My own guide on boosting credit rating

Discussion in 'General Discussion | Credit Cards' started by howtofreetravel, Jul 29, 2014.  |  Print Topic

  1. howtofreetravel

    howtofreetravel Active Member

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    Hi i wrote my own little guide on improving credit scores. I hope you can give me some feedback and what i should add to it .
    It is very important to have a good credit rating. If you want to rent an apartment, find employment, apply for a credit card, be approved for a loan or mortgage or even get a private student loan you need a good credit rating. Improving your credit score is vital. Here are some tips to help you in your quest to become credit worthy.

    Credit card companies rate you partially according to your balance, usage, and payment history. Spend as much as you want on a credit card, but pay the bill (PIF) before you even get the actual bill. Keep your charges to around 1% to 9% of your credit limit. For example, a $5000 credit line should only report a balance of $50 to $450. If you only carry one credit card, keep the payments current by PIF. If you carry more then one credit card . Pay off the other cards completely before the end of the billing cycle.. and keep one card with a balance of $50 to $450 As a fun note, using an AMEX Platinum, gold (charge cards) do not count against you in the credit rating system.
    The age of your accounts is very important. Lenders will frown on you if you have a record of regularly opening and closing credit cards. Keep credit cards open as long as you can. It is wise, however to change from a card with a yearly fee to a non-yearly fee card or you can also ask for a refund on the fees. Look into AMEX cards. If you have a card that is 10 years old and get a different type of AMEX account, AMEX will backdate all cards. Backdating helps increase your credit rating as the new card will receive the age of the old amex cards

    Keeping cards for a long time also increases your credit score. Having a credit card from one major bank often gives you a heads-up when applying for a card from another bank. Do be aware, however, that you still need to keep payments current on all cards.
    A line of credit on the card affects your credit rating. Some cards, like AMEX, allow you to apply for 3x your credit line (with a soft pull). An increase in credit limits will improve your rating.

    If you are continually applying for new credit cards, your credit will suffer. Credit does rebound after several months, but it causes lenders to think twice before lending you money. Too many inquiries will hurt your chances for instant approvals. Only worry about this when you have over 8 hard inquiries.

    Do note that if you miss payments or are continually late you will hurt your credit rating. Do what you can to pay back your card before the bill arrives at your doorstep. Check your credit rating, at least once a year, to find any mistakes.
    Using these tips will keep your credit rating in a 720+ range. Only apply for credit cards that have good point bonuses if you have a good credit score. Being rejected for a credit card jeopardizes your chances of receiving additional credit.
     
    Last edited: Jul 30, 2014
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  2. Wandering Aramean
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    Wandering Aramean Gold Member

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    Telling anyone to carry a balance on any card rather than pay them all off all the time is simply ridiculous. Even if that does increase one's credit score - and I'm not convinced it would - the cost to do so would far outweigh the value of whatever improvement in the score is realized.

    It is also unclear what credibility, if any, you have as an expert in this area. Why should people believe that your advice is correct?
     
  3. jbcarioca
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    jbcarioca Gold Member

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    There are a few guides prepared by authoritative or semi-authoritative sources. Some of your points are valid, others not so much. A few comments:
    Each of these points is incorrect. There is zero advantage in paying prior to due date, although PIF on due date is very important. These is no advantage in keeping activity low as a percentage of credit limit, so long as you pay your balances on time every time with minimum payment or more. In fact more usage makes the issuer more money so they like more usage. lastly American Express cards, either charge or credit DO count in credit evaluation.
    American Express backdating is totally unrelated to account credit reporting. The date shown on their cards is a vanity date posted because customers like it. Each American Express account reports separately just like all others. You can see that if you look at any of your credit reports.

    There are some other issues too. I suggest you review information readily available in your credit reports, and on many credit card issuers websites. That may help you understand these processes a little bit better.
     
  4. NYCUA1K

    NYCUA1K Gold Member

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    Agreed.
    True only if the total debt to credit ratio across all the cards remains low (the lower the better but ok up to ~20%), which may be tough to maintain if one is making only the minimum payment. One would ideally avoid just making the minimum payment because that would extend the debt, resulting in money being wasted in interest payments. PIF, baby, PIF!
    The OP is correct about this. My AMEX Biz Platinum does not count toward the evaluation of my credit and part of the reason is that it is tough to do when there is no set credit limit and full payment is due at the end of each cycle (unless one accepted the extended payment option, which AMEX offers selectively). In fact, this is likely the case with most business CCs, as I reported before: My Chase United Club Business visa card does not appear to figure in the evaluation of my credit.
     
    Last edited: Jul 29, 2014
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  5. jbcarioca
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    jbcarioca Gold Member

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    Sorry, but you're responding to an issue the OP did not raise. There is one and only one reason why Business/Corporate cards do not appear on personal credit reports in normal circumstances. They are not personal cards, not personal credit and do not have the FCRA and other consumer credit regulations and procedures applying.

    The difference between "no set credit limit" (i.e. charge card) vs "stated credit limit" (credit card) makes some adjustments in some calculations, but has nothing to do with reporting or credit risk evaluation. Thus charge cards count precisely as do credit cards, except that charge cards normally report "high credit" while credit cards usually, but not always, report credit limit. In any event under most normal conditions the presence of charge cards is a positive factor in credit evaluation and a number of inferred calculations regarding credit utilisation are sometimes made by some issuers.

    Such non-consumer cards sold to small businesses and even proprietorships may carry American Express, MasterCard, Visa, some industry-specific solution such as Universal, myriad fleet cards and purchasing cards or even a vendor proprietary product such as offers by office supply stores and construction services firms. These all become confusing because the business and consumer products are frequently offered with similar promotions. The only way to know for sure, in the least well-disclosed cases, is if they ask for an EIN rather than SSAN and ask business revenue and credit questions. In some cases only the EIN question will make one know for certain. Is this somewhat deceptive sometimes? Yes. It can continue because these are not subject to ANY FCRA or other consumer disclosure requirements. They can be very good choices but Caveat Emptor!
     
  6. NYCUA1K

    NYCUA1K Gold Member

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    I do not wish to get tangled up in this because we are grossly over-simplifying a matter that could be quite complex. However, I suspect that the OP's thrust related to maximizing one's so-called FICO score. For that purpose, neither my AMEX Biz Plat nor my UC Biz visa card figure in. I am a "sole proprietor" so that my business cards and my personal cards are the same for tax and credit purposes. I used to have an AMEX Corporate card, which clearly was not a personal card because my employer paid the AF and it had nothing to do with my personal finances. The credit models that lenders use are, however, usually determined by the type of credit that they are being asked to extend, so, therefore, the matter is a lot more complex than when dealing with the FICO model....

    BTW, my SSN and EIN are one and the same...
     
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  7. satman40

    satman40 Gold Member

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    I pay mine in full the day it is due,

    We use to look for a listed phone number, length of time on a job, length of time at same house,

    As a LL we look for 3x income for the rent., and no evictions. College kids GPA

    Never paid any attention to credit scores, till about a year ago, did not even know mine,

    Never been turned down for a CC, or any loans..

    I have more properties than CC, all have a 0 balance, at the end of the month.

    Over 50 years at this, and banks love to loan money and CCs that is their business.
     
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  8. howtofreetravel

    howtofreetravel Active Member

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    Not sure if i mis phrased it but i am advocating not to carry a balance. I meant there is an advantage in paying before you balance even closes (you get the bill) . Also i mean charge card don't count against you in credit card utilization (perhaps an edit to clarify is due).
    P.S i have updated the guide with what it was supposed to say

    jbcarioca sorry but you are wrong about backdating
     
    Last edited: Jul 30, 2014
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  9. satman40

    satman40 Gold Member

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    I always made extra car and house payments, so one could say I paid before they were due.

    As for CC, we set them up on CC Auto pay, the day they are due.

    Things change, but that is the way it is for me, I have paid CC debt early, just to add more charges to the same card.

    Chase does not let one pay a balance greater than the debt,
    lowe's will let you use the card for a positive balance.

    Credit score and net worth do not go hand in hand.
     
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  10. iolaire
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    iolaire Gold Member

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    Can you explain what this this advantage is? From looking at your edited post I guess your argument is that paying early keeps your credit utilization low?

    The main advantage I can see is that it allows you to spend more than your credit limit. For example say you have a $2000 credit limit, if you spend $1,8000 then pay it off immediately you could then spend up to $2000 more that month...
     
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  11. Wandering Aramean
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    Wandering Aramean Gold Member

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    "keep one card with a balance of $50 to $450"

    That sounds a lot like carrying a balance to me.

    There's also the part where the advice is much more difficult to read than it should be owing to lack of proper punctuation and such so maybe you meant something different but it is quite hard to tell given what's written there.
     
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  12. jbcarioca
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    jbcarioca Gold Member

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    I do not wish to be rude, but checking a credit report demonstrates that. This specific point is one that is clear, and American Express will even tell you if you ask. The "member since" date is not used for any purpose other than customer positioning. It is absolutely not reported. Even if it were there would not be material impact on a credit risk model except in the remote chance that the credit file were 'thin', itself highly unlikely if the oldest American Express trade were old enough to make a difference. This is an internet bulletin board so it is not really appropriate to discuss specific credentials for statements made. Thus, believe some of the other posters or not, that is the readers prerogative.
     
  13. satman40

    satman40 Gold Member

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    20 some years ago, I had a United Card, and the CL was 10k, I would pay it off early to justify raising the CL, back then 10,000 miles a month was all they would give you on their card, found that out the hard way... did not take long before I applied for a different card.

    Today Chase United has no limits per month, we now cancel the card, wait 2 years and get the new card perk.

    Bank sets the rules, we just roll with them.

    To me it is a game, the wife tells me it is getting old., we all know a mile is not worth what it use to be.
     
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  14. NYCUA1K

    NYCUA1K Gold Member

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    JBC is correct about this. The AMEX purported "backdating" is for show only. I currently have three AMEX cards, including one (SPG) I got earlier this year, and they all say "Member since 2003". Why 2003? Simply because that is when I got the oldest AMEX card (Biz Plat) in my wallet at this time. Before that, it used say "Member since 1994" because that was when I got my Corporate Card, which was terminated just recently after the employer found out that I had stopped being their employee back in 2003 but they never canceled my Corporate card :D. Losing that card, which I had for nearly 2 decades, did not affect the length of my credit history at all, and remember also that a Corporate Card is not a personal card, so that it also made no sense to backdate all the cards to such a card. In short, I have had various AMEX cards on and off going back to the late 80s, and the "Member since" schtick was never very meaningful. No serious credit evaluation agency would take AMEX's so-called "backdating" seriously...

    Having said that, I believe that the reaction to the OP's "guide" has been more negative than it should've been: most of what it states happens to be the prevailing view...
     
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  15. satman40

    satman40 Gold Member

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    This same post is on FT, seems MP is a lot more aggressive with this discussion.
     
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  16. newbluesea
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    newbluesea Gold Member

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    Hmmm bring attention to inaccuracies is considered "aggressive" ... my take here is that there are perhaps more knowledgeable posters here.:)
     
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  17. IDGflygirl
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    IDGflygirl Gold Member

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    There is a difference between outright 'inaccuracies' and variations in 'interpretation'.;)
     
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  18. NYCUA1K

    NYCUA1K Gold Member

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    ...or conversely, it could be that there are more knowledgeable folks at TOBB on the subject, whose initial take was the same as mine, which was that some things could have been stated better but overall the "guide" was fine.
     
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  19. jbcarioca
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    jbcarioca Gold Member

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    Mostly we seem to be far less aggressive here than on TOBB. We do have quite a few generally more experienced regular posters here, although TOBB has much more quantity and in absolute numbers I am sure they have more knowledge. After all, virtually all the most active MP posters are also quite active on TOBB.

    A key difference on this subject exists, though. TOBB is dominated, on credit related matters, by a handful of people who, for better or worse, make money from credit card referrals so advocate a number of practices that are not endorsed by industry types other than sales staff. Of course we have a few of those too.

    Generally my impression is that the people who make money from referrals, all bloggers I think, tend to advocate churning and take a quite aggressive stance about anything that might generate one more account opened that is credited to them. Not all of them are misleading, but several of them are.

    The other side is that a few of us, both on TOBB and here, have worked and/or do work in developing and/or managing consumer credit policies and procedures. My impression is that there are probably three such people who are regulars here and maybe five on TOBB. They invariably are more conservative in recommendations and are quite careful to make explicit and clear the differences in definition that often trip people into decisions they might later regret.

    With no doubt I am in the latter group. I can get pedantic, no question about it, probably harsh too. I try to work hard to make absolutely clear differences in definition, reporting conventions, product classifications and so on.

    The OP, in my opinion, is doing a good thing by trying to document his/her own experiences. This discussion is useful, in my opinion, by helping clarify some quite arcane points that do make a difference to people. After all, the OP was explicit about seeking advice on improvements. That the OP is not employed professionally doing this is obvious. OTOH, people who are doing this professionally can describe things in excessive detail, often can be doctrinaire, and generally have no clue what life is like for normal people. As somebody who has worked in the credit card industry for several decades I obviously have that conservative bias myself.

    Final point: several people have posted things that imply "higher credit scores are always better". That is definitely not true if one wants to get attractive credit card (revolving) offers- which are often suppressed for people with bureau FICO scores above 780 or so. For charge cards (traditional American Express, MasterCard World, Visa Signature) the higher the better. The reason is that revolving balances are the most profitable part of no-annual-fee credit cards, so lower scores show higher propensity to borrow, thus are preferred, with limits. The charge cards have annual fees, mostly, and are positioned to make money on transactions, so the higher scores do correlate to higher spend, so are preferred. Business cards, BTW, are desirable for high spenders because they have much higher interchange fees, so are more profitable to issuers without revolving. We've danced around that issue in this thread without discussing it directly.

    All this is a trifle OT for the OP, but clarifies why some of the other points apply, I hope.
     
  20. Counsellor
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    Counsellor Gold Member

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    I'm reasonably sure you didn't mean to say it doesn't matter at all. It should matter to the extent that it shows you've had credit that long. Where it doesn't matter is in calculating the average age of accounts, where, as you say, they begin counting as to each individual card from when it was activated.

    (And they don't stop counting until it falls off your credit report, which is usually seven to ten years after the card account is closed, so the thing about closing your oldest card immediately affecting your FICO score is more legend than truth. This is not to say that I recommend closing old cards; they're good to have on the books since they add to available credit and thus lower the "percent of available credit used" calculation.)
     
  21. NYCUA1K

    NYCUA1K Gold Member

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    The OP may be interested in a thread from 3 months ago titled "Free FICO Scores?" which was quite lively and where some of us even posted our credit scores and factors that affected them...

    It should be pointed out that every credit bureau or their for-free affiliates like CreditKarma do offer tools for modeling the effect of various factors on the FICO score.

    About 2-3 years back, I had approached the issue of improving one's score as a serious "academic exercise" because I was irritated that my 3-bureau scores (Experian, Equifax, TransUnion) were always very different (by 100-200 points). Since the scores were based on the FICO model, the only reason for them to be different would be that they were not based on the same input data. That is when I did something that I would advise everyone to do because it did wonders for my credit history and credit score: I got my credit reports from all three bureaus and compared the credit information that each bureau had on me. The result was that I found lots and lots of discrepancies and inaccuracies among the three databases (I call them "dangling pointers", because they were accounts that were closed or loans that were paid off years ago but were still shown as active!!!). I challenged officially everything that I did not agree with and reconciled the data among all three bureaus. As a result, my 3-bureau FICO scores not only increased substantially but they differed by only 16 points after the clean up, since they were at that point based on virtually the same credit data. In fact, this made it easy to attribute the difference to Experian, who rated me lower than the other two, because virtually all "hard pulls" on my credit history whenever I applied for a CC within the last 2 years went to them ("hard pulls" do lower the FICO score). The only other "negative" in my credit report has always been that I have never applied for a major loan, like a mortgage, to show that I can take on and manage a big risk...;)
     
    Last edited: Jul 31, 2014
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  22. NYCUA1K

    NYCUA1K Gold Member

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    It did not matter to anyone but the ego of the cardmember, meaning that it did not matter at all. As you can see in my examples, I was "member since:" on three different dates...which one was the right date? It was all relative and therefore meaningless...
    It did not count because it was a Corporate card, which was never used in figuring out my credit history. But you're right old accounts do stay in credit reports for a long time, often exceeding 7 years unless one explicitly requests that they be removed from the databases (see preceding post).
     
  23. janetadams

    janetadams New Member

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    If your credit score is poor or you have no history of borrowing for lenders to see, then there are immediate steps you can take to improve your credit score.

    • Stop applying for credit until you’ve sorted out any problems on your credit file and improved your credit score.
    • Get on the electoral register. If your name’s not on there you will find it much harder to get credit.
    • Cancel unused credit cards. This also reduces the chances you’ll fall victim to fraud if they were ever to be stolen.
    • If you have defaulted on credit agreements in the past, which normally means you’re three months in arrears, then this will really affect your credit rating. Try negotiating with your lender and offer to pay all or part of the outstanding debt and see if they will remove the default from your credit report.
     
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  24. jbcarioca
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    jbcarioca Gold Member

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    Just as a technicality, all FICO scores are not the same, nor is the same FICO model used by all three bureaux. There are differences, almost always minor, in the way some information such as credit lines/high credit and merge/purge processes, among other things are handled. Major lenders use different bureaux for different purposes and also have geographic bureau preference for individual review. It would be a surprise were the scores the same between the three. That said, as you point out, errors are common. In quality audits as much as 25% or more of all credit reports have errors. Most of them are not really consequential but some are.

    Several years ago I found out I had an improperly merged file when it turned out that my file was merged with another person who had my complete name, a social security number which matched then first five digits. The other person was quite different than am I; he was half my age, and was serving time in a prison on a conviction for armed robbery. Mine showed up in my application for Global Entry. Luckily the other guy was still in prison and had skin color quite dramatically different than mine. The GE people cleared that one for me. For reference, many obvious merged file errors are caught by financial institutions doing reviews, but reviewing them yourself is essential! I agree with you completely about that.

    Owning your residence does make a positive in many credit scoring algorithms, including many developed by FICO, but is very rarely part of a typical credit card risk model, although it is part of many charge card models. In any event it is rare than having a mortgage would raise a credit score substantially. Having a mortgage and a generic FICO of 790 or above WILL produce screening/exclusion for many credit card offers. Why? Propensity-to-borrow models are also used and owning your own home with a high credit score, same address, family status and employment for more than five years is a major negative factor in many propensity-to-borrow models.
     
  25. NYCUA1K

    NYCUA1K Gold Member

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    A technicality it is. As my "academic exercise" indicated, the FICO scores from the 3 majors bureaus can be reconciled quite well if one starts with the same input data. The 16 point spread has not changed since the reconciliation, meaning that no new differential exists among the 3 bureaus databases. What I need to do is to let Experian know that it is time for them to stop penalizing me for the "hard pulls" since it has been almost a year when I applied for credit; that should make the three scores virtually the same. Like you said, and I agree, it is a technicality. The scores may or may not be the same depending on which factors in the FICO model an agency decides to emphasize. The three major bureaus seem to walk in lock step...
    Wow, what a coincidence! The incident does make a strong case for doing periodic checks of one's credit records.
    MY FICO score has been just below 800 for a long time, even when there were no "hard pulls", and the only "negative" that all three bureaus could point to was that I had not taken out a mortgage loan. I believe that if I take out such a loan, my score would get over 800. Do I need it to be higher? No, because I have not had a hard time getting approved for credit; it has usually been instantaneous approval.
     
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