conversation: User (aBoglehead): "The credit score are probably the most oft-addressed topic in /r/personalfinance.  It shouldn't be.  Building a good credit score is simple.  A few simple truths you should keep in mind:\n\n**Utilization is not worth worrying about.**  It has no history, can be changed in a month, and isn't the biggest factor in your credit score anyways.  Stop worrying about it.\n\n**Extending loans for the sake of improving your credit score is stupid.**  Choose to extend a loan longer than you otherwise would to use your money more effectively (for example, if you have a very low interest loan you might want to make an IRA contribution instead where you hope to get higher returns), not because you think it will improve your credit score.  \n\n**It doesn't matter what your credit score is if the rest of your finances are a mess.**  Good credit scores come from sound finances, not the other way around.\n\n**It's fine to leave unused accounts open as long as you aren't being charged.**  This could include old credit cards, lines of credit from a bank, or whatever else.  Just make sure you verify you aren't being charged a fee to do so.\n\n**Never carry a credit card balance.**  Always pay your credit card bills in full, every month.  If you can't afford to pay off your credit card bill in full, that is a sign you cannot afford whatever it is you charged to it.\n\nEveryone has lots more to worry about in life besides their credit score.  Focus on what's important in your financial life and a good credit score will follow.\n\nI hope everyone has a Happy, debt-free holiday season.  Let's all make an effort in the new year to unwrap people from around FICO's little finger even just a little bit, shall we?"
  Self: "Amen. The obsession with one's FICO score is not healthy. "
  User (aBoglehead): "Nor productive."
  zz_z (zz_z): "Going from 650 to 760+ can lower your mortgage rate by a whole percentage point, saving you tens of thousands of dollars when you buy a home.\n\nIf you plan on buying a home in the next 5 years you should absolutely be concerned about your credit rating. For homes in my price range the difference in interest between a high score and low score is around $100,000. That seems pretty productive to me. I'm not obsessed or anything, but I do think about it."
  MargaretThrasher (MargaretThrasher): "I work in a bank in lending. The lending market is so damn competitive that you're absolutely crazy if you think a better score means you get a better rate. If you're above the cutoff threshold for credit scores, you get a loan. If you're not, you don't. Banks are in the business of making money and based on today's market, they're not going to sacrifice profit just because your credit score is great. "
  dtiftw (dtiftw): "So you don't have credit tiers? Everyone gets the same rate?\n\nI'd love to talk to your risk department. Because either you're full of it or your back office is staffed by orangutans."
  MargaretThrasher (MargaretThrasher): "I work in a small bank with very strict underwriting standards. Typically the rate/term matches what is appropriate for the type of collateral. We have a minimum credit score threshold which as long as we stick to that and don't engage in any predatory/discriminatory types of lending, we're good with the examiners. \n\nRisk analysis goes far beyond credit score though. We orangutans look at personal cash flow analyses based on an individual's past three years of tax returns, debt profile based on their credit report and pfs, any secondary collateral that is reasonable to take, and a complete market analysis of the area in which the property (or business) is located. \n\nCredit score is more of a gatekeeper for us rather than the decision maker. \n\nAnd no, rates are negotiable. There's no set rate per the individual. The rate decision is based on cost of funds, potential value of the customer in terms of deposits/future business, rates of the competition, etc. All proposed rates are subject to several levels of internal approval and external audit. \n\nAlso, as orangutans, we're most interested in whether or not the customers are willing to eat the bugs out of our coats.  "
  