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Hmm that sounds a little bit strange. Although, if you opened a card fairly recently, your credit will have taken a hit but it's supposed to bounce back up. Do you have any outstanding claims or anything like that? My FI thought his credit was great until he checked it and it turned out he had two marks against him for outstanding medical claims that he didn't know anything about (one wound up being a mistake, the other was just a doctor's office).
I am not a finance expert AT ALL so I'd be interested to hear other people's responses to this.
I actually opened up that second card a week or so ago...so maybe that has contributed. And no - I don't have any claims - there was section on the report for that and I have none. I don't know Miss Burgandy it's all very confusing...I'm definitely not a financial expert either! Thanks for the advice!
Credit can be very confusing. There are lots of things that can effect your score such as how long you've had credit and the types of credit you have ( credit cards,student loans,car loans,mortgage,ect) It sounds like you aren't planning to purchase anything big for a few years so as long as you pay everything on time you shouldn't have a problem. Try to never use more than half of the limit on your credit cards. If you need to buy a house right now many banks can also look at alternative forms of payment history like a gym membership( if you've had it over 2 years) or tithing.
Also, just to toss this out there- AAA has this credit monitoring thing where you can sign up and monitor your credit for any changes. It's pretty neat! I started using it a month ago and it gave me info on my score and whenever someone checks my credit I get notified!
Yes, it's bizarre, but that is how it works.
If you have no history of accumulating debt and paying it off, credit companies view you as a higher credit risk than, say, someone who has had a car loan, high student loans, or a credit card balance,, for the last 10 years, but has made regular on time payments. To lenders, payment history, and demonstrating an ability to make regular payments on an account is almost as important as a low debt-credit ratio.
I agree with PP not to use more than 50% of credit on a credit card. Also, don't close any open accounts (and also don't apply for a bunch of new ones). Those things also affect your credit.
Erindesmar - thank you - that actually makes sense...although I still think it is dumb that we get penalized for not having debt. But I do see that it's important to have a history of paying off debt in a timely manner. I'm sure my fiance and I will accrue debt sooner or later especially when we buy a house in a few years!
Yea we usually never use more than 15-20% of our credit on our card. And I guess since we got a new card that we should keep open our other credit card account as well? I was thinking of cancelling it but now I guess we should keep it open.
Thank you :)
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Just an FYI - if you pay off your credit card every month, it actually does nothing to boost your score. I dont know that it hurts it, but it definitely doesnt change it. You have to actually carry a balance and maybe monthly payments in order to boost the score. so counterintuitive right?!?!
This kind of makes sense, because if you charge to the card and then pay off each month, you are showing you are reliable and good for your money, right?
I guess that's what I would suggest. I use my credit card every now and then for large purchases, and then usually pay them off over a few months. I did have some credit card debt for about a year where I just could not pay the balance off, but I paid the min each month and finally got it under control this year, and my credit score is considered pretty high. (I think).
Good luck!
Also, if you CHECK your score, your score goes down! that's what irks me! I hate the whole credit system.. I have a high score, but still get denied certain cards because I don't have a house or have 1 card with a high debt-credit ratio. They make it hard for you.
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Yea that's the confusing part nada122 - how do you build up good credit if the only way to acquire good credit is to already have good credit in the first place?!?!?! What a cycle!
I feel so bad for people who have horrible credit - from what i've learned about this today, it seems like the way the system is now would make it nearly impossible for anyone to climb out and boost their score into good standing.
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Actually, what Nada said isn't quite right. If you check your own score, it is not affected. However, if you apply for credit and that company checks your score, your score takes a hit. Basically, if you're constantly applying for new credit, they take that as a bad sign.
http://debtcurestore.com/2009/06/26/does-your-credit-score-go-down-by-checking-it-online/
I've always been confused by the backwards nature of the FICO/credit score. Basically, they're rewarding you with a higher credit rating for going into debt and proving that you can pay it off. So if you have cash in your savings and the income to support your mortgage, and want to buy a house but have never had a credit card or loan, mortgage companies will penalize you because you won't have accumulated a good credit score. It's so confusing and backwards!
I've found lots of good answers and helpful advice on Dave Ramsey's website: http://www.daveramsey.com/tdrs/index.cfm/Credit-score He's a big advocate of getting out of debt, paying cash for all future purchases, and saying "Who cares" to having a credit score. I wish it were that easy! The reality is that most of us have credit card or student loan or car payment debt. But being debt-free is definitely something I'm striving for! A low credit score might bite me in the butt later on but I'd rather be debt free than trying to prove to a stupid credit card company that I can make a monthly payment.
I've also read Suze Orman's (http://www.suzeorman.com/index.cfm) book Young, Fabulous & Broke, which provided helpful insight into the FICO scores and other financial info.
Kosstobe - Thank you so much - I think I'm going to go to my library today and see if Suze Orman's book is on there. I've watched her show before and she is a very intense person but she definitely gives good advice.
Haha yea if only it were that easy to pay in cash and never worry about a credit score. My fiance and I joke about building a house in a remote location in the woods and living off of wild game and vegetation so we can drop off of the grid. Then our credit score etc. wouldn't matter. But we both happen to enjoy modern amenities (such as flushable toilets and the internet) so we definitely will have to remain as members of society. :0)
My credit score is 792. Yeah, I know I'm a bad ass. This is why:
-I'm 27 and have had some sort of credit card balance since I was 18. I currently have 2 credit cards
-Never had any late payments
-Financed a car in 2004
-I do not own a home
One note: I've heard that if you receive lots of 'pre-approved' credit deals in the mail that it's bad for your credit score. It's viewed as 'potential debt' even if you don't sign up. You can opt out of this, but I'm not sure how.
your score depends on many things. if your debt-credit ratio is high, that can hurt your score. paying it off monthly, whether in full or not, helps you because it shows a good track record. having a card active for a long time is good for the same reason. opening and closing lots of credit cards hurt your score. credit scores are strange and each of the 3 major credit bureaus calculates it differently.
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I am with poli2b. I am lucky and have a very high score. I am only 22, but here is how I got it:
-Before I left for college I needed a new PC and wanted to pay for it myself, I got approved for a 500 best buy card and then paed some cash, maxed out the card and then paied it off in like 3 months.
-got a "personal loan" for 3000 to buy a car from my grandpa. no late payments
-pc broke and needed a new one. I do a lot of photo editing and gaming so I needed something that could handel it. I had good credit by this time, so I got approved for the best buy mastercard, used half the max for a pc and am paying it off slowly but surly.
What I find really funny is that becuase im a student and dont have too much of "provable income" because I work in tipped based jobs(bartending. My debt to income ratio was too high for me to get a car loan, but my FH who has a crap credit score was able to be a co borrower with me bc he has a decent income...but he cant get a loan b himself for anything...
Also, with the preapproved credt card stuff... I just looked at my credit report and there are no inquries on there that we didnt make for the car loan, and I have been getting those offers since i was 17. If you really are concerned about them hurting your score and you dont need a new line of credit in a hurry you can alwaays put a freeze on your credit. That basically makes it impossible for anyone to hit it or open a new line of credit without you calling and unlocking. It takes passwords and personal info to unlock it so not just anyone could do it.. I knwo people that have done that after having identity theft issues.
I don't think that you have to have a "debt" perse to get higher credit rating. It's the fact of establishing good credit. If you don't have credit cards you can not establish credit. Good or bad. I'm not saying to run out and apply to 50 million cards. But if you're fairly young, have not much in your name then it makes sense that your credit is about average.
You can go to www.annualcreditreport.com yearly and get a full detailed credit report from all 3 agencies. They are the ONLY FTC (Federal Trade Commision) authorized source to get your free credit report. I recommend doing this yearly and looking through EVERYTHING. If they have your name wrong, listed addresses wrong. Credit cards that they think you have. This does NOT affect your credit score.
If you're truly worried about it I would look more into it -like you already are- from reliable sources. Don't listen just to us, after all we're just the average Jane as well. :) Keeping a good credit rating is easy, getting rid of a bad one is MUCH harder. An average bad report on your credit report can stick around for 5-7 years.
Here are some more useful tips: http://www.ftc.gov/freereports
Thank you for all the suggestions and advice - I'll be doing some reading and research of my own too. Happy 4th of July weekend :)
Just curious, does anyone know what is considered to be a "good" credit score?
According to Experian.com, the U.S. average credit score is 693, generally a score above 700 is considered good.
http://www.experian.com/credit-education/what-is-a-good-credit-score.html
Another question since now I'm thinking about this subject... how much do one or two late payments affect your credit score? Do utility payments count towards your credit score?
In the month or two before our wedding I had so much going on (wedding stuff, my grandmother passed away, job stress) that I was a few days late paying one of my credit card bills -- total accident, I thought I had set up my billpayer to do it but had never pressed "submit" because I was such a scatterbrain. I promptly paid and called my credit card company to see if they could waive any sort of late fee because it was the first time I had been late, but they wouldn't budge. How poorly does this reflect on my credit?
Credit Score in Canada isnt the same...
so I cant really give my take on it.
But I have several credit cards, and even if I made a couple of late payment in my whole life, that hasnt affected my credit score.
If you have more than one credit card and you dont use it... call to cancel it. (That looks really good in your file - the fact that YOU requested to cancel the card)
Well, it makes a difference here in Canada
Cupcake, I think if it was only a few days it won't affect it much, if at all. If it was over 30 days late it will show up as so on the report. There are so many other factors that go into computing the score though. If paying a few days late once is your only offense and you're clear in other areas, your score shouldn't suffer.
I use Credit Karma to check my score each month, it's a soft score, so it does not affect your credit report (but it does show up that you checked, just doesn't lower it). Anyway, a couple months ago, I goofed and paid a store credit card 2 days late. My score went down 10 points! However, the next month it was back up, but unfortunately, it does affect it sometimes. :(
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So I just checked my credit score for the first time. I'm in good standing at a score a bit higher than the average score. I wondered why it was lower than I thought it would be because I only have a few thousand dollars of school debt and I have two credit cards one of which has a $0 balance and one that my fiance and use regularly but pay off in full at the end of each month. The credit report gave me a few reasons why my score was negatively affected:
1. We do not have any real estate loans like a mortgage
2. I do not have any retail credit cards (like a Kohl's or Sears' card)
3. I have too few accounts (?? are they penalizing me for having too few credit cards?)
4. The time between now and when I opened my most recent credit card is too short (and that is bad apparently...sorry I can't make time go faster credit union people!)
WHHHAAATT? Does this seem counterintuitive or is it just me? I thought it was good to NOT have many credit cards or store credit cards. And as far as the mortgage goes, my Fiance and I are 22 and 23 and have only been out of college for a year so we're not quite ready to buy, but we'll get to that in a few years...but why is that a bad thing that we are not taking out hundreds of thousands of dollars in loans?
This is so confusing that my score is lowered because I don't have debt basically...am I understanding this correctly or am I missing something? Does anyone work in finances etc. (or have life experience) that could help me understand this?
Thank you :)