Credit score improvement

[beatle]

I just got my credit report from TransUnion tonight. I'm doing ok without any real negative marks on it. I am curious, however, why these three things are listed as ways to improve my score:

1. Not enough revolving debt experience:
More revolving accounts, containing longer credit histories, provides more payment behavior information.
2. Too few premium bankcard accounts:
Not enough premium bankcard accounts has a negative impact on your credit score.
3. Length of time since oldest bankcard has been established is too short:
Longer credit histories provide more payment behavior information. Continuing prompt payments over a long period of time on the same accounts may improve your credit score.

Without getting into too much detail, I got my first credit card when I was 17 in Sept of 1997. I still have it and it has my highest limit. I never use it anymore, though. I generally use my MBNA cashback card (got this in Feb of 02) and my Citi Dividends card (got in Feb of 05) for purchases. I don't carry a balance on either card.

Last year when I got my first credit report from all 3 agencies, the #1 suggestion was that I had too many recently opened accounts. At that time, my Citi account was only a few months old. I haven't opened any new accounts since then. I can't really compare my score last year and the score I got today because they're computed differently now.

Is this advice to open more accounts a good idea? I've avoided opening accounts for promotional reasons as I've read that it's bad to have too many revolving lines of credit. I'd like to buy a house in the next 2-3 years, so I want to get my credit up as high as possible.

 

[axnff]

What they want to see is payment history. I just checked my credit the other day, and some banks don't report unless there was a payment due. So if no payment due, no history of making payments.

The best way to have good credit is to have low balances on high limits and take forever to pay them off. Of course, that is bad financial advice....

 

[everman]

I don't believe having a low balance you keep paying off little by little helps you at all, it seems to be a common misconception that you can buy good credit this way through paying interest.

Just keep low to no balance, you want to be as little leveraged as possible. Credit history takes time to build, one year at a time. Make sure you never make late payments or anything of the sort.

 

[beatle]

I have a student loan that I've been paying off every month since November of 02...

Is paying off the balance in full not as good as leaving a balance on the card? I don't really see how that makes sense.

 

[Aimster]

Open Two Savings Account

Put $500 in each

Go take out $500 loans and use the money in the savings as collateral.

Welcome to the 720+ club

 

[kranky]

Well, what IS your score?

 

[Viper GTS]

What is your score right now?

The thing with the "suggestions" is they always suggest SOMETHING. If there are no major issues with your credit those suggestions can be rather useless (like yours seem to be).

There will always be something they can ponit at and say "See your score could be higher if..."

Where you're at now is important to this discussion, you could very easily be in the 740's & get those suggestions (I do).

Viper GTS

 

[everman]

Originally posted by: Aimster
Open Two Savings Account

Put $500 in each

Go take out $500 loans and use the money in the savings as collateral.

Welcome to the 720+ club

Again, I don't believe that helps you at all, at least according to what I have read. I'd be very interested to see any proof that this works.

 

[Aimster]

Originally posted by: everman

Originally posted by: Aimster
Open Two Savings Account

Put $500 in each

Go take out $500 loans and use the money in the savings as collateral.

Welcome to the 720+ club

Again, I don't believe that helps you at all, at least according to what I have read. I'd be very interested to see any proof that this works.

It works.

I did it when I was 17. I had no credit when I did it. Zero credit.

At 18 I had a 720 credit score.

It shows up on your credit report that you have A) Savings B) Loans approved C) Payments.

Other than this I had no credit score. It helped establish my credit score.

 

[everman]

Interesting

 

[HexiumVII]

credit shoots up if you owe money. Shows that someone can actually make money off of you.

 

[QED]

Originally posted by: HexiumVII
credit shoots up if you owe money. Shows that someone can actually make money off of you.

Wrong... well, right to a very, very small extent. But mostly wrong.

 

[beatle]

According to the new rules it's 862. Last summer it was 777 (through TransUnion), Experian gave me a 796 and Equifax gave me 775.

I've heard about the 2 bank accounts, 2 loans "scheme," though it was with $1k loans for 1 year. The friend told me that a lower amount really doesn't make a difference. I've only had one other loan, which was for a car in the summer of 2000. I needed the money to buy the car in the beginning of the summer and I paid it off by the end of the summer (no, it wasn't a new car ). It was a 1 year loan with no penalty for paying it off early. It doesn't show on my credit report.

 

[QED]

OP... yes, there is such a thing as having too few accounts.

Or accounts with too short of a history.

And when you think about it... it makes sense. It takes more responsibility to mange three credit cards (and their payments) than it does just one.

Fair Isaac has never revealed what the ideal number of ACTIVE revolving lines are (i.e. credit cards), but it seems to be around 3 or 4. Having more than this indicates that you might be overextended or have an over-reliance on credit.

That's why I recommend that those who are starting out and trying to establish good credit get 3 credit cards. Use them sparingly each month, and pay them off in full each month.

In a few years, your credit will be golden.

 

[beatle]

Other items to mention:

My girlfriend works at Sam's Club and I have her "spouse" card. She had a Sam's credit card from June of 03 to April of 05 when she closed it. It shows up on my credit report. It doesn't appear to be negative, as there were no late payments. Its limit is only $700. I'm not sure if this can be taken off or if it's even hurting me (or is it helping?)

I have a couple credit cards from department stores that I opened years ago and then never used again. Should I leave these open or close them?

I have a credit card I don't recall ever signing up for. It's from "Fleet CC." According to the report I opened it Sept of 99 and closed it 2 years later. It had a $2500 limit and it was closed by the credit grantor. There is no payment history and the high balance is $0. Should I investigate this or am I better to let it be? I really have no idea what this would have been from.

 

[QED]

Originally posted by: beatle
Other items to mention:

My girlfriend works at Sam's Club and I have her "spouse" card. She had a Sam's credit card from June of 03 to April of 05 when she closed it. It shows up on my credit report. It doesn't appear to be negative, as there were no late payments. Its limit is only $700. I'm not sure if this can be taken off or if it's even hurting me (or is it helping?)

It can't be taken off if you agreed to receive a spouse card-- in any case, it's not hurting anything at all being there.

I have a couple credit cards from department stores that I opened years ago and then never used again. Should I leave these open or close them?

I would leave them be as well. Inactive revolving accounts typically do not factor too largely into your credit score. If anything, they are contributing to your credit aging (average age for your revolving trade-- the longer the better).

I have a credit card I don't recall ever signing up for. It's from "Fleet CC." According to the report I opened it Sept of 99 and closed it 2 years later. It had a $2500 limit and it was closed by the credit grantor. There is no payment history and the high balance is $0. Should I investigate this or am I better to let it be? I really have no idea what this would have been from.

Like the others, it's not really hurting anything. It might even be marginally helpful, but if you aren't comfortable with it being there I would have it investigated and removed.

 

[kranky]

Perhaps Vic will chime in to verify my statement (or correct me if I'm wrong!), but if your credit score is 770+ at all three CRAs, and by the time you want a mortgage you'll have 10 years of perfect credit history, a steady job, a checking and a savings account, and you're not looking to get a mortgage that is beyond your perceived ability to repay, then sit back, relax, and do nothing besides keep your record clean.

Someone with a 770 score doesn't get a better deal than someone with 765. As long as your score is over 720 or thereabouts, you'll get the most favorable terms. It won't make one shred of difference if you raise your current score 10 or 30 points. You're so far above the threshold for best rates it makes no difference.

 

[beatle]

Thanks. I wasn't sure about the Sam's credit, as I was never issued a card. I'm just glad she behaved herself. It seems like there are a lot of "tricks" to getting a high score aside from simply living within your means!

 

[beatle]

Originally posted by: kranky
It won't make one shred of difference if you raise your current score 10 or 30 points.

That's good to know. I'd heard of the magic "800" thrown around at work a few times, but if it's just talk, I'm not going to sweat it. I am curious about the new scoring system, as there are 5 categories, with the top now being 901+. Are these more BS "magic numbers" or is there substance behind the classifications?

 

[Raywong78]

Hey guys this may be a little of topic but where can I get a free credit report to find out what my credit rating is right now?

 

[beatle]

You can get a free report from http://www.annualcreditreport.com. Note this is the REAL free site backed by the government. Your report is free, but you won't get a free score, as I found out. That cost me an extra $6 from TransUnion. Still that's less than the discounted rate I got last year: $42 from all 3. I plan to check my report 3 times a year. You're entitled to one free report from each agency annually.

 

[Viper GTS]

If you don't want the Sam's club card on your report anymore just write all three bureaus & let them know it's not your account & you have no responsibility for it.

It's the truth, & they'll drop it.

Consider AU reporting as a benefit, not all companies report AU's. If it becomes a problem (ie she runs the card up, defaults, etc.) then just have it remvoed.

Viper GTS