sure we can have give them absolutely no disclosure requirements as you might wish.

The first condition of getting NO government support is NOT a regulation. So there you have it. A system that can run completely on its own and unregulated but alongside a government regulated system. People would have a choice of which type of institutions they would do business with and that seems a reasonable compromise to me.

A component of your FICO score is ratio of the amount of debt relative to your credit limit. To the extent that paying off your account every month helps keep this number down, paying off does help your credit limit.

But, I believe that measure uses the 'high water' mark — so, if you have a limit of $10,000 on a card and regularly go to $9,000 on it, every month, even if you pay it off in full, you'll still get dinged.

Pay at least the minimum, of course.

Satire is a fine art on this site, which SHALL CONTINUE, given the Magyar victory over the Woverhampton Wanderers, 3-nil.

I personally am increasing my leverage as we speak, mostly via overseas investments in Cambodian muffler shops.

David you have gotten your facts completely wrong again. Are you sure you are not Martin?

Paying off your balance on time every month is a very, very, very bad idea. It will lower your credit rating and make it harder for you to get credit in the future.

I use United airlines visa card. I get 1 UA mile for every dollar I spend using that card. I pay my balance every month. I have a very good credit score. FICO score is not arbitrarily decided by the bank.

It is true that banks don't make much money by lending to people who pay the full balance every month. But, my bank ( JP MOrgan chase ) keep increasing my credit balance all the time, even though I use less than 10% of my available credit every month.

Paying off your balance on time every month is a very, very, very bad idea. It will lower your credit rating and make it harder for you to get credit in the future. You see, banks don't make very much money off of people like you. You are a liability to them that the annual fee does little to remedy. Sooner or later, they'll show you the door or add little additional charges to make you profitable to them or to encourage you to get someone elses' card. Plus, your paying off every month's balance demonstrates to the credit rating companies that you do not have sufficient experience with managing credit and that will lower your credit rating. You are far better off in a lot of ways using a debit card if you do pay your bills off every month.