Most people get around the identity theft problem by having a credit score that nobody wants to steal.

In the past 6 months I've gotten 2 notifications from CC companies that my accounts are now closed bec I haven't used the cards in years. I'm told that these closings lower credit scores so mine must be in the toilet. Luckily, I don't need any credit beyond the 2 cards that I still have.

I don't think closing credit cards lower your scores. Opening cards will lower your score for sure.

Looking at your credit score will lower your score, and I think that's a pretty good indicator of how well designed this system is.

I think both of these are false.

Closing credit cards lowers your credit limit, which can increase your debt-to-credit ratio, which can lower your score.

Looking at your own credit score doesn't lower your score, but some credit inquiries can.

Edit: I guess there were three statements. The third one is true. Opening a new credit card can lower your score by reducing the average age of your credit history and adds an inquiry that can negatively impact your credit score.

If you're concerned about identity theft and you have no reason to think you'll need to open a new credit card/take out a loan any time soon, you can also freeze your credit report. But there are some potential drawbacks, such as the fact that it's free to freeze it, but it costs money to unfreeze it, not to mention the self-imposed-inconvenience factor.

https://www.huffingtonpost.com/jason...b_3193577.html

The problem w/ freezing your own credit is that you have to remember to do it every three months. What LifeLock initially did was simply charge ppl to file fraud alerts for them and they got knocked severely for charging for what was free for something anyone could do. And, iirc, they were sued by the credit agencies for the huge pita they were going through bec LifeLock kept sending in the fraud alert requests. But, w/e, they changed their method and have saved me twice now.

This also isn't true. If you put a fraud report on your credit, it needs to be renewed every three months. A credit freeze is something different.

Some states have a 7 year limit on freezes, but others are frozen until you unfreeze it.

When I was buying a house, friends in the financial industry specifically said to close any credit cards we didn't use but keep any we did.

I don't even pretend to know what the formula is. Perhaps there's a ceiling above which or a floor below which it doesn't matter any more or starts mattering. Or things are different now - or things were different then (we were bargain hunting while prices were crashing so it was a bit unusual).

Shrug.

This may sound strange, but I tend to be particularly distrustful of "friends in the financial industry" when it comes to financial advice. A lot of them are merely reciting information that they were told at some training, and that training may or may not have been completely truthful information. People are trained to say/do things that are good for the company, not necessarily things that are good for the customer.

The same thing with people in the insurance industry. People who sell whole life insurance actually believe it's a good thing for people to spend money on.

You won't find an exact formula anywhere, but you can know the categories:

https://www.investopedia.com/ask/ans...alculation.asp

I can see that maybe if you close a newer credit card with a low line of credit, you'll be increasing your average length of credit. So if you've got some small credit card that you opened because of some promotional at a department store a few years but you never use it... that could possibly help.

That being said, if you had a LOT of credit cards, it's possible that closing a couple isn't going to do much. Going from 9 to 7 probably isn't a big deal. But going from 3 to 1 can be. A lot of this has to do with averages of things, so as your N gets smaller, the size of the impact of changes increases. This could a type of floor/ceiling effect.

Oh, ok.

I have $1100 in available credit because I don't spend money and I'm a grad student.

I also have zero debt.

Winning or losing?

I will let you decide.

It's kind of funny that you won't trust friends in the financial industry, but you'll trust a wiki.

The whole point of friendship is to gave people more loyal to you than to their employer. If you're talking about not trusting acquaintances in the industry, absolutely. If you're talking about not trusting friends, you've got a funny definition of friends.

Opaque processes like this are exactly when you want to reach out to friends over public information. And maybe the advice I received was specific to my situation - again, the advantage of friendship over acquaintanceship is that they knew my financial situation.

It's not that different from asking for poker advice. There's a huge difference between "I should raise JTs because it's in the starting hand chart" and "DeathDonkey said I should raise JTs in this spot because ..." You could probably put in a bunch of work and get as good as DeathDonkey and answer the question for yourself, but if you're not going to be answering it repeatedly - and asking for a loan big enough for your credit score to matter is like a single digit number in a lifetime thing - the best way is to either ask a friend or overpay someone to give you the answer.

I can trust it doesn't over-declare what it knows. I can also verify the information in several other independent places.

It's not about loyalty. They believe they're telling you good information and they want what's best for you. It's also just the type of information they would also tell their customers (who they also want to do good for).

But that doesn't mean that they've done a ton of independent research on it and know that what they're telling you is actually what's best for you and your specific situation.

That's fair. The advice could definitely have been specific to your situation. If they looked at your credit report and then gave you advice about how to improve your credit score, then I would say it's probably trustworthy. If you asked them for advice, and they asked you to give them some information about your current credit situation and then gave you advice, that's probably also good.

But if you asked them for advice, and they simply told you to close some credit cards to raise your credit score... that's questionable advice at best. There's too much information missing for that advice to be knowingly good. (It could have been accidentally good.)

I'm kind of meh on this analogy, but whatever. I get what you're saying. I'll stick with the insurance analogy. There are people who sell whole life insurance that really do believe that it's a good investment. It's not because they're being deceptive about it, or because they're not actually thinking with your best interests in mind. They could probably present reasons to you as to why you should get it.

But their honest belief does not mean that it's really a good idea.

Edit: Or maybe investing in actively managed mutual funds?

Who do you think writes Wiki pages? It all comes from the same source, often cut and paste (do phrase searches to see the overlap).

Okay. Let's do that. I'll start by pointing out that your use of the word "good investment" to characterize peoples' good intentions stokes my suspicions. Only people with bad intentions would ever characterize insurance as an investment - insurance in any form is inherently EV-.

It is, however, CE+ for many.

Sure, there are unscrupulous salesmen out there who are peddling high premium life insurance to seniors who in turn are gambling they're going to die sooner than actuaries say. But that these people exist doesn't mean there aren't young parents who have really good reasons to have life insurance, plus really good salespeople who will help them find the appropriate product.

Looking at insurance in broader terms, I would say that there are probably as many ill-informed people who sneer at blackjack insurance as a sucker's bet as there are who take it based on a feeling. You absolutely want to take blackjack insurance sometimes - definitely when it's EV+ and sometimes when it's EV-, and if you either accept it blindly or decline it blindly, you're not getting very good information.

If you're in grad school and not in debt, that's winning as far as I'm concerned. You don't need credit until later.

I think my credit limit was $500 for a long time. My bank account was larger than my credit limit even after I got a job - I had to make two trips to the jewelry store to buy an engagement ring, I didn't have enough credit but I had the money straight up so I had to go home and get a paper check.

You're right in general, but in this specific case I'm very certain I know what I'm talking about and that this isn't bogus information.

From FICO itself:

https://www.myfico.com/credit-educat...-credit-score/



Also:

https://www.cnbc.com/id/36737279

http://time.com/money/collection-pos...-credit-score/

So yes, I linked to investopedia because it was what came up. And no, I don't have a problem linking to it because I have multiple sources to back up the statement.

Not really. There are people who mean well, but are not knowledgeable enough to carefully parse their words. Also, whole life insurance policies gain a certain type of cash value that can be considered as an "investment" even if it really isn't one.

CE? Cash equity? I'm not sure what you mean here.

Why would you take blackjack insurance when it's -EV? And how often is it *actually* +EV? Very, very rarely.

Certainty Equivalent. Let's say there's a pool of 1,000,000 people. 999,999 will be healthy and 1 will be inflicted with a rare medical issue that will cost $1,000,000.

The EV of the pool is -$1, but depending on the ability of each individual to absorb $1,000,000, it is almost always "worth it" for everyone to pay a little more than $1 into a pool and let the insurance company take a small cut in order to reduce the uncertainty for everyone.

If you're the sole earner in a family with a lot of dependents and nobody else who has your earning potential, the loss of your life (however improbable) ends up being devastating for your family, and you can rationally pay more than your EV for the certainty.

Same reason.

Let's start with a simple example, heads you win 10c, tails you lose 5c, or you can take 1c in certain winnings. EV = 2.5c, so you flip the coin and everyone who takes the certain money is stupid, right?

Not so fast - multiply the stakes by 100,000x and see what happens. Heads you win $10,000, tails you lose $5,000, or you can take $1,000. Depending on your ability to eat a few tails flips, you may rationally take the $1,000 even though it leaves over half of your expected value on the table.

Blackjack insurance is the same. It's EV+ a tiny fraction of the time, but even when it's EV-, it's possible that the amount of money you have at risk - say a large bet at TC +3.5 (insurance becomes positive at +4, IIRC) - is worth locking up rather than gambling for a little more.

The math is complicated. And it depends on your bankroll and risk tolerance and a bunch of other assumptions. And sometimes the answer is take insurance and other times the answe is don't take it, but what is definitely true is that if you always or never take insurance, there's a near certain chance you don't know as much as you think.

And of course, I say "near certain" instead of certain because I can think of one example where you'd always take insurance - by Wonging in and out at TC +4, often as the gorilla - and one example where you'd never take it, as the spotter for the gorilla. In that case, both players are playing optimally even while doing the opposite thing.

I'm just pointing out that the self-made analysts are often grossly overestimating their ability to analyze things past some superficial level, and that often the easiest way to arrive at the best answer is to ask someone who knows (despite all the pitfalls of that).

Thanks. I agree 100% with you on that. You're looking more at risk mitigation than EV, and you're talking about life insurance in general and not specifically whole life insurance policies. Not getting whole life insurance is correct for a HUGE portion of the population.

Conceptually, I can see that it's possible, but it seems that you wouldn't do it in practice unless you were playing substantially under-rolled.

I also agree with this. Dunning-Kruger and all that. But what you're describing also fits in very well with being skeptical of "the friend in financial services" as a source for credit advice. Unless they're working specifically with the part of financial services that deals with managing credit scores, they could think they know more than they do. Especially if they're remembering something they once heard at a training or just what they've heard other people say around the office.

[nit]The EV of the pool is 0. There's $1,000,000 going into the pool and $1,000,000 coming out of it.[/nit]

Only if the insurance company works for free.

If the EV of the pool is -$1, then the insurance never actually pays out.

Towards the end of a deck/shoe the TC can change drastically. So you might put down a max bet at TC +6 or something and then get slaughtered on the count and it drops down to below TC +4 by the time you make an insurance decision.

For CE to be greater than 90% of EV, you'd have to have a bankroll of 1,000 bets (so for a 20 unit max bet that would be $100,000 for $5 blackjack).

I'm not trying to convince you that this is some kind of slam dunk decision. On the contrary the point is to highlight how difficult the self-made analysis is and how much easier it is when someone who is both trustworthy and knowledgeable either gives you the answer or walks you through it.

I take BJ insurance only if I've run up my bet to $400+. No math, just want to lock up a $400 winning bet.

This has been my understanding as well. I have heard different things on opening new cards or maintaining a high available credit. Someone once told me they would be less likely to get a loan if their available credit was too high due to risk of them being able to run up a huge balance. This contradicts everything I have read about your score being higher if you have a low utilization ratio. I'm not sure what's right, but I kept asking for credit limit increases until my utilization ratio was under 10%.

I've read many times that you never want to close your oldest card if it doesn't have an annual fee. Just use it occasionally so they don't close it on you.

And regarding whole life insurance, it's possible the benefits and fees could be structured in a way to make it not a scam, but I doubt it exists in the real world. It's so bad that I find it hard to believe there are people selling it that actually think it's a good product.

It's possible that different institutions look at different things.

If I am loaning out $10,000, like for a car, I'm less concerned with their raw ability to pay and more concerned with their willingness to pay. If I am loaning out $500,000 for a primary residence, I am going to scrutinize their ability to pay way more than their willingness to pay.

Not that these sorts of things always follow logic, but I'm saying that I wouldn't be surprised if it didn't boil down to a single number.