Credit score questions

[351mach11647545510]

Jacked my credit up a few years ago when I ran into several life changes and in the last year all debts have been paid off with the exception of a small bike loan. I'm wanting to get myself into a house and I'm looking at how to help my credit score recover faster. Last year I went and talked to the bank about a home loan and based on what he saw he said I just needed to get my score back up and suggested getting another credit card as well as trying to have settled accounts cleared off my credit. I've only recently considered the credit card now that all debts and loans (except bike) are paid off. My thoughts are, I'm more disciplined now and have more cash put back, plus if the woman and I get a joint account we could start building a credit history for her. What I want to know is, if it's even worth getting a credit card especially when my plans are to basically use like my bank account. Example, cut up debit card and don't use the bank account and only use the card for what I have cash for and turn right around and pay it. Like go to grocery store today, turn around and pay that balance off Thursday. Any thoughts, opinions or experiences with this?

[El Karacho1647545492]

The best way to build your credit is to use as much as your credit limit as possible on a card, and pay it off every month.

 

it shows the bank that not only do you have a very good idea of your cash flow, but that you use it responsibly. "revolving credit" is what its called, and they like to see that you use it and are trustworthy with it. they figure that if you can set a budget for yourself and make payments more than when they are required, you are a good candidate for installment credit where you have mandatory payments.

[wnaplay1647545503]

My experience and maybe someone with more knowledge can address,,,

 

I was told to pay cash when I purchased everything but a home. I have always had a credit card with a $5k limit but always maintained a $1k balance(suggested rather than paying off). I have never defaulted or been late on a payment and have had a few smaller loans throughout the years always payed on time. My credit score still does not appear all that great and I feel I have always done right by it. I had no issue buying my home by myself but despite this I still cant figure out the hoops these companies want you to jump through to have an excellent score.

[351mach11647545510]

The best way to build your credit is to use as much as your credit limit as possible on a card, and pay it off every month.

 

it shows the bank that not only do you have a very good idea of your cash flow, but that you use it responsibly. "revolving credit" is what its called, and they like to see that you use it and are trustworthy with it. they figure that if you can set a budget for yourself and make payments more than when they are required, you are a good candidate for installment credit where you have mandatory payments.

 

So would that work, creating a balance 1 day then paying it off 2 days later?

[351mach11647545510]

My experience and maybe someone with more knowledge can address,,,

 

I was told to pay cash when I purchased everything but a home. I have always had a credit card with a $5k limit but always maintained a $1k balance(suggested rather than paying off). I have never defaulted or been late on a payment and have had a few smaller loans throughout the years always payed on time. My credit score still does not appear all that great and I feel I have always done right by it. I had no issue buying my home by myself but despite this I still cant figure out the hoops these companies want you to jump through to have an excellent score.

 

I know what you mean about paying cash for everything. That's where I've been, but trying to bump my credit and considering the credit card for only what I have cash for at that moment so I can turn right around and clear the balance within that week.

[El Karacho1647545492]

So would that work, creating a balance 1 day then paying it off 2 days later?

 

Yes, but not much. They'd rather you carry that balance to the end of the billing period, and then pay it off. They want to see that you trust yourself enough to not worry about that balance, but when it comes time to pay that you've got enough money to pay it all off easily.

 

wnaplay, don't ever carry a balance month-to-month if you can help it.

 

source: my dad is a chartered financial analyst

[brent1976]

We have a couple cards a piece, but each use a certain one to pay bills/ buy groceries/ lunch/ spending money, and pay them off every month. We do this instead of checks or cash.

[wnaplay1647545503]

So your saying that I am infact hurting my credit rather than helping it by never paying off my credit card? I was always told to carry a $1k balance. If I payed it off today it could be months or years before I would charge anything on it. Besides my home I would appear to never be using credit at that time.

[downingracing]

So your saying that I am infact hurting my credit rather than helping it by never paying off my credit card? I was always told to carry a $1k balance. If I payed it off today it could be months or years before I would charge anything on it. Besides my home I would appear to never be using credit at that time.

 

You should charge something on it every month. Something you pay cash for and are buying anyway. When you get the bill - pay it off.

 

I've been doing this for years and have a very good credit score. I pay my balance in full every month and get CC rewards on top of that. I've had my current CC for 3 years and have over $1200 in rewards dollars given to me for doing nothing more than borrowing the bank's money interest free. I've got a second CC (been open for 10 years) and it is a GM rewards card. I keep it open and only use it when my rewards balance is below the maximum I can have for a new vehicle purchase.

 

The 'game' is easy to come out ahead - you just need to be smart and not spend over your means. Easier said than done for most.

[copperhead]

Credit isn't cut and dry. There are tons of factors involved, some are reported when you check your credit and some the credit reporting agencies probably aren't telling us. I've done tons of research on this and here's what I've got to say on it (disclosure - I just today applied for 3 cards at the same time and was instantly approved. One came back with my credit report saying I've got a 744 score even with a list of 3 or 4 negatives).

 

First things first - if you have chargeoffs or defaults or any serious negatives on your report, they need to go away. Pull your credit report with Experian, Equifax and Transunion, I think they charge around $7 each to do it. Don't screw around with freecreditreport.com or anything like that, you want the full picture and you don't want to sign up for credit monitoring through anyone. See what you have hurting you so you can fix it. Call up whoever has the negatives and see what you have to do to clear it, then do it. PM Mensan for suggestions on how to get that stuff cleared off, he should have some tips, as he had a bunch of fraud hurting him.

 

Once that is cleared up you need to build history. When you use credit of any kind, the bank you are making payments to will report to the credit agencies that you paid on time, paid late or missed payment. That's it. If you aren't using your credit (IE $0 balance) then there is nothing to report. They don't give a fuck if you carry a balance month to month, they just make that simple report. This means that yes, you want to charge something every month, but for the scope of building credit it doesn't matter if you buy a candy bar every month then pay back the 55 cents once you get your statement, because that is simply reported as an on time payment.

 

Other factors are:

 

Length of credit history. Figure out what credit card and what bank accounts you have had the longest and don't ever let them close. Banks are closing shit for lack of activity so make sure whatever you've had the longest gets used from time to time.

 

Debt to income ratio. Don't borrow more than you can deal with.

 

Ratio of balance to credit limit. Stay under 50% of your max limit on any card. You want to have as high of a credit limit as possible on cards so you don't have this issue - if you have $500 limit cards or something else pretty low they are hurting you more than they are helping, so ditch them unless they are your oldest account.

 

Applying for a lot of things in a row, regardless of whether they are approved or denied. These inquiries stay on your credit report for two years. This means that you may have to wait two years for enough things to drop off to be able to get a house, depending on how bad they are hurting you.

 

Cliffs - clean up your report, get a points earning credit card and pay it off every month, and play the waiting game. If you want suggestions for what kind of points card to get PM me with what you would like to work towards, cash back, airline miles or hotel points and I'll give you some suggestions.

[gillbot]

Credit isn't cut and dry. There are tons of factors involved, some are reported when you check your credit and some the credit reporting agencies probably aren't telling us. I've done tons of research on this and here's what I've got to say on it (disclosure - I just today applied for 3 cards at the same time and was instantly approved. One came back with my credit report saying I've got a 744 score even with a list of 3 or 4 negatives).

 

First things first - if you have chargeoffs or defaults or any serious negatives on your report, they need to go away. Pull your credit report with Experian, Equifax and Transunion, I think they charge around $7 each to do it. Don't screw around with freecreditreport.com or anything like that, you want the full picture and you don't want to sign up for credit monitoring through anyone. See what you have hurting you so you can fix it. Call up whoever has the negatives and see what you have to do to clear it, then do it. PM Mensan for suggestions on how to get that stuff cleared off, he should have some tips, as he had a bunch of fraud hurting him.

 

Once that is cleared up you need to build history. When you use credit of any kind, the bank you are making payments to will report to the credit agencies that you paid on time, paid late or missed payment. That's it. If you aren't using your credit (IE $0 balance) then there is nothing to report. They don't give a fuck if you carry a balance month to month, they just make that simple report. This means that yes, you want to charge something every month, but for the scope of building credit it doesn't matter if you buy a candy bar every month then pay back the 55 cents once you get your statement, because that is simply reported as an on time payment.

 

Other factors are:

 

Length of credit history. Figure out what credit card and what bank accounts you have had the longest and don't ever let them close. Banks are closing shit for lack of activity so make sure whatever you've had the longest gets used from time to time.

 

Debt to income ratio. Don't borrow more than you can deal with.

 

Ratio of balance to credit limit. Stay under 50% of your max limit on any card. You want to have as high of a credit limit as possible on cards so you don't have this issue - if you have $500 limit cards or something else pretty low they are hurting you more than they are helping, so ditch them unless they are your oldest account.

 

Applying for a lot of things in a row, regardless of whether they are approved or denied. These inquiries stay on your credit report for two years. This means that you may have to wait two years for enough things to drop off to be able to get a house, depending on how bad they are hurting you.

 

Cliffs - clean up your report, get a points earning credit card and pay it off every month, and play the waiting game. If you want suggestions for what kind of points card to get PM me with what you would like to work towards, cash back, airline miles or hotel points and I'll give you some suggestions.

 

Good advise here.

 

My $0.02, the two biggest factors i've found are credit history and balance to limit ratio. Also, having SOME liquid assets helps out a ton also but you can get around that.

[2highpsi]

A couple common misconceptions.

 

A. Liquid assets help. (false) the credit bureaus have no idea how much you have in deposit.

 

B. Pay cash for everything (false). You have to use credit to build credit. I know 60 year old millionaires who have a 0 credit score. They never used credit. Now their personal small town bank would probably give them a loan because they (and only they) actually know how much he has on deposit.

 

C. Pay everything off right away (false again)

Two very important factors in all credit score models are AVERAGE AGE OF ACCOUNTS and AVERAGE BALANCE IN RELATION TO LIMIT. Someone with 7 year old (still active) accounts, that carry a balance of roughly 25% balance to limit will have a higher score than someone with all new accounts that have 0 balances.

 

Copperheads post pretty much sums up all the good and correct info. Follow it and you will be good

[copperhead]

You may get a small bump for carrying some sort of balance but putting money in the bank instead of paying it to the bank in interest isn't worth the trade off. Pay that shit off every month, don't leave money on the table.