Improving credit score.
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Improving credit score.
Posted by LordSnow on 11/11 at 3:56 pm
So, Lets say $ isnt really an issue.
All the monthly bills are paid on time.
Nothing left in collections
Some student loans but in good standing
I have 2 Credit Cards with 0 balances

My plan is to start paying a monthly bill with each one and then paying them off each month to start some churn. But I'm reading some places that actually carrying a small balance on each is actually more beneficial to your scores. What Sayeth the financial wizards of the OT?



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Posted by wegotdatwood on 11/11 at 4:04 pm to LordSnow
quote:

But I'm reading some places that actually carrying a small balance on each is actually more beneficial to your scores. What Sayeth the financial wizards of the OT?




Just pay the shite in full. Don't worry about carrying a balance.



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Posted by foshizzle on 11/11 at 5:00 pm to LordSnow
Unless you have a very very low teaser rate of some sort carrying a balance is almost never a good idea.

That said, it is a good move to use a card and pay it off every month. The ending balance will appear on your credit report as credit utilized even though you are paying it off.



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Posted by LSUtigerME on 11/11 at 5:49 pm to LordSnow
So why are you trying to improve score? Young, past problems, or what?

For the credit card issue, I use one to get the points/rewards, and pay it off every month. I shift my payoff date from the due date (ie payoff on 1st, due on 8th) so it's reported as ~$400 balance each monthly vs $3k-ish paid off.

Otherwise, only way to improve is time and use. Staying in good standing on loans, not requesting a bunch of credit, and keeping debt/credit ratio in check.



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Posted by jso0003 on 11/11 at 6:35 pm to LSUtigerME
quote:

Otherwise, only way to improve is time and use. Staying in good standing on loans, not requesting a bunch of credit, and keeping debt/credit ratio in check.


Can you explain the not requesting a bunch of credit part?

Just curious because I keep trying to get a limit increase on one of my cards that only has a $500 limit.

I have 3 cards one with a $5000 limit, a $3000 limit, and then that crappy card with a $500 limit that I don't use.

My credit score is high 700s and I don't carry a balance on any of my cards. I know that $500 dollar limit card probably hurts my credit but would I be better off waiting until I can get it increased or should I just cancel it?



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Posted by LordSnow on 11/11 at 6:37 pm to LSUtigerME
Past issues from years ago that are all clear now.
I only plan on having the 2 cards and only like 150.00 on each one each month with them being paid off each month.
I plan on purchasing a house in 6-8 months and dont want my "ok" credit to be a henderance. Debt to income ratio is already awesome. Plus if we decide to buy a car later I would like +720



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Posted by JonTheTigerFan on 11/12 at 9:46 am to LordSnow
According to people in the know, it is best to keep a zero balance on all revolving accounts except one. On that one, you should keep a balance of between 1 and 9% of the limit. Since you have 2 cards, you should carry a small balance on one and pay the other one off in full before it reports every month. You need to use it, though, or you risk the account being closed.

Like someone else said, don't apply for any more credit or limit increases until you are ready to get approved for your new house. Hard inquiries will bring your score down for a year and will show up on your credit report for 2 years.

ETA: make sure you know your FICO score. All other credit scores can be useful in tracking your progress but useless when it comes to finding out whether you qualify for new credit.


This post was edited on 11/12 at 9:49 am

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Posted by mglsu21 on 11/12 at 11:37 am to LordSnow
quote:

But I'm reading some places that actually carrying a small balance on each is actually more beneficial to your scores


Your credit score is basically a snapshot of your credit report at that particular time. Never plan on carrying a balance just to have a better credit score as the balance only will really matter at the time of you requesting new credit. I have seen that keeping a balance of 1-9% on one card does improve the score slightly....by about 10 points or so.

So if you do plan on keeping a 1-9% balance, only do it for the short amount of time in which you are requesting new credit. The interest that you will pay always keeping a small balance will not be worth the small jump in credit score.

Main thing to do is not have a ton of inquiries, pay all revolving lines in full each month if you can, never have a late payment, slowly try to develop a good mix of credit, and keep your DTI well within check. It is a long process, but if you do all those things then you will have no problems in the future.

Good luck!



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Posted by CajunTigerBabe on 11/12 at 12:59 pm to mglsu21
Most of what everyone else said is false. I help people improve their credit so they can buy a house.

1. Don't apply for any new cards
2. make sure your student loans are below the loan limit. I see loans all the time, due to accrued interest, that are above the loan limit. This hurts your score even if you are making your payments
3. Don't use more than 40% of your credit limit on anything.
4. Pick a card and make a $50 - $100 puchase. Check your limit. Pay the minimum amount each month until it is paid off. Then do it again and again. Yes, you are wasting money on interest, but this will bring your score up.
5. Make sure the credit scores you have checked are FICO scores. All other scores don't matter.
6. Don't cancel any cards that you already have. Leave them open even if you don't use them. Your credit is based on credit history and when you cancel the card, you cancel your history.



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Posted by GoHoGsGo06 on 11/12 at 1:58 pm to CajunTigerBabe
quote:

CajunTigerBabe
You forgot:
7. When applying for loans, if asking at multiple locations for the best rates, make sure you do them all within a short time span (a week), or else all the hard pulls on your credit history will start knocking your score down.



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Posted by Fat Bastard on 11/12 at 2:01 pm to GoHoGsGo06
quote:

7. When applying for loans, if asking at multiple locations for the best rates, make sure you do them all within a short time span (a week), or else all the hard pulls on your credit history will start knocking your score down.



true..... to the tune of what? 5 points a inquiry if not done in the small window of time?



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Posted by mglsu21 on 11/12 at 2:07 pm to Fat Bastard
quote:

true..... to the tune of what? 5 points a inquiry if not done in the small window of time?


Generally 4-7 points each inquiry. In the case of auto financing and mortgage lending, inquiries made within 30 days of each other get lumped together as 1 inquiry.

An inquiry stays on your credit report for 2 years, but only affects your credit score for a period of 1 year.



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Posted by foshizzle on 11/12 at 2:36 pm to JonTheTigerFan
quote:

it is best to keep a zero balance on all revolving accounts except one. On that one, you should keep a balance of between 1 and 9% of the limit.


Keep in mind that so long as you pay the balance in full each month you are still reported as having a balance as of the end of the statement period. There is no need to pay interest.



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Posted by CajunTigerBabe on 11/12 at 3:00 pm to foshizzle
quote:

Keep in mind that so long as you pay the balance in full each month you are still reported as having a balance as of the end of the statement period. There is no need to pay interest


This isn't always true. Just keep a very small balace and you will see your score increase. After you buy a house, never carry a balance again.



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Posted by LordSnow on 11/12 at 3:12 pm to CajunTigerBabe
So with a card that has a 500 limit and no balance on it now. Will it hurt or help to pay say my electic bill (180.00) each month and then pay that off?




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Posted by CajunTigerBabe on 11/12 at 3:27 pm to LordSnow
Don't use it to pay your electric bill. Go buy a tank of gas on it one time. That should be $60 or less. Pay the minimum on it until it is paid off, then repeat. That is it. Your score will raise.


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Posted by JonTheTigerFan on 11/12 at 3:28 pm to LordSnow
quote:

So with a card that has a 500 limit and no balance on it now. Will it hurt or help to pay say my electic bill (180.00) each month and then pay that off?


Just make sure you pay it off before the statement posts so the balance doesn't show when the CC company reports to the bureaus.



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Posted by LordSnow on 11/12 at 3:41 pm to JonTheTigerFan
Lots of conflicting info / opinions




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Posted by JonTheTigerFan on 11/12 at 3:45 pm to LordSnow
I went through a "rebuilding" phase and got solid advice from the MyFico credit rebuilding forum. Those people know their shite. I played around with my balances on my 2 CC's to get the highest FICO score. I tried zero balances on both, small balances on both, etc. my score was highest with a zero balance on one and less than 10% on the other.


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Posted by JonTheTigerFan on 11/12 at 4:11 pm to JonTheTigerFan
Oh, and I subscribed to MyFico score watch so that I could see any changes in my Equifax FICO score while I was rebuilding. So I know with 100% certainty how different balances affect your score.


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