Credit, Credit Scores, and people who understand this stuff GTFIH

[brettthejett]

The following is regarding a CANADIAN.
Before I went to school I had incredible credit. Had three credit cards and a cell phone since I was 18, made above minimum payments earlier than on time.

When I went to school I continued to make payments on time, only this time I had abut $30,000 line of credit.

After school is said and done the line is maxed and so is the credit cards. Payments are continued to be submitted on time, and it should all be paid off within 18 months of graduation.

Here is my concern. I ran a credit report before and after getting this $30k line of credit. The second time I ran it my score had dropped 150 points, effectively bringing me from "Excellent" to "Poor"

This was on the report:

[h3]

[h3]What's Impacting Your Score[/h3]
Below are the aspects of your credit profile and history that are important to your Equifax credit score. They are listed in order of impact to your score - the first has the largest impact, and the last has the least.

Number of trades with high utilization

Utilization for revolving trades

Average utilization for open revolving trades

[/h3]


I could try to decipher this but in reality it's just financial jargon.

Basically my question is once all of my credit cards/lines of credit are paid off, will my score go back to excellent or even higher?

What are really efficient ways to build credit in the mean time? A friend once told me that carrying a balance of 70% on your credit card and making the min payments is the best for building credit. I always thought it was a maximum value?

 

[brettthejett]

The following is regarding a CANADIAN.
Before I went to school I had incredible credit. Had three credit cards and a cell phone since I was 18, made above minimum payments earlier than on time.

When I went to school I continued to make payments on time, only this time I had abut $30,000 line of credit.

After school is said and done the line is maxed and so is the credit cards. Payments are continued to be submitted on time, and it should all be paid off within 18 months of graduation.

Here is my concern. I ran a credit report before and after getting this $30k line of credit. The second time I ran it my score had dropped 150 points, effectively bringing me from "Excellent" to "Poor"

This was on the report:

[h3]

[h3]What's Impacting Your Score[/h3]
Below are the aspects of your credit profile and history that are important to your Equifax credit score. They are listed in order of impact to your score - the first has the largest impact, and the last has the least.

Number of trades with high utilization

Utilization for revolving trades

Average utilization for open revolving trades

[/h3]


I could try to decipher this but in reality it's just financial jargon.

Basically my question is once all of my credit cards/lines of credit are paid off, will my score go back to excellent or even higher?

What are really efficient ways to build credit in the mean time? A friend once told me that carrying a balance of 70% on your credit card and making the min payments is the best for building credit. I always thought it was a maximum value?

 

[tml09]

brettTHEjett wrote:
[h3]

[h3]
[/h3]

[/h3]


Basically my question is once all of my credit cards/lines of credit are paid off, will my score go back to excellent or even higher?

What are really efficient ways to build credit in the mean time? A friend once told me that carrying a balance of 70% on your credit card and making the min payments is the best for building credit. I always thought it was a maximum value?

Please, for the love of all that is holy, do not do this. I don't know what kind of sick twisted game your friend was trying to play, but that is surely not going to help your credit score.  Unless of course he meant "maximum"

. If you pay it off in full, then it should be closer to 30 pct utilization or less, so you're not straining the credit line (like you are w/ your 30k debt; more on that below).
A high utilization/availability ratio is most likely what's affecting your score (I believe that is what those three points are trying to say).  The only thing that will definitely help your score is paying it off on time. 

Personally, I wouldn't get a new credit card if you are going to buy a house/car in the near future, since just the act of opening one decreases your score slightly. If that's not the case, get one and use it for bills/food/etc. and make sure to pay off the full balance every month. That would help in the long run, but it's probably not going to a whole lot in the short run because, frankly, 30k is quite a lot to max. Once you do get that paid off, using your credit card for bills, etc.. and paying it off in full is a really good way to keep your credit high.

My advice is to continue making payments in order to quickly pay off your debt. 18 months from now is not now, so your score will go up. Pay it off quickly and as soon as you can.

 

[tml09]

brettTHEjett wrote:
[h3]

[h3]
[/h3]

[/h3]


Basically my question is once all of my credit cards/lines of credit are paid off, will my score go back to excellent or even higher?

What are really efficient ways to build credit in the mean time? A friend once told me that carrying a balance of 70% on your credit card and making the min payments is the best for building credit. I always thought it was a maximum value?

Please, for the love of all that is holy, do not do this. I don't know what kind of sick twisted game your friend was trying to play, but that is surely not going to help your credit score.  Unless of course he meant "maximum"

. If you pay it off in full, then it should be closer to 30 pct utilization or less, so you're not straining the credit line (like you are w/ your 30k debt; more on that below).
A high utilization/availability ratio is most likely what's affecting your score (I believe that is what those three points are trying to say).  The only thing that will definitely help your score is paying it off on time. 

Personally, I wouldn't get a new credit card if you are going to buy a house/car in the near future, since just the act of opening one decreases your score slightly. If that's not the case, get one and use it for bills/food/etc. and make sure to pay off the full balance every month. That would help in the long run, but it's probably not going to a whole lot in the short run because, frankly, 30k is quite a lot to max. Once you do get that paid off, using your credit card for bills, etc.. and paying it off in full is a really good way to keep your credit high.

My advice is to continue making payments in order to quickly pay off your debt. 18 months from now is not now, so your score will go up. Pay it off quickly and as soon as you can.

 

[hombrelobo]

^Great advice. Knowledge dropped.

Get those bills paid, son!

 

[hombrelobo]

^Great advice. Knowledge dropped.

Get those bills paid, son!

 

[jaypesoz]

Originally Posted by brettTHEjett

What are really efficient ways to build credit in the mean time? A friend once told me that carrying a balance of 70% on your credit card and making the min payments is the best for building credit. I always thought it was a maximum value?

You sure it wasn't keeping an available credit of 70% was what he said?  If you do that and listen to tml09 above, you'll be good

 

[jaypesoz]

Originally Posted by brettTHEjett

What are really efficient ways to build credit in the mean time? A friend once told me that carrying a balance of 70% on your credit card and making the min payments is the best for building credit. I always thought it was a maximum value?

You sure it wasn't keeping an available credit of 70% was what he said?  If you do that and listen to tml09 above, you'll be good

 

[mojodmonky1]

hahahahaha damn... your buddy must do business with me (I work in sub-prime lending). He is just trying to set his boys up to kill their credit so he can make money off of them when he needs to refer them to high rate lenders like me.

 

[mojodmonky1]

hahahahaha damn... your buddy must do business with me (I work in sub-prime lending). He is just trying to set his boys up to kill their credit so he can make money off of them when he needs to refer them to high rate lenders like me.

 

[mftioa]

Question - would it hurt my credit score if I closed 2-3 of my cards? I don't have a balance on any of my cards at the moment and I have a few that I never use.

 

[mftioa]

Question - would it hurt my credit score if I closed 2-3 of my cards? I don't have a balance on any of my cards at the moment and I have a few that I never use.

 

[mexclusive]

Originally Posted by MFTIOA

Question - would it hurt my credit score if I closed 2-3 of my cards? I don't have a balance on any of my cards at the moment and I have a few that I never use.

Depends if you have any credit plans in the near future. But if your not using them and you have a zero balance on all of them it should be fine. Just make sure its not the card with most time on your credit report.

Closing accounts usually hurt your credit ratios, so you may see a slight dip in your credit report but again if you dont plan on using your score near future it should be fine.

Basically your ratio is ( credit line used / total credit line) Say you have 2 card with max of $2000 each, and you have a revolving balance of  500/ month, that would mean 500/4000 is being used or about 13%. Its best to stay under 30% revolving debt. It takes into consideration credit, loans, and other lines of credit.

Brett, it just seems your using most of your credit line right now. I wouldn't worry about it too much since its a student loan and atleast you didnt go on a shopping spree. Just keep makin payments on time and as much as possible to bring down your ratio down. Check back in 6 month or you could calculate your own ratio. Plus credit scores get affected by anything, opening/ closing accounts, looking up credit reports, late payments...

 

[mexclusive]

Originally Posted by MFTIOA

Question - would it hurt my credit score if I closed 2-3 of my cards? I don't have a balance on any of my cards at the moment and I have a few that I never use.

Depends if you have any credit plans in the near future. But if your not using them and you have a zero balance on all of them it should be fine. Just make sure its not the card with most time on your credit report.

Closing accounts usually hurt your credit ratios, so you may see a slight dip in your credit report but again if you dont plan on using your score near future it should be fine.

Basically your ratio is ( credit line used / total credit line) Say you have 2 card with max of $2000 each, and you have a revolving balance of  500/ month, that would mean 500/4000 is being used or about 13%. Its best to stay under 30% revolving debt. It takes into consideration credit, loans, and other lines of credit.

Brett, it just seems your using most of your credit line right now. I wouldn't worry about it too much since its a student loan and atleast you didnt go on a shopping spree. Just keep makin payments on time and as much as possible to bring down your ratio down. Check back in 6 month or you could calculate your own ratio. Plus credit scores get affected by anything, opening/ closing accounts, looking up credit reports, late payments...

 

[brettthejett]

Great advice thanks guys.

His logic to maintaining a 70% balance on credit cards:
It provides the opportunity to show lenders/creditors that you are able to make payments on time on a regular basis; the foundation of why someone should have credit in the first place.

How is this better than paying off your amount each month? I don't want to conspiracy theorize but the interest you pay on a higher balance is almost like 'purchasing' a good credit score. The CONSISTENCY to paying your monthly payment on time shows you are reputable.


.....this could be completely wrong though

 

[brettthejett]

Great advice thanks guys.

His logic to maintaining a 70% balance on credit cards:
It provides the opportunity to show lenders/creditors that you are able to make payments on time on a regular basis; the foundation of why someone should have credit in the first place.

How is this better than paying off your amount each month? I don't want to conspiracy theorize but the interest you pay on a higher balance is almost like 'purchasing' a good credit score. The CONSISTENCY to paying your monthly payment on time shows you are reputable.


.....this could be completely wrong though

 

[crcballer55]

Originally Posted by brettTHEjett

Great advice thanks guys.

His logic to maintaining a 70% balance on credit cards:
It provides the opportunity to show lenders/creditors that you are able to make payments on time on a regular basis; the foundation of why someone should have credit in the first place.

How is this better than paying off your amount each month? I don't want to conspiracy theorize but the interest you pay on a higher balance is almost like 'purchasing' a good credit score. The CONSISTENCY to paying your monthly payment on time shows you are reputable.


.....this could be completely wrong though

That's EXACTLY what your credit score is.  You "purchase" it by utilizing debt debt.  Anyone who says that you need to maintain a balance on your cards to obtain a good credit score is either 1) ignorant/misinformed or 2) lying to your face.  I have never carried a balance on any of my cards and have an excellent score.  Actually, I have closed all but 2 cards with my name on it and my score barely moved. 

To the brettTHEjett, your score went down because you recently opened an account with a large line of credit.  This will substantially decrease your average timeline of all accounts.  Pay off what you have in full like you planned and worry about keeping your bank account in great shape more so than having a good credit score.  You'll eventually be able to buy things with cash if you keep your priorities straight.

 

[crcballer55]

Originally Posted by brettTHEjett

Great advice thanks guys.

His logic to maintaining a 70% balance on credit cards:
It provides the opportunity to show lenders/creditors that you are able to make payments on time on a regular basis; the foundation of why someone should have credit in the first place.

How is this better than paying off your amount each month? I don't want to conspiracy theorize but the interest you pay on a higher balance is almost like 'purchasing' a good credit score. The CONSISTENCY to paying your monthly payment on time shows you are reputable.


.....this could be completely wrong though

That's EXACTLY what your credit score is.  You "purchase" it by utilizing debt debt.  Anyone who says that you need to maintain a balance on your cards to obtain a good credit score is either 1) ignorant/misinformed or 2) lying to your face.  I have never carried a balance on any of my cards and have an excellent score.  Actually, I have closed all but 2 cards with my name on it and my score barely moved. 

To the brettTHEjett, your score went down because you recently opened an account with a large line of credit.  This will substantially decrease your average timeline of all accounts.  Pay off what you have in full like you planned and worry about keeping your bank account in great shape more so than having a good credit score.  You'll eventually be able to buy things with cash if you keep your priorities straight.