topic Re: Polishing credit in Understanding FICO® Scoring

Polishing credit

Croselx — Fri, 26 Oct 2012 14:20:11 GMT

Hi there I have a question regarding increasing credit score.

Backstory:

AAoA is 2.5 years

Have 10 reported inquiries, about 8 date back to 1 year and 3 months, the other 2 have 5-6 months.

I have 2 Credit Cards with overall util of 3%

Visa: 500 (1 30 day late payment about a year and a half ago)

Paypal SC: 800 (CLI increase due on december) always on time

I have 2 reported 'loan' types

Telephone bill (not sure how it got reported) %100 on time

$1k loan @ ridiculous interest: paid always on time.

My scores from creditkarma:

Vantage: 729

Transrisk: 704

My scores from credit.com:

Experian: 734

Estimated Fico: 719

I know the above are just estimates and aren't to be taken as real scores. I currently have no intention of paying to view my score. I ask my lenders which agency they use and what is the score when they soft pull (or hard pull) and then compare it to vantage and it is pretty close.

I owe 19 months on the $1k loan and will pay a total of $1265 if I go through the normal payment plan. Principal is about $890-$900. I can prepay without penalty and currently have the money to do so. I have also been offered a 'loan renewal' on the 8th month to lower interest rate. My end-goal is just to increase credit score and history. I'm not sure of renewing as that may lower my AAoA (in case it is closing current and opening a new account), I definitely don't want to ride this out the whole 2 years as I would be paying too much interest (and I hate paying interest..). What do you all recommend here, keep account and open a few others or close account and open a few others? Important info: I'm in 'farming' mode and will remain this way until at least December or March (when my 30 day late will age to 2 years).

Re: Polishing credit

Jutz — Fri, 26 Oct 2012 14:29:55 GMT

Looks like you're doing a good job so far, keep it up. As far as the question about whether to pay it off or not, it's probably going to get the best answers in Understanding Fico, or Rebuilding my Credit. The basic question is, does an installment loan only help credit mix if it is currently open. It will continue to help AAoA for 10 years after closed, but the credit mix I'm unsure of.

Re: Polishing credit

webhopper — Fri, 26 Oct 2012 14:41:06 GMT

a installment loan is great for building history... I did a secured loan with Chase back in 2007, and it really helped me with rebuilding. The interest rates on secured loans is rediculously low. If you have the money to pay off the unsecured loan, I would pay it off at the 12 month mark if I were you. After twelve months, if you still need an installment loan you can look at the secured loan option... the great thing about secured loans is that at the end of the repayment period, you have a financial asset (usually a CD) :)

Re: Polishing credit

Jutz — Fri, 26 Oct 2012 14:46:07 GMT

Does Chase still do secured loans?

Re: Polishing credit

GregB — Fri, 26 Oct 2012 16:43:33 GMT

You are doing fine.

Any similarity between your Vantage Score and any lender pulled score is almost certainly an accident. There are such a tiny number of lenders using Vantage that it is unlikely that you hit one. Vantage is WAY off, in general.

If I was in your situation, I would pay a substantial chunk of the installment loan off ASAP. Make sure that you have enough of a balance left that the loan has a total duration of more than one year. That will mean you will be paying the high interest rate but on a much smaller balance. When the lower balance shows, that will helpl insure the CLI due in December. I agree with your concern about AAoA by renewing the loan.

The inquiries over one year don't count on FICO, which is what counts for most lenders.

Re: Polishing credit

Croselx — Fri, 26 Oct 2012 17:05:39 GMT

Thanks for the quick replies (and mod moving to the right place). My worry about paying only a part of the loan is in case the payment remains the same (as in same amount applied to interest and the rest as principal). Should I get a new loan note if I pay off 50-70% of the balance?

Re: Polishing credit

GregB — Fri, 26 Oct 2012 19:15:38 GMT

In any normal loan the interest is always charged against the remaining principal. The payment amount is always the same in most loans. So when you pay off extra principal, the interest will be less in each following payment and the principal will go up. An extra $100 paid in the beginning can take $200 off at the end if the interest is high enough and/or the term is long enough. An extra $100 paid at the beginning has a big effect. An extra $100 toward the end has little more than $100 reduction in total payments.

Re: Polishing credit

jamie123 — Fri, 26 Oct 2012 20:43:46 GMT

Okay...I have a few questions so I can come back with a bit more accurate advice.

How soon are you looking to make a large purchase like an auto or house?

How old is the Visa with the $500 CL?

Who is the lender on the Visa?

How old is the Paypal SC?

Are you polishing your credit for a specific reason?

Re: Polishing credit

Croselx — Sat, 27 Oct 2012 01:33:45 GMT

How soon are you looking to make a large purchase like an auto or house?

Home - 2-3 years from now will be investment property.

How old is the Visa with the $500 CL?

3.5 years, it is a student visa serviced by a major bank in PR, has a starting limit of $300 and maximum of $500. Should I want a bigger limit = new card, hard pull, and most likely a low limit with hard pulls should I want CLI considering close relatives' experience with this bank.

Who is the lender on the Visa?

Major bank in PR.

How old is the Paypal SC?

About 1.5 years. Never requested CLI until summer and only requested $800 then because of a purchase I was going to make (probably could of gotten a little bit more).

Are you polishing your credit for a specific reason?

Looking forward to buy several investment properties and I want to get the lowest interest rate available/make myself attractive to the possible lender. Also want a card with cash back rewards and a nice limit so I can use it for my month-to-month expenses and rack up rewards.

EDIT: Thanks to GregB's explanation I have decided that I will just pay off a big chunk of the owed money and then pay off the rest in 5-6 months so the loan reaches the 1 year mark. This way I won't pay as much interest.

Re: Polishing credit

jamie123 — Sat, 27 Oct 2012 13:03:26 GMT

You are doing great with what you have but your file is a bit thin. Since you have 2 years before making a purchase you have about 1 year to add some additional credit to thicken your file. You don't really want to add any credit for 1 year prior to applying for a mortgage.

With all that in mind, this would be my suggestion:

Apply for a Bank of America 1-2-3 Cash Rewards card. This is a really good cash back card and is not too difficult to be approved for. This is a prime bank and the CL will grow with you for life.

Apply for a Walmart card. They are really good with CLIs and you will get a free TU FICO score every month after you sign up for electronic bill pay. You should easily qualify for this card with your scores.

After you get these cards I would call your Major PR bank and ask for a CLI. All they can say is no, but I would at least try. You might want to get another card with this bank if they won't increase the CL on the card you have now. You need to get some cards now that will grow with you for life.

Don't get any other store cards besides the Walmart and the Paypal you have now.

Don't be concerned about the HPs right now. They will only affect your scores for 1 year and by getting a few more cards now your credit file will be much stronger in a year.

Keep us posted on what you decide and how it turns out.

Good luck!

Re: Polishing credit

Croselx — Sat, 27 Oct 2012 14:55:56 GMT

Can I apply for a BoA card living in PR? That bank doesn't seem to exist here. As for the apps, how should I go about them, all in 1 day? 1 week? 1 month? I'm willing to apply if my current estimates/story allow for at least a low limit approval.

Edit: I remember that the last app I did for walmart didn't go through due to verification issues so I went ahead and applied. Got a $1K discover auto-approved online. Think I should of waited? As for the bank card (PR bank) I'd rather not apply yet, they are really annoying to deal with and require the same amount of paperwork as a loan. When I do apply I'd like it to be after I have decent CLs and can guarantee a 5k+ CL from them to make the effort worth it.

Re: Polishing credit

jamie123 — Sat, 27 Oct 2012 19:32:38 GMT

You need to get a card from one of the following PRIME banks:

AMEX

Chase

CitiBank

Bank of America

Wells Fargo

Do you know if any of these banks have branches in PR?

You have a Discover card, that is considered a prime bank. You were a bit unclear with your last post, did you just now get approved for Discover?

App for 1 of the bank cards today.

Let me know how it works out for you.

Re: Polishing credit

Croselx — Sat, 27 Oct 2012 21:14:18 GMT

I think there was Citi here before, but it's been a while since I saw one. Will avoid them until my 30 day late reaches the 2 year mark as they seem pretty sensitive about it from my HD denials. The others I have never seen here (only AMEX cards through local banking). I would like a Sears MC, but not sure if I should apply because it is Citi and they have denied me 2 times already for HD.

** For the Discover I got approved earlier today. This wasn't planned so I'm happy if I don't/can't get another card until summer next year.

Edit: from what I found the major banks in the US have no presence here, but have contracts/deals with some local banks to offer their CCs/financial products.

Re: Polishing credit

jamie123 — Sat, 27 Oct 2012 22:05:01 GMT

Well hey....Congrats on the Discover! That is a PRIME bank card!

Treat it well and it will grow with you!

You really should try and get one more card now. You are still far away from needing a mortgage. The HPs you do now won't hurt you for the martgage down the road but if you could get another card now it will certainly help you for the mortgage.

Have you ever tried for the BoA 1-2-3 Rewards? If not, maybe try that now?

Re: Polishing credit

Croselx — Sat, 27 Oct 2012 23:52:11 GMT

Thanks!

As for BoA (and the other US banks) I haven't tried them because they don't have local branches and in their online app form they don't include PR as one of the states so I can't apply with my address. I may try to go for the Sears Master Card, should I wait a bit or apply today/tomorrow?

Re: Polishing credit

jamie123 — Sun, 28 Oct 2012 00:26:54 GMT

I would suggest you apply now. Discover hasn't reported yet so you haven't taken a hit for Discover yet.

Good luck!

Let us know how it turns out.

Re: Polishing credit

Croselx — Sun, 28 Oct 2012 15:07:37 GMT

Applied for the Sears card in-store and got insta approved for $2.5k CL.Not sure if it is the MC, will have to wait as the store attendant didn't seem to know either. By this time I was very confident that I could finally get a Home Depot card and went ahead and applied... denied. I don't know what metric they use, but Sears is citi as well and they just approved me a few minutes before applying for HD. This is the third time that HD denies me this year (march, july, now).

Anyways I'm happy with what I got today and thankful for the advice, I'll be sure to go to 'farm mode' now and manage these accounts and hopefully they grow with me.

EDIT: Today checked CreditKarma and the 3 inquiries have already posted! The cards haven't posted yet.

Re: Polishing credit

jamie123 — Sun, 28 Oct 2012 16:48:36 GMT

Congrats!

You did well!

These new cards will really help you build a stronger credit profile. If you treat all your cards right you should be able to get any card you want in a year.

Good luck!