(Closed) Credit Score Confusion

posted 9 years ago in Money
Post # 3
Member
1042 posts
Bumble bee
  • Wedding: May 2010

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 Fiance 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.

Post # 5
Member
2 posts
Wannabee

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.

Post # 6
Member
1042 posts
Bumble bee
  • Wedding: May 2010

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!

Post # 7
Member
2022 posts
Buzzing bee

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.

Post # 9
Member
2207 posts
Buzzing bee
  • Wedding: September 2009

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?!?!

Post # 11
Member
1042 posts
Bumble bee
  • Wedding: May 2010

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!

Post # 12
Member
100 posts
Blushing bee
  • Wedding: January 2009

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.

Post # 15
Member
100 posts
Blushing bee
  • Wedding: April 2010

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.

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