Thin credit report

[BBQdDude]

I made a post a few months back. I was working on removing all debt, waiting for alimony to end and helping my daughter out in her time of need.

 

Fast forward to today and all debt is totally paid off after three years!!!!

 

Issue, I closed all credit cards out once each was paid off over the last few years.

 

I had a credit score of 709 but now I am at 631 (WTF!!!) but no negative credit???

 

I am told my credit report is "thin" which they said meant while I have excellent bill pay etc I have no credit which is a bad thing.

 

My debt to income ratio is at an awesome point due to the above.

 

I am confused, I have always had a car loan up to two or three years ago. I even had a mortgage. Why is that history not viewed or taken into account?

 

Now I see I can get a few credit cards but APR I see is like 29% so I immediately thought F that.

 

I am currently saving up for a new to me daily car for around 20k.

 

 

Soooooo…

 

Should I accept my fate and take out two new credit cards with that high APR but keep them paid off each month?

 

Should I just finance that car and most likely get ass raped on interest I am assuming???

 

I am one confused dude as I thought I did the best thing to make all this crap go away.

 

Recommendations?

[Cordell]

My debt to income ratio isn’t the best but it’s decent, I do believe that one of the reasons my score stays in the high 700s is my 20k+ in open credit accounts with no balance. These are also some of my oldest accounts so I don’t close them. When I used one card to buy parts for my Camaro earlier this year (10k or so) my score was down to 710, paid it back off by October and now my score is back to 785.

 

I’m sure everyone is different so take my example however you want.

[10phone2]

First off congrats on the accomplishment. Unfortunately it will take some time to get it back up due to not having a line of credit that is current and long term. Your spot on with getting 1-2 credit cards and pay in full each month to earn rewards.

[greg1647545532]

Should I accept my fate and take out two new credit cards with that high APR but keep them paid off each month?

 

Yes, this. Two, three, four cards, the higher the limit, the better. Use them once a year for a small purchase to reset the "last used" date.

 

If you have 100k in available credit that you're not using that means you're responsible and also that if you get in a pickle you have access to credit to bail you out (e.g., you won't default).

[cruizin01]

I keep a revolving low balance on 3-4 high available credit credit cards. I dont use a debit card for anything and pay the cards off every few weeks. I tend to rotate, switch them around every few years to get the best rewards/points. Aside from 1 car payment and a mortgage that has got my to a 830+ score. I dont know the ins and outs to credit but this works well for me.

[iwashmycar]

Yep, its your age of credit & utilization of that credit. You should never close accounts.

 

Just last week Discover said they were closing one of my oldest (but unused) cards. That would also be maybe 10 percent of my available credit. A simple phone call usually keeps it open and available.

 

Since I have a good many accounts - some of which have been open 7-8 years, I have a longish credit age, and just over 100K worth of limits I dont use...so if I have 2-3K on one card I'm only using 2% or so of my available credit. Plus per the reporting bodies....I have made hundreds of "on-time" payments, as they are just zero, but accounted for. This helps scores soar.

 

I also often go for credit limit raises whenever I can on these accounts.

 

Based on what you've done here you sound responsible enough...sometime there is no reason not to use a credit card daily. The cash back, miles, or whatever 'reward' you are after is much better than an old checking account debit card. Might as well get 2% of whatever you spend back or something.

[RC K9]

I have something like $150,000+ in credit card credit available to me. And I also get increases on those limits as often as possible. I just obviously don't max them out. I just make sure to use them every month and pay them off every month. If it can be paid for with a CC, it's getting paid for that way and just pay off the balance every month.

 

Credit in this country is a racket, but it seems to be a necessary evil. I don't cancel CC's. If I get a notice that one is going to be turned off due to inactivity, I go buy a pack of gum with it, or put a $13/mo reoccurring netflix subscription on it.

[RC K9]

Yep, its your age of credit & utilization of that credit. You should never close accounts.

 

Just last week Discover said they were closing one of my oldest (but unused) cards. That would also be maybe 10 percent of my available credit. A simple phone call usually keeps it open and available.

 

Since I have a good many accounts - some of which have been open 7-8 years, I have a longish credit age, and just over 100K worth of limits I dont use...so if I have 2-3K on one card I'm only using 2% or so of my available credit. Plus per the reporting bodies....I have made hundreds of "on-time" payments, as they are just zero, but accounted for. This helps scores soar.

 

I also often go for credit limit raises whenever I can on these accounts.

 

Based on what you've done here you sound responsible enough...sometime there is no reason not to use a credit card daily. The cash back, miles, or whatever 'reward' you are after is much better than an old checking account debit card. Might as well get 2% of whatever you spend back or something.

 

 

Just read your response after posting min and pretty much identical. This is the way to go.

[Geeto67]

Issue, I closed all credit cards out once each was paid off over the last few years.

 

This was your primary mistake. Even if you pay off the balance on the credit card, NEVER close the account. Why? closing out the account destroys your credit utilization and can wipe out the debt history so it appears as if you have never had credit. Ok, so maybe never, but almost never - it is just a huge setback. too late to do anything about it now, but learn for next time.

 

You are going to need to re-establish your credit utilization, which means at least one credit card. Try contacting one of your old credit card companies, preferably the one with the oldest history or one tied to a large financial institution or your existing bank. If you can do it in person at a bank branch even better. Make the case that you have along history with them and you made the mistake of closing the account when you didn't mean to and that you would like to see if they can give you a favorable rate. It may not be as good as you had it, but it won't be an off the street rate either.

 

you can also look at a credit builder loan. These work almost like a forced savings account - you take out a loan, the lender put the money you borrowed in an account that you can't touch. You make payments to the bank, and when the loan is "paid off" the lender releases the sum to you. You are probably going to have to go to a credit union for one of these but they tend to run in the 12% interest rate range and some even offer to refund 50% of the interest if all your payments are made on time.

 

If you want to finance a car, see if someone in your family has better credit than you currently and have them co-sign the car. This will bring the interest rate down significantly.

[TimTaylor751647545500]

I closed all credit cards out once each was paid off over the last few years.

 

This was your primary mistake. Even if you pay off the balance on the credit card, NEVER close the account.

 

Yep! Gotta leave those cards open after you pay them off so they continue to report.

[POS VETT]

I wouldn't close credit cards with the oldest opening dates. I still have the one that was opened in 1993. Use a credit card responsibly and make sure monthly balance is paid off on time, then 0.9% or 90% APR means nothing. Also, a car loan with small/minimum principal amount that's never paid late every month/week/two weeks would help with credit score.

[Cordell]

On a side note, I made my daughter an authorized user on my 2 oldest/highest limit credit cards, didn’t even give her the cards (not going to), but now my 18 year old, who has never had any debt, has a better credit score then I do. Fuck this credit racket. Edited January 9, 2020 by Cordell

[BBQdDude]

Thank you all. Lesson learned I guess on closing accounts. Hard mistake to live with but it is what it is.

 

I am thinking about hitting a car lot this spring and pay cash for half and finance the other half even if it is ass rape rate of over 10%. My only follow-up is should I pay that small amount off in under 6 months or just let it ride the entire time the loan was setup for?

[Furloaf]

Let the loan ride for longer than 6 months. 18 months perhaps. Depends on what your credit goals are. Check with the auto loan that there isn't an early payoff penalty also.

 

CapitalOne Auto might be worth checking out right now, to see a ballpark of where your APR may fall. Their pre-approval doesn't initiate a hard credit check so will not ding your credit score.

[Tractor]

Your score went down because you don't have any available credit. As you have seen its better to have a ton of zero balance credit cards in open accounts. I was just going over this for my business and personal accounts with my wife (personal banker). She's telling me the same thing, open and keep all the accounts you want as it looks better to future lenders.

 

This is actually a mistake made by many people as the become 18 yrs old and start life. In this current era of society it would be a great idea to hit up someone like capital one for even a $100 limit card asap and just not use it. So many people roll through college on parents money or a part time job, work hard in school and get out then find out they can't get an apartment, car, etc even with their shiny new degree and a career because they have nearly zero credit. Student loans don't count nearly has much towards your available credit or income/debt ratio.

[dakotart]

no longer needed Edited January 13, 2020 by dakotart

[Gergwheel1647545492]

I am thinking about hitting a car lot this spring and pay cash for half and finance the other half even if it is ass rape rate of over 10%.

 

DO NOT DO THIS!!!!

 

 

Just get a few Credit Cards and pay them off every month. Way better solution than paying one of those places a few hundred/thousand dollars just to get the same result.

[BBQdDude]

Thank you all for the follow-up.

 

Very good suggestions for sure.

[Dharris89]

I am going to get shit for this but why are you worried about your credit score right now? Are you planning on buying something big in the near future? If no, then don’t worry about it.

 

Congrats on paying off your debt. It is an awesome feeling. Now you can pile up cash and invest. Without debt and more money you shouldn’t need to borrow so the credit score will not matter. I have one credit card and a debit card. I use the cc for online purchases and cash or the debit for everything else. My credit score is good but I am not planning on buying anything I need credit for so I am not worried about it going up or down. Good luck.

[POS VETT]

Can you try to reinstate one or two of the oldest credit card accounts? When I reinstated a defunct AmEx account, the account activation date stayed the same.

[Furloaf]

I am going to get shit for this but why are you worried about your credit score right now? Are you planning on buying something big in the near future? If no, then don’t worry about it.

 

Congrats on paying off your debt. It is an awesome feeling. Now you can pile up cash and invest. Without debt and more money you shouldn’t need to borrow so the credit score will not matter. I have one credit card and a debit card. I use the cc for online purchases and cash or the debit for everything else. My credit score is good but I am not planning on buying anything I need credit for so I am not worried about it going up or down. Good luck.

 

Credit score affects other things beyond borrowing money

[Coaster]

I am going to get shit for this but why are you worried about your credit score right now? Are you planning on buying something big in the near future? If no, then don’t worry about it.

 

Congrats on paying off your debt. It is an awesome feeling. Now you can pile up cash and invest. Without debt and more money you shouldn’t need to borrow so the credit score will not matter. I have one credit card and a debit card. I use the cc for online purchases and cash or the debit for everything else. My credit score is good but I am not planning on buying anything I need credit for so I am not worried about it going up or down. Good luck.

 

According to Credit Karma you average credit account age should be over 7 years. If you decide to buy something on credit, even if it isn't in the near future, you can't get a few 7 year old accounts in 6 months.

[Dharris89]

According to Credit Karma you average credit account age should be over 7 years. If you decide to buy something on credit, even if it isn't in the near future, you can't get a few 7 year old accounts in 6 months.

 

Right but the primary reason for a high credit score is so you are eligible for a loan or big purchases. I asked the OP if he was planning on making a large purchase in the near future. If no, then go slow and build it up over time. You can only have one or two revolving credit accounts and still have a good credit score. But when you make big changes it takes time for it to come back.

 

For me personally, once I got out of debt I try not to use it more than I need to. It is much easier for us to budget and plan for big purchases. But we also have an emergency fund for those Oh Shit moments. Our A/C and Furnace took a dump last summer. It sucked but we got it replaced and worked to rebuild our savings.

[Furloaf]

Yeah definitely don't get a high APR car loan as a means of building credit.

[BBQdDude]

Thank you again for all the added comments.

 

For the why question asked:

Some jobs do run a credit report on you

Insurance also comes to mind as being effected via credit score

Big purchase, say house is in the future which will be happening in about 5-7 years.

 

 

I thought long and hard over the weekend:

 

I refuse to get a high APR car loan. So the car will come late summer through savings etc..

 

I did call my oldest credit card company that I used to have. They told me they could not reactivate it.

 

The next few weeks I am going to look at credit card offers. However, I will only be putting a tank of gas once a month on what I get and pay it out prior to the end of the billing cycle.

 

Otherwise I have resigned myself to save, save, save for what I want to purchase. Yes this sucks in the age of instant gratification but I guess I can appease that with hookers lol.