Your example is rather flawed because realistically the interest you paid back to your buddy is what you would have paid to him originally for the loan in the first place. My claim is that you pay back an amount where half that amount is interest, fines and fees and yet you aren't back at square one. If I loaned you $800 and made you pay me back $1400 you'd call me a loan shark. Like I said I'm not broke and I'm not in serious debt, I just have student loans. But in moving on to the next stage of my life, I feel like debt is a requisite not a choice. I will need a car, a house and such, and those things are rarely bought straight up with cash. I feel like yeah, you don't have to play their game of being in debt, but if you choose not to getting the basic things an American has is almost 20x harder. Because in my metaphor you paid the debt back with interest, bs fines and fees. Realistically, if you did default on a debt you're still on the hook for the debt but that's only half the cost of what you pay back. Let's say I play along with their game, pay them back and essentially pay back double my debt, are you saying we should not be back at square one? No other institution in this country works like that. Let's say I sue you for breach of contract, and I win. You pay me back plus damages. I can't go ahead and sue you again. It's once and done. However, if I pay a credit card company back with interest, fines and fees they still choose to make more money off of me by offering me only high interest loans and credit. It's a negative feedback loop.
Also, I should clarify I don't feel like a person who pays back their debt with interest, fines and such should have perfect credit or even good credit. The credit score should return to where it was before the person had credit is my claim. So yes, I agree with you they should reject the person for a $180,000 loan, but to be fair without credit you wouldn't have even gotten that loan in the first place.
your interest and penalties are just that interest and penalties for not abiding by the original payment plan, your credit score is a reflection of that as well. Your score will be lowered or increased by the way you handle these contracts. creditors want to know if you can be trusted to pay back the loan on time. I think that is where your failing to miss the point. Creditors are not interested in if you are willing to pay penalties and interest, and no where in their contracts does it state that penalties and interest BUYS you a year to pay your bills.
If you have the extra cash and need to improve your score relatively quickly an option to consider is a secured card from a major bank (B of A, Wells Fargo, Chase, etc.). You pay a deposit for the amount you want your credit limit to be (usually up to $10,000) and in a year of good payments your deposit is returned and your limit remains what you signed up for. Your average length of credit history takes a hit, but your ratio of debt to credit available increases, as does your average credit line. If you don't already have at least 2 credit cards that's a plus as well. The best thing you can do is never be late with anything ever. IDK what consumer laws are in Texas, but here in California late payments stay on your report for up to 5 years. Tax Liens stay up to 10 years. Re-possessions up to 7. Good luck.
