What is a Credit Score? Before you finance, Please read this:
10-12-2002, 09:47 PM
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What is a Credit Score? Before you finance, Please read this:
I found this info very interesting... Thought to share with you guys....Read on to solve the mystery of credit scoring (from Fair Isaac & Co).
FICO is used by the three main credit reporting agencies to score your credit report. The score range from 300-850, and the higher the score the better. It is a snapshot of your credit history at a moment in time that helps lender determine your likelihood to re-pay your debts. Your score can change throughout your credit history and their are even ways to improve your chances.
WHAT MAKES UP MY SCORE?
a) 35%
payment history.
b) 30%
Capacity for debt you have. The balances on your credit cards compared to the limits on your credit cards, are very important. When you max out your c.card, you lower the score. Number one reason people file bankcruptcy is beacuse they are overectended on their debts.
c) 15%
Length of credit. Are you applying for the first time or are you a consumer who has had credit for several years?
d) 10%
Search for & ecquisition of new credit. How many recent inquiries are on your credit reports? Are you aggresively trying to obtain credit card now? Have you opened a lot of new accounts?
e) 10%
Types of credit. Are all of your accounts revolving? Do you have any loans from finance companies?
YOU CAN HURT YOUR SCORE:
- Missing payments. Takes 24 months to clear this.
- Credit card capacity (maxed out c.cards).
- Closing credit cards accounts.
- Shopping for excessive credits.
- Having more revolving loans.
- Loans at finance companies.
YOU CAN IMPROVE YOUR SCORE:
- Pay down on credit cards.
- Do not close creditcards (cut them up and do not use them again).
- Continue to make payments on time. Internet payments are
efficient and cheaper!
- Slow down on opening new accounts.
- Acquire solid history with years of experience
FICO is used by the three main credit reporting agencies to score your credit report. The score range from 300-850, and the higher the score the better. It is a snapshot of your credit history at a moment in time that helps lender determine your likelihood to re-pay your debts. Your score can change throughout your credit history and their are even ways to improve your chances.
WHAT MAKES UP MY SCORE?
a) 35%
payment history.
b) 30%
Capacity for debt you have. The balances on your credit cards compared to the limits on your credit cards, are very important. When you max out your c.card, you lower the score. Number one reason people file bankcruptcy is beacuse they are overectended on their debts.
c) 15%
Length of credit. Are you applying for the first time or are you a consumer who has had credit for several years?
d) 10%
Search for & ecquisition of new credit. How many recent inquiries are on your credit reports? Are you aggresively trying to obtain credit card now? Have you opened a lot of new accounts?
e) 10%
Types of credit. Are all of your accounts revolving? Do you have any loans from finance companies?
YOU CAN HURT YOUR SCORE:
- Missing payments. Takes 24 months to clear this.
- Credit card capacity (maxed out c.cards).
- Closing credit cards accounts.
- Shopping for excessive credits.
- Having more revolving loans.
- Loans at finance companies.
YOU CAN IMPROVE YOUR SCORE:
- Pay down on credit cards.
- Do not close creditcards (cut them up and do not use them again).
- Continue to make payments on time. Internet payments are
efficient and cheaper!
- Slow down on opening new accounts.
- Acquire solid history with years of experience
10-12-2002, 10:03 PM
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I know it is pretty surprisng... since I recently closed many of my non active c.cards. When you pay off a credit card or transfer balances, do not close the account. Stop using the card. If you prefer, just cut it up but dont call the bank to close it. This limits on the cards you have will still be there, but no balances, therefore increasing your capacity.
For instance, having 5 c.cards with 5K capacity will yeild to 25K capacity where as closing all 5 of them and have a 0 capacity.
For instance, having 5 c.cards with 5K capacity will yeild to 25K capacity where as closing all 5 of them and have a 0 capacity.
10-12-2002, 10:15 PM
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Originally posted by BrainStorm
All I've got is my one credit card (only a $500 limit) and my car which is almost paid off.
All I've got is my one credit card (only a $500 limit) and my car which is almost paid off.
The odd part is that it doesn't matter if you pay it off every month, it's the unpaid balance that gets reported, so you need to wait a couple months so a zero balance is reported.
HTH
10-12-2002, 10:19 PM
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10-12-2002, 10:24 PM
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Originally posted by ksj
If you are carrying a balance on your CC, pay off and don't use it for a couple of months. Your score will go up as much as 40-50 points so that you can get another CC. After all, you've demonstrated you don't need it.
The odd part is that it doesn't matter if you pay it off every month, it's the unpaid balance that gets reported, so you need to wait a couple months so a zero balance is reported.
HTH
If you are carrying a balance on your CC, pay off and don't use it for a couple of months. Your score will go up as much as 40-50 points so that you can get another CC. After all, you've demonstrated you don't need it.
The odd part is that it doesn't matter if you pay it off every month, it's the unpaid balance that gets reported, so you need to wait a couple months so a zero balance is reported.
HTH
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10-12-2002, 10:56 PM
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Originally posted by drivebywire
I know it is pretty surprisng... since I recently closed many of my non active c.cards. When you pay off a credit card or transfer balances, do not close the account. Stop using the card. If you prefer, just cut it up but dont call the bank to close it. This limits on the cards you have will still be there, but no balances, therefore increasing your capacity.
For instance, having 5 c.cards with 5K capacity will yeild to 25K capacity where as closing all 5 of them and have a 0 capacity.
I know it is pretty surprisng... since I recently closed many of my non active c.cards. When you pay off a credit card or transfer balances, do not close the account. Stop using the card. If you prefer, just cut it up but dont call the bank to close it. This limits on the cards you have will still be there, but no balances, therefore increasing your capacity.
For instance, having 5 c.cards with 5K capacity will yeild to 25K capacity where as closing all 5 of them and have a 0 capacity.
to put it simply, more credit available = greater risk to go into bigger debt.
10-12-2002, 11:19 PM
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Originally posted by Matt
having lots of credit cards with lots of 'capacity' is bad for your fico score.
to put it simply, more credit available = greater risk to go into bigger debt.
having lots of credit cards with lots of 'capacity' is bad for your fico score.
to put it simply, more credit available = greater risk to go into bigger debt.
It's best to not have any other inquiries for your credit report for the previous 3-4 months. And keep an unpaid balance of less than 34% of your available credit for a 2-3 months in advance as well before you ask.
Edit: I have to say I disagree about more available credit if you mean someones overall high limit. The score has far more to do with how you use your available credit than how much you have. Lots of cards are just bad though...
Last edited by ksj; 10-12-2002 at 11:22 PM.
10-13-2002, 12:27 AM
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Equifax recommends that you do not have more credit than you need. Closing accounts is not a bad thing, so long as you are the one requesting the account closed. Just don't close all of your accounts. They recommend that you carry around three credit cards.
Any more can start affecting your score negatively, even if you have low balances on all of your cards. This is because you have the potential to start using your cards like crazy and run yourself into debt.
Another good idea is to keep your oldest credit card, even if it does not have the best APR. It's important to have a long credit history, so keeping your oldest credit card active and in good standing is a great way to boost your FICO score. Don't forget that if your card's APR is on the high side, you can always contact your card company and request them to lower your interest--if your account is in good standing, credit card companies will usually give you a better rate in order to keep you around.
Also, it's a good idea to have different types of credit. If you have a mix of auto loans, credit cards, etc, it shows that you can handle different kinds of credit. This will help you boost your score significantly, especially if your credit history is relatively short.
I applied these techniques to my accounts, and my FICO score has gone up from 650 to just slightly above 800 in the last two years. Not bad for a 25 year-old, right?
Any more can start affecting your score negatively, even if you have low balances on all of your cards. This is because you have the potential to start using your cards like crazy and run yourself into debt.
Another good idea is to keep your oldest credit card, even if it does not have the best APR. It's important to have a long credit history, so keeping your oldest credit card active and in good standing is a great way to boost your FICO score. Don't forget that if your card's APR is on the high side, you can always contact your card company and request them to lower your interest--if your account is in good standing, credit card companies will usually give you a better rate in order to keep you around.
Also, it's a good idea to have different types of credit. If you have a mix of auto loans, credit cards, etc, it shows that you can handle different kinds of credit. This will help you boost your score significantly, especially if your credit history is relatively short.
I applied these techniques to my accounts, and my FICO score has gone up from 650 to just slightly above 800 in the last two years. Not bad for a 25 year-old, right?
10-13-2002, 03:28 AM
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As a 40-year old who once had very poor credit and now have stellar credit, this is very near to me. I have received my credit reports numerous times and have talked to credit folks. I am told it is great to have some history of paying down and maintaining revolving debt (i.e., a Visa) as well as paying off a loan (i.e., a car loan). But I was told that more is not better in the revolving side. As Matt had stated below, the general theory is that if you are carrying revolving credit lines you can build your debt up again very quickly.
The nice part is once I got a mortgage and my credit report showed that I paid well on this, there was no 'need' to carry cards to impress the scorers. I now have the discipline to use my Amex and pay it off monthy. My rating has never been higher.
The nice part is once I got a mortgage and my credit report showed that I paid well on this, there was no 'need' to carry cards to impress the scorers. I now have the discipline to use my Amex and pay it off monthy. My rating has never been higher.
10-14-2002, 10:05 AM
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Be careful when you use those "free score" offers at lending companies. When lending companies initiate a credit inquiry, that goes on your credit history that anyone can see. If you get a few done within a year, your score starts to go down because the credit agencies believe that you are aggressively seeking new credit, and your score goes down.
If you get a credit check done through the three credit agencies, however, you avoid this problem, because credit checks that you initiate for yourself do not count against you. So spend the 15 bucks and get your score from Equifax or any of the other credit agencies yourself. It's worth it!
If you get a credit check done through the three credit agencies, however, you avoid this problem, because credit checks that you initiate for yourself do not count against you. So spend the 15 bucks and get your score from Equifax or any of the other credit agencies yourself. It's worth it!
10-14-2002, 10:23 AM
#14
The not closing credit card accounts may slightly affect your score, but even unused credit cards can be counted against you in your debt to income calculations when seeing if you qualify for a loan. Banks often take total potential revolving debt and calculate a monthly payment based on the available lines, used or not.
I'd advise closing all those unused accounts.
I'd advise closing all those unused accounts.
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