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> For a period I had no FICO score, yet I was able to secure a loan from a Credit Union.

The credit union was content to use its own capital and hold your loan to maturity on its books. (I'm presuming you were probably a banking customer of the credit union, though I realize not necessarily.)

Non-credit union lenders though most often want to either sell your loan to investors or pledge it as collateral to borrow money for themselves, and for that they need a FICO.

> The score from what I have gathered when I learn really rewards those who remain in debt and pay substantial interest, not the frugal and financially stable (check to check is not financially stable). Basically encouraging to keep self in debt just at the edge of financial disaster's precipice.

That's not really true. Using a credit card for most of your expenses and paying it off in full every month is actually a great boost to your credit score. It's both an indication that you live within your means and you honor your agreements.

Meanwhile paying down my debt faster than I'm supposed to often leads to my score dropping a few points. I've also lost dozens of points for closing rarely used accounts to reduce my financial attack surface. It's all bullshit. I was in the mid 700's while struggling my ass off with debt only to drop into the high 600's for cleaning up my debt habits.

Revolving accounts like credit cards using them each month and then paying them off is good for your score, fixed accounts like mortgages, car loans, etc, when you pay them down/off, the amount of credit you have drops with the balance, and once it is paid off the account is closed, so it actually drops your score. If you don't use a credit card (and increasingly for me, if I don't use a card enough) the issuer will likely close the account or reduce your available credit, which will reduce your credit score...

So yeah, it is a pain in the rear to maintain a very high credit score.

Most government securitized backed mortgage loans (which has 70% of the market) require a credit pull. Private or direct lending can have a different set of lending standards. From FNMA...

https://selling-guide.fanniemae.com/sel/b3-5.1-01/general-re...

>Credit scores are required for most loans purchased or securitized by Fannie Mae. The classic FICO credit score is produced from software developed by Fair Isaac Corporation and is available from the three major credit repositories. Fannie Mae requires the following versions of the classic FICO score for both DU and manually underwritten mortgage loans:

    Equifax Beacon® 5.0;

    Experian®/Fair Isaac Risk Model V2SM; and

    TransUnion FICO® Risk Score, Classic 04.

>The score from what I have gathered when I learn really rewards those who remain in debt and pay substantial interest,

Way back when, getting my first credit card was difficult--although there are a lot more credit options today.

But, at some point, you absolutely do not need to be in debt to have a good credit score. I guess technically, if you use credit cards and pay them off every month without paying any interest, you're in debt all the time but that's not what most people mean by "debt."

I guess from a certain point of view you're right, a credit score is a list of all the debts you've had an how you've paid them back.

So somebody with no debt is "unknown", rather than the expected "good".

In Finland we don't have credit scores, instead we allow looking up defaults. Which seems like a reasonably sane approach - known-bad borrowers find it hard to repeat that behaviour, and somebody with no history of taking loans/debts isn't penalized.

> In Finland we don't have credit scores, instead we allow looking up defaults.

There is also the newly established The Positive credit register which contains list of all of your debts. Lenders must pull (started in April 2024) the information from there when they are making the decision to grant or deny the request. The report also contains your income for past 12 months (I assume those reported to Income Register). I'm not sure if there is regulation on if they actually need to use the data or not.

Right. There is certainly a component of risk in the models but there’s also “how valuable a credit consumer are you”.

Which is why things like closing accounts or paying loans early actually hurt your score. CRAs and their advocates say “we lost a datapoint so our uncertainty increases”, acting as if that historical data has no value.

When I was applying for a mortgage and my credit was as “clean” as it has been (balances, accounts, etc.) Verizon filed a collection over what was a fraudulent account. Score dropped 140 points. In the course of three business days that collection was deleted, and my score went back up… 50 points.

Multiple factors, I know, but that also makes me think that even some of those deleted trade lines and delinquencies and others are still floating around and factoring in.

A good credit union will bring loans to the board of trustees and often approve them when no Bank will.

For most individuals, building a relationship with a local credit union is an asset in and of itself.

> This cartel will never be broken up. Too much money goes into the politicians pockets to move for break-up.

They said this about Bell Telephone at one time too.