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Loan and credit score
Posted on 7/7/10 at 3:07 pm
Posted on 7/7/10 at 3:07 pm
I'm 19 and just finished paying off my first loan($1500). All payments were made on time, and my mom who has nearly perfect credit cosigned for me. Now I really don't know how the credit system works too much, but my question was how much did paying this loan off improve credit? Will it help me out when I go to apply for a credit card in the near future?
2
Posted on 7/7/10 at 3:11 pm to Chrisgriffin
quote:
how much did paying this loan off improve credit? Will
A lot. At your age, the biggest knock on you is that you have no credit.
quote:
Will it help me out when I go to apply for a credit card in the near future?
It will help out a whole lot. See first response.
Your credit score is probably still pretty shabby, but if you get a credit card and pay it off on time, every month, you will boost it up in no time.
Posted on 7/7/10 at 3:14 pm to TheHiddenFlask
Yea the main reason I got the loan was to build credit. I was planning on getting a 200 or 300 max credit card just to put gas on and pay it off.
Posted on 7/7/10 at 3:18 pm to Chrisgriffin
quote:
Yea the main reason I got the loan was to build credit. I was planning on getting a 200 or 300 max credit card just to put gas on and pay it off.
Get the highest limit that you can, assuming you trust yourself enough.
1) overcharge fees are lame.
2) Higher credit = higher credit score.
You should check out creditkarma.com
Posted on 7/7/10 at 3:21 pm to Chrisgriffin
quote:
I was planning on getting a 200 or 300 max credit card just to put gas on and pay it off.
Good card for limited credit
Good card for fair credit and 2% back on gas; but $40 a year
Posted on 7/7/10 at 3:52 pm to Chrisgriffin
200 - 300 max card and only one card IS A BAD IDEA! It can kill your credit score. You say you want to just pay it off monthly and put gas on it. Say it costs you 150 a month in gas. If you have a 300 limit thats 50% Credit to Debt ratio! Big hit and even worse if you have a 200 limit.
Yea you are paying it off monthly but you have to know the exact reporting day the bank uploads its file to the CRA's if you pay it off before that then you are fine if not then your credit score will get killed due to high utilization.
Yea you are paying it off monthly but you have to know the exact reporting day the bank uploads its file to the CRA's if you pay it off before that then you are fine if not then your credit score will get killed due to high utilization.
Posted on 7/7/10 at 4:00 pm to Catman88
Like I said I don't really know about this stuff. Why is it bad if I don't max the card and still pay it off?
Posted on 7/7/10 at 4:17 pm to Chrisgriffin
A critical component of the scoring systems is your debt to credit ratio.
If its under 20% you are ok. If its over your score will be hurt depending on how much over.
If you have 1 Credit Card with a 300 limit then any amount of money on your card can hurt. If you have 150 on it when your CC reports to the CRA then you will have a 50% reported and can take a big hit. Maxing out one card is not even that big of a deal if you have 2 cards 1 with a 2000 credit limit and the other with a 500 limit. If you max out the 500 card you are still at 20%. Its the overall debt to credit ratio not individual.
Best thing would be to just never go over 20% no matter the limit. But $40 on a 200 card isnt going to go very far.
Like I said before you can pay it off monthly on your due date but if the company reports to the bureau 5 days before your due day then it doesnt do any good as far as your score is concerned.
If its under 20% you are ok. If its over your score will be hurt depending on how much over.
If you have 1 Credit Card with a 300 limit then any amount of money on your card can hurt. If you have 150 on it when your CC reports to the CRA then you will have a 50% reported and can take a big hit. Maxing out one card is not even that big of a deal if you have 2 cards 1 with a 2000 credit limit and the other with a 500 limit. If you max out the 500 card you are still at 20%. Its the overall debt to credit ratio not individual.
Best thing would be to just never go over 20% no matter the limit. But $40 on a 200 card isnt going to go very far.
Like I said before you can pay it off monthly on your due date but if the company reports to the bureau 5 days before your due day then it doesnt do any good as far as your score is concerned.
Posted on 7/7/10 at 7:20 pm to Chrisgriffin
One idea on a visa is a share/savings secured visa. I know at my credit union you pay a lower rate because the visa is secured by your savings account (they put a hold on the money so you can't use it) but they will give you a limit of up to what is in the account.
Posted on 7/7/10 at 7:49 pm to East TN Tiger
quote:
One idea on a visa is a share/savings secured visa. I know at my credit union you pay a lower rate because the visa is secured by your savings account (they put a hold on the money so you can't use it) but they will give you a limit of up to what is in the account.
The secured card is a good idea if you have no credit at all.
As long as you continue to use your card and pay it down, it reflects positively on your report. I would recommend not paying a card off completely and just paying it down to a few dollars. It shows that you know how to manage your credit and keeps the account revolving. As long as you keep the balance below 30% (around 10% is best), you will maximize your credit utilization and boost your score.
Posted on 7/8/10 at 4:50 pm to LBAR18
I've been in the mortgage business 10yrs and I know all the tricks to getting your credit score up. One easy was is to ask your mom to make you an authorized user on one of her credit card that she has had open for a long time and has a solid pay history on. You can tell her you don't even need to know what card it is, so she won't think you're going to go and charge on it behind her back. My wife just became an authorized user on her bosses 50k AMEX and her credit score went up 70pts
This post was edited on 7/9/10 at 1:42 am
Posted on 7/8/10 at 8:14 pm to RiceNGravy
quote:Wonder if that effects his score.
My wife just became an authorized user on her bosses 50k AMEX and he credit score went 70pts
Posted on 7/9/10 at 9:04 am to NC_Tigah
quote:
Wonder if that effects his score.
If she is an authorized user she can technically request her own card and can drag his credit down.
I was under the impression you could not piggy back credit any longer at least from non relatives. People were actually paying companies to be an authorized user and maintain credit for them. I though something was done to stop that.
Now the thing is that if you do that and you are an authorized user on someone's card and something happens and they miss a payment you are hurt. But it does help your score.
Posted on 7/9/10 at 9:45 am to Catman88
quote:
I was under the impression you could not piggy back credit any longer at least from non relatives. People were actually paying companies to be an authorized user and maintain credit for them. I though something was done to stop that.
Piggybacking is still alive. The FICO model has been revamped and certain things are disallowed and certain scenarios do not give people a credit boost, but in many situations piggybacking still does offer the credit boost.
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