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Posted: 3/9/2006 10:44:48 AM EDT
This may or may not be a question that I'll get a decent answer to here among all you heathens, but JohnnyReno's threads got me thinking.

I won't sit and brag, but I *think* I have a good credit score. Mrs gorilla's was even better than mine before we were married, but neither of us have EVER been late on a payment on anything. I don't even know what the upper limit on a credit score is, but I'm curious, are there any ways to improve it?
Link Posted: 3/9/2006 10:46:23 AM EDT
Link Posted: 3/9/2006 10:47:20 AM EDT
pay your goddamn bills dumbass!

Link Posted: 3/9/2006 10:48:12 AM EDT
Bah, who needs it?
Link Posted: 3/9/2006 10:48:42 AM EDT
Upper limit is 850, anything over 750 is damn good.
Link Posted: 3/9/2006 10:48:45 AM EDT
Pay your bills on time and keep the balances below 30%. Don't close accounts that are already open even if they have no balance. Don't pursue credit that you don't need. All these are important. The highest theoretical score you can achieve is 850. The highest I have ever seen is 842.
Link Posted: 3/9/2006 10:51:27 AM EDT

Originally Posted By thelastgunslinger:
Upper limit is 850, anything over 750 is damn good.



That makes me feel better.
Link Posted: 3/9/2006 10:51:36 AM EDT

Originally Posted By vito113:
Keep making purchases on your Credit Cards and pay them off in full within the 52 day 'free' period.



Actually, that doesn't necessarily help your credit score, and it could actually hurt it (slightly). Your credit score is a reflection of how good (profitable) a person you are to loan money to. The fact that you don't ever pay any interest to credit card companies by paying off your full balance doesn't make you look more attractive to creditors.

Link Posted: 3/9/2006 10:52:20 AM EDT
If your over 740 don't worry about it. I think 850 is about high as it will go. There are many factors that affect a score. Payment history, amount of open credit, amount of credit being used in relation to amount of credit available, number of inquiries, history of credit length, and so on. Pay your stuff on time don't have an excessive amount of credit and keep low balances on what is available and your score will be good or improve, also limit the number of inquiries as much as possible.
Link Posted: 3/9/2006 10:57:58 AM EDT

Originally Posted By pliftkl:

Originally Posted By vito113:
Keep making purchases on your Credit Cards and pay them off in full within the 52 day 'free' period.



Actually, that doesn't necessarily help your credit score, and it could actually hurt it (slightly). Your credit score is a reflection of how good (profitable) a person you are to loan money to. The fact that you don't ever pay any interest to credit card companies by paying off your full balance doesn't make you look more attractive to creditors.




Very true.
Keep in mind that all your current credit cards = the amount of debt you "could" be in, theoretically. Say you have 10,000 limits on 5 cards. Combined on those 5 you have say, 5000.00 on account. That means that you are currently in debt for 5k but could tomorrow be in debt for 50,000.00 as far as the banks are concerned.

Banks DO look at that. So if you have cards you are not using and have no intention of using and WILL be needing a sizeable bank loan (car/home), close the cards. Everything you've signed for also goes "against" you. Say you co-sign a 20,000.00 loan for your kid. Technically, the banks view that as YOUR debt as well. So don't co-sign a debt for someone else that could adversely affect you.

Link Posted: 3/9/2006 11:02:21 AM EDT

Originally Posted By PlaymoreMinds:
Very true.
Keep in mind that all your current credit cards = the amount of debt you "could" be in, theoretically. Say you have 10,000 limits on 5 cards. Combined on those 5 you have say, 5000.00 on account. That means that you are currently in debt for 5k but could tomorrow be in debt for 50,000.00 as far as the banks are concerned.



I think I recall reading that they recently changed the way they figured this because it was a little silly and now they look at what percentage of the balance you hold on your revolving accounts. The lower the better.
Link Posted: 3/9/2006 11:02:52 AM EDT

Originally Posted By j-fonz:
Pay your bills on time and keep the balances below 30%. Don't close accounts that are already open even if they have no balance. Don't pursue credit that you don't need. All these are important. The highest theoretical score you can achieve is 850. The highest I have ever seen is 842.



This is all real solid advice. Low balances = low overall credit utilization. A low utilization is very good. Closing accounts can shorten your credit history, so don't close any. Paying on time is the most effective thing you can do, because having late payments on your report hurts. A track record of paying on time will raise your score continually over time.

Pursuing new credit is really up for debate. The only negative is you get hit with a "pull". That is when a lender checks your report. That "pull" stays on your report for 2 years. It's not a very big deal, and as someone who, for the last year has monitored score monthly while making some big moves, I can assure you... grabbing a new card because of a great offer isn't a big deal at all. Mostly the key here is not looking desperate.

My scores are over 750 and I've got higher utilization and shorter history then I would like. This month, utilization will drop to about 3-5% and student loans will be paid off early. I'm expecting good results. Next I have to shop around for auto financing, which is why I've kept such close track. Higher the score, the better the rate.
Link Posted: 3/9/2006 11:06:29 AM EDT

Originally Posted By PlaymoreMinds:
Very true.
Keep in mind that all your current credit cards = the amount of debt you "could" be in, theoretically. Say you have 10,000 limits on 5 cards. Combined on those 5 you have say, 5000.00 on account. That means that you are currently in debt for 5k but could tomorrow be in debt for 50,000.00 as far as the banks are concerned.

Banks DO look at that. So if you have cards you are not using and have no intention of using and WILL be needing a sizeable bank loan (car/home), close the cards. Everything you've signed for also goes "against" you. Say you co-sign a 20,000.00 loan for your kid. Technically, the banks view that as YOUR debt as well. So don't co-sign a debt for someone else that could adversely affect you.




Actually, the lines of credit available to you, really only matter when you go to get a mortgage. At that point, they will advise you as to how much credit is acceptable. You then look at your pros and cons.. you don't want to close your old accounts, and you dont want to lose good cards... so what you can do, is call the companies to have them lower your limits. Close a few cards which fall into "medium age, so-so terms" ... and then fall under the lenders guidelines.

You have to work the system, not let the system work you.
Link Posted: 3/9/2006 11:12:39 AM EDT

Originally Posted By dolanp:
I think I recall reading that they recently changed the way they figured this because it was a little silly and now they look at what percentage of the balance you hold on your revolving accounts. The lower the better.



In terms of new credit cards, or auto financing, YES.
In terms of house mortgages, they look at the overall.

Of course, having a history of paying everything, and paying on time, always helps. But for some reason, mortgage lenders make you slim down your available credit before they'll approve you. This goes based on annual income too, so for everyone, this experience will be different.

Thats why my best advice, is make no move till the lender tells you exactly what would be suitable to them. Then you make sure it won't be harmful to you. Theres other types of mortgages and many other lenders, so you always have plenty of options when and if something seems unreasonable.
Link Posted: 3/9/2006 11:18:58 AM EDT
Best way to get credit score is

1.) Pay your bills
2.) Have a history of paying bills
3.) Maintaining a good debt/credit ratio. (Having a high credit limit and low balance will help you.)
Link Posted: 3/9/2006 11:20:29 AM EDT

Originally Posted By dolanp:

Originally Posted By PlaymoreMinds:
Very true.
Keep in mind that all your current credit cards = the amount of debt you "could" be in, theoretically. Say you have 10,000 limits on 5 cards. Combined on those 5 you have say, 5000.00 on account. That means that you are currently in debt for 5k but could tomorrow be in debt for 50,000.00 as far as the banks are concerned.



I think I recall reading that they recently changed the way they figured this because it was a little silly and now they look at what percentage of the balance you hold on your revolving accounts. The lower the better.



If so, then I stand corrected. Sorry if I gave old info.

Link Posted: 3/9/2006 12:34:06 PM EDT
Some general guidelines from the Motley Fool:

FICO (and other credit scoring companies) offers different risk models to banks, insurers, and even landlords than it does to the general populace. Think of it as over-the-counter vs. prescription-strength versions of its product. There can be 20 or more points' difference between what you see on your screen and the report in your mortgage broker's inbox. At current rates, that could be the difference between qualifying for a 8% car loan or having to settle for a 10% one.

It might seem unfair, but consider that a credit score is really just a measure of how likely you are to repay a loan. The industry rightly assumes that you -- the consumer -- are not in the banking business. So your credit score is based on more general risk-assessment measures. Corporate clients, however, put their money on the line and use a more exacting measure of a potential client's likelihood of taking off to Tahiti with the bank's dough.

Still, that doesn't mean that the score is useless to you. In many cases the corporate and consumer numbers are completely in sync. While you have no control over the algorithm that your score is based on, you're very much in charge of everything else in your credit file. And it's this information that your mortgage broker, your car insurer, your potential employer, and anyone else interested in measuring your worth is plugging into its black box.

Even general guidelines about how a score is calculated are useful. Based on information directly from FICO, here's what matters most to those judging you:

1. Past payment history. Your payment punctuality weighs heavily (about 35%) on your credit score. The more recent your tardiness, the more points you sacrifice. Your credit report will indicate whether you are 30, 60, or 90 days or more late with a payment. A history of late payments on several accounts will cause more damage than late payments on a single account. On the flip side, by paying your bills consistently on time, you can greatly improve your overall score.

2. Amounts owed. Add up all of your outstanding balances and compare the number to the amount of credit that is available to you. If you are reaching -- or exceeding -- your credit limits (perhaps you've heard the term "maxing out"?), lenders will get antsy. This measure of your credit karma makes up 30% of your credit score. At the same time, if you aren't anywhere near maxing out your accounts, you want to make sure that the credit extended to you isn't out of proportion with your income. Interestingly enough, your score can be significantly affected depending on where you are in your billing cycle. You can add 20 points to your score the day after you pay your credit card bill (even if you pay in full every month).

3. Length of credit history. Fifteen percent of your credit score is determined by how long you've been using credit. Obviously, the longer your credit history, the more favorably lenders will see you. Your score in this area also takes into account how long it has been since you used certain accounts. So just having an idle card for 10 years won't necessarily raise your score. Don't open a lot of new accounts at once to establish a credit history. That strategy will lower the "average account age" on your score, which could affect your score negatively.

4. Amount of new credit. Each time you apply for new credit, an inquiry shows up on your report. Red flags start waving when you take on more credit -- or even just apply for new credit -- in a short period of time. This is one area where good habits can work against you. If you prove yourself a reliable bill payer, charge card issuers will be quick to offer additional credit.

Future lenders, however, may not take kindly to all this readily available credit. Some fear you will use it to go on a spending binge, quickly undermining standard calculations for determining how much additional debt you can shoulder. This area of credit management carries a 10% weight on your overall credit score.

When you shop for new credit (such as a home loan), try to do so in a concentrated period of time. FICO distinguishes a search for a single loan and requests for many new credit lines. (Note that requesting a copy of your own credit report -- even through our sponsor's limited-time 3-report/3-score deal -- does not affect your score.)

If you've had trouble with this area in the past, you can boost your score by re-establishing credit (not too much credit, though!) and making on-time payments.

5. Types of credit. Types of credit include credit cards, retail accounts, and installment loans (such as car loans and mortgages). Your use -- or overuse -- of these has a 10% impact on your overall score. Though you may be tempted to show what a good borrower you are by using all types of credit, more is not always better in the eyes of credit scorers. If you have had no credit, lenders will consider you a higher risk than someone who has managed credit cards responsibly.
Link Posted: 3/9/2006 12:41:45 PM EDT

Originally Posted By rkbar15:

4. Amount of new credit. Each time you apply for new credit, an inquiry shows up on your report. Red flags start waving when you take on more credit -- or even just apply for new credit -- in a short period of time. This is one area where good habits can work against you. If you prove yourself a reliable bill payer, charge card issuers will be quick to offer additional credit.




Awesome list...Question on the above point: If your M/C issuer decides to up you from 10k to 12k is that considered "new credit?" I ask because evidently, I may have misunderstood the "available credit vs. used credit" look that they give you.
Also, what about "Pre-approved" cards. I get 3 in the mail a day. Do those count adversely in any way, especially if you don't initiate or accept them?
Link Posted: 3/9/2006 12:47:22 PM EDT

Originally Posted By PlaymoreMinds:

Also, what about "Pre-approved" cards. I get 3 in the mail a day. Do those count adversely in any way, especially if you don't initiate or accept them?


Nope
Link Posted: 3/9/2006 1:02:38 PM EDT
[Last Edit: 3/9/2006 1:02:48 PM EDT by FALARAK]

Originally Posted By thelastgunslinger:
Upper limit is 850, anything over 750 is damn good.



Anything over 720 is considered *excellent* by most companies and gets you access to the best rates.
Link Posted: 3/9/2006 1:15:29 PM EDT
Link Posted: 3/9/2006 1:16:40 PM EDT

Originally Posted By PlaymoreMinds:
If your M/C issuer decides to up you from 10k to 12k is that considered "new credit?" I ask because evidently, I may have misunderstood the "available credit vs. used credit" look that they give you.



AFAIK an increase in available credit to an existing CC would not be considered new credit. An increase in your credit limit may actually raise your credit score depending on your percentage of outstanding debt .vs available credit.
Link Posted: 3/9/2006 1:24:53 PM EDT
Some more info from the Motley Fool:

Credit bureaus are nearly as secretive about their special formulas as Coca-Cola (NYSE: KO) is about the exact amounts of corn syrup and various 13-letter ingredients it uses to quench the world's thirst.

Like the soda-pop king's sugar-water ingredients, the credit-reporting industry's scoring recipe is proprietary. It's how companies like the inventor of the ubiquitous FICO score, Fair Isaac (NYSE: FIC), earn a living, after all. Unlike Coke, which is the same from the can, bottle, or fountain, FICO and its ilk offer different risk models to banks than they do to the general population. (Yet another scoring model gets peddled to insurance companies.)

There can be 20 or more points' difference between the credit score you order for around $5 and the one in your mortgage broker's inbox. At current rates, that could be the difference between qualifying for an 8% car loan or having to settle for a 10% one. Or a 30-year mortgage at 5.717% or 6.379%.

Oh, and just because Equifax says you're an 810, that doesn't mean that Experian agrees.

You say to-may-toe ...
To add further confusion to the grading scale, each credit-reporting agency uses a different scoring system. "FICO" has become the "Kleenex" of credit scores. The acronym is often used as if it were a generic term for "credit score." But "FICO," a term based on the name "Fair Isaac Corp.," refers to that brand and that specific product. Its consumer arm -- MyFico.com -- sells FICO scores based on the information from each of the three major credit-reporting agencies.

The only credit-reporting agency that sells the FICO-brand score to consumers is Equifax (NYSE: EFX). The other two major credit-reporting agencies, TransUnion and Experian, each sell a consumer score based on credit-risk formulas developed internally.

Depending on the mood of the marketing copywriters, you may find the scores being given various names. Not only that, but the grading scale is also different from agency to agency -- even though they all partnered with Fair Isaac to develop risk-assessment scores for business clients.

* When you shop at TransUnion, you're offered a "Personal Credit Score" ranging from 300 to 850. The company sells its business clients a "Classic FICO Risk Score" (formerly known as an "Emperica" score).

* Experian's consumer score is based on its own "PLUS Score" system, with scores ranging from 330 to 830. Its business-to-business score is the less catchy "Experian/Fair Isaac Risk Model."

* At Equifax, you can buy your FICO score (scale 300 to 850), which is the same score (called a "Beacon" score) that gets sold to businesses.

Yet another kink in the consumer-scoring system is the lack of complete reporting. Lenders (and other reporting entities, such as landlords and utility companies) are not required to report any business activity or relationship you two have engaged in to any of the credit-reporting bureaus. Obviously, most of the big banks do. But that doesn't mean they report their business across the board.

Your stellar history with First Bank of Firstness may only be evident on your TransUnion and Experian credit reports. So if a mortgage lender checks your Equifax report, he or she won't even use that relationship as a factor when deciding your interest rate. (Conversely, the lack of standard reporting across all channels can be a boon to those with black marks on their bills.) This same issue is why identity-watch services that guard activity on just one credit file are ineffective.

You can call your lenders and ask that they report account activity or even set credit limits -- which many refuse to do because they want to discourage competitors from poaching. But there is no law that requires them to comply.

The credit score pageant
Despite the lack of consistency in the credit-scoring world, the 2001 amendment to the Fair Credit Reporting Act (the one that lets us access our once-off-limits credit score) was a win for the average card-carrying citizen. Although the score you're sold is not the same one your lender uses to make his or her business decisions, it's a fair indicator of how you'll be judged.

While you have no control over the algorithm that it's based on, you're very much in charge of everything else in your credit file. And it's this information that your mortgage broker, your car insurer, your potential employer, and anyone else interested in measuring your worth is plugging into their black box.

In general, we know that past payment history accounts for 35% of your score. The amount of money you owe holds a 30% weight. How long you've been in the system makes up 15% of your final grade. The amount of new credit you apply for affects 10% of your score, and the types of credit (retail accounts, installment loans) has another 10% impact on your overall score. (Here's more detail on how lenders keep score.) But these are just general guidelines.

A lot of little things can leave a semi-permanent mark on your credit record, and there are certainly smart moves you can make (here are seven) that will improve your score -- and the score lenders see -- before you apply for a loan.

But until borrowers are allowed to see the same three-digit score that lenders use, view your credit score with a grain of salt and concentrate on the underlying information that goes into forming it.
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