Credit Score/Use Of Credit

[Sepultura]

http://en.wikipedia.org/wiki/Credit_score

interesting how they score your credit worthiness and how many tens of scores exist for one individual.

my question is this: it says that 30% weight is given to "capacity used: the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)"

so is it bad if you don't use your credit cards, and will that make you have a lower score? I ask because my score right now is 768, and my 3 cards together (visa, MC, amex) have a credit limit of $25k and i have a balance of only $1300, which will be paid off promptly, before that i never really used them except to pay bills and paid them off asap, so it it bad to have a bunch of credit and never use it?

 

[Doug]

I just bought a house and I know the lender looked at how much credit I had used and what I had available. I thinks ok if you are responsible with it, but, if you have a LOT of open credit and lets say you buy an expensive car or house, they could look at you as if you had it maxed. I dunno, just my opinion.

 

[Sepultura]

i've been told by people that you have to buy your credit score - i.e get into significant debt and make monthly payments, sometimes late to incrue interest so you make the lender more money, and that way you get a better score... so no debt, not a good score.

 

[JHZR2]

Capacity used is bad...

You want to be using as little of the caqpacity that you have (but you do want to use some of it all the time, to keep good ontime payment history growing). Supposedly it also helps if you have stretched the percentage of total that you have, and paid it off fuly and without missing or being late.

Supposedly having lots of excess credit to use does not count against you. I think thats why the the capacity used ratio is important. However, it does seem that if you have a LOT of credit, used or unused, and low salary or no salary, then it might be a stretch to give you more, which you coulg get tempted to use.

JMH

 

[JHZR2]

quote:

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Originally posted by Sepultura:
i've been told by people that you have to buy your credit score - i.e get into significant debt and make monthly payments, sometimes late to incrue interest so you make the lender more money, and that way you get a better score... so no debt, not a good score.

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Getting into debt and paying it off over time to incur interest is supposedly good.

Paying anything late is VERY BAD. You incur interest by not paying all your balance prior to the due date, but AT LEAST paying the MINIMUM DUE as it is presented in your statement.

JMH

 

[The_Jeff]

I paid late once due to a mistake on the credit card company's part.

You would not believe the solicitations that came in the mail after that.

Ones credit score and their ability to obtain additional credit may not be a 1:1 correlation.

 

[Sepultura]

but paying off the ENTIRE balance on the first staement is bad, because they make no money on you... like eljefino pointed out, they will come after you in a good way.

i'm wondering if they look at me like i have 3 heads considering how in debt most americans are.

 

[JHZR2]

Solicitations because they know that if one company could rack the fees then they all can... and if youre missing payments, you very well be in financial hurt, needing credit, so they want to be the first to give you a new line with a high rate.

Trust e, if you pay late, theyre not sending the solicitations with the best of the best deals... right eljefino?

If you have good credit and pay everything off, they look at you like you have 3 heads, but Ill bet they send you lots of solicitations for 0% introductory credit cards and similar 'offers'... if not yet, its just time before they try to tempt you into debt to line their pockets.

JMH

 

[wileyE]

Read somewhere the exact formula's used to determine scores and ratings are not for public consumption. Also that they are fluid and change quite often depending on the money supply. A person with the same "score" or rating could get money today, but next year may have trouble.

 

[Sepultura]

wileye - might be true, cause i know of a few people with scores a little better than mine who have gone to either get a home loan or car loan and were given offers of anywhere between 15 to 22% financing, for a score higher than mine, those rates are for the 500 folks. But i learned from their experience that the best bet is to go to your bank, one you have used for a while and get a loan through them with a much better rate, and then go get your car/house, that way there is only one application for credit on your file and you don't have to pay an artificially inflated rate, that the dealer is probably getting a fat kickback from.

 

[JHZR2]

If you have no debt, pay everything in full and on time, and have a score in the 500 range...

you havent developed a real credit score yet...

Get a little car loan, keep a balance on your CC (but pay the minimum balance on time, every time), or take a small loan from a bank.

If you are paying everything on time and dont have any issues in your past... you should be up in the 700s.

JMH

 

[Master ACiD]

i really dislike credit but it is a nessassary evil because insurance companys base youre car insurance rate in part by youre credit rating. i dont know what a credit rating has to do with car insurance, if you ask me i think its just a way to charge more for insurance but i dont make the rules i can only play by them. if it were not for this and only this sole reason, i would not have a credit card. a check card does everything i need and offers all the protection of a credit card.

i was talking to my insurance agent last year and she mentioned that if i had good credit i would probably save about $200 a year on my car insurance. at the time i didnt have bad credit or good credit. i had no credit. i never had a credit card before.

so i went to walmart and filled out a credit card application, and got approved for $150. ive been using the card and even got a visa credit card issued from my bank. now i own 2 credit cards and a check card. i try to use credit whenever i can to build up my credit rating so i can get cheaper car insurance. i never use my credit cards for anything that i wouldnt normally use my check card for so i can avoid overspending which i hear is a problem for most people in america, and i awalys pay off the balance in full each month.

so far ive been pretty good at this. i have never been in debit in my life and i have alot of spare cash saved up in my bank account. i wish i didnt have to do this because i honestly believe credit card companys are evil. they are the closest form to a stereotypical "devil" that i can imagine.

 

[Razl]

quote:

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so it it bad to have a bunch of credit and never use it?

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No, but is does little to help you. One factor is how long you've had access to credit so don't go canceling your oldest card just because you don't use it. Also, closing a card will reduce your credit limit (currently $25K), and slightly reduce your score. Why?

A $1300 debt on a $25,000 puts you at a 5.2% "capacity used". Increasing your debt and/or decreasing your available, will increase your capacity used and lower your score (even if slightly).

But don't sweat it too much since your FICO is over a 750 putting you in excellent position to get the best rates on a loan. Great discipline!

 

[Sepultura]

JHZR2 - thats the thing, I've never gotten a loan for anything, car, house, nadda. Just applied for a US Bank college visa and they gave me one, i bought tiny things with it and paid it in full evertime, then when the card expired they gave me a gold card, currently at $8500 limit, that got me an american express, now at $14,900, and a mastercard from my bank (credit, not debit) for $3,000, so i guess it's just over $26k in credit. So master acid, thats the plan, you are on track man.

Razl - i see, good info for sure.

it's funny that not one of these CC's asked where i worked or how much $ i made, just kept upping my limit.

quote:

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i was talking to my insurance agent last year and she mentioned that if i had good credit i would probably save about $200 a year on my car insurance.

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i heard you can do that just by switching to Geico.... j/k