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Confused on Credit Scoring

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Anonymous
Not applicable

Re: Confused on Credit Scoring


@Anonymous wrote:

We have a clean record in regards to lates (none) etc and never a BK for sure.. about 15 years ago.. I paid off all my debt and ripped up my credit cards... and found I had to rebuild our credit about 6 1/2 yrs ago in order to do a few things we wanted todo (like buy a new car).  Wasn't really hard to do - as I said I have no negatives... took a few months to get us back on track, but we are now looking to purchase a home which will have a substantial mortgage until we liquidate some property - and I wanted all to be "perfect" - but you are correct, in that my banker isn't concerned about the drop as he sees why - I just didn't want those two car loans to dimish our chances of getting the best interest rate available.  We are going to have to replace our AC (very expensive) on our current property.  Maybe I'll just finance that to get us a credit mix again, and then pay it down quickly.

 

Thank you for all your assistance -


The early payoff of the car loans is fine.  (THere's a FICO 8 scoring impact but may be none of significance for your mortgage scores.)

 

It's the decision to pay all of your cards to $0 that is unnecessary.  The right approach would have been to pay all the cards to $0 except one, on which you would leave a small amount, e.g. $5 each month.)  Paying all cards to $0 hurt your score, possibly by a substantial margin.  You will get a lot of scoring points back (for both mortgage scores and FICO 8) if you will leave $5 on one card as Sj and others have advised.

 

The sentence at the bottom of your last post is a very bad idea.  Not many people know this (except the folks who hang out here on the forum) but "finance accounts" are considered negatively by FICO, even if you make perfect payments.  You should avoid doing that.  If for some reason you really want to improve your score by adding a loan. you should do so via the way that SJ and others have advised, via the Alliant Share Secure loan approach.  You have been given a link that provides step by step guidance as well.

 

If you really want a simple thing that will raise your scores a lot and will have virtually no impact on your DTI calculation, that should be to have exactly one card reporting at a small positive balance, e.g. $5-6.

Message 11 of 20
StartingOver10
Moderator Emerita

Re: Confused on Credit Scoring

^^^Right. Also, please remember that vendors like a/c companies and solar panel companies have the capacity to add a lien to your home when doing work on your home. Many of the unsavory vendors put that lien on immediately rather than waiting for a default. Don't finance the a/c through the vendor -use a cc so you have zero chance of having an unwarranted lien added. I'm a Realtor and you wouldn't believe how many people have NO IDEA that a lien was placed on their home when they financed an item like the a/c or solar panels. This issue comes up when the owner wants to sell. One more note:  if you are getting an a/c check with your jurisdiction to see if you need a permit. In my area you have to have one when replacing (or adding) an ac unit. There are huge penalties if you don't have one. Don't let the HVAC sales rep bs you. Find out for yourself before you sign anything.

Message 12 of 20
Anonymous
Not applicable

Re: Confused on Credit Scoring

I use my credit cards to pay for nearly everything.

 

While I PIF and therefor pay no interest, it is actually difficult to report a zero balance as charges are being added at least 3 times a week.  To get a zero reported balance I would need to pay in advance of the acutal due date, and even then I can get a small charge sneak in and get reported.

 

There is abolutely no need to carrry a balance over month to month and pay interest on it.

 

 

Message 13 of 20
Revelate
Moderator Emeritus

Re: Confused on Credit Scoring


@Anonymous wrote:

I use my credit cards to pay for nearly everything.

 

While I PIF and therefor pay no interest, it is actually difficult to report a zero balance as charges are being added at least 3 times a week.  To get a zero reported balance I would need to pay in advance of the acutal due date, and even then I can get a small charge sneak in and get reported.

 

There is abolutely no need to carrry a balance over month to month and pay interest on it.

 

 


You could  just not use a given card for a week (or two even) then prepay before the statement date when you need to maximize your score.  It's actually not that hard to do, and you only lose a fractional amount of rewards anyway.  Pick the actual common use card (Sallie for me) to be the balance reporting one.  

 

That vs. getting a higher interest rate on a car, or a mortgage, seems like a small price to pay.  FWIW I agree it's annoying (I've used my cards for something like 99.99% of my transactions since 12/2011) but it's truly not that difficult given that hundreds if not thousands of members here have managed to do it. 




        
Message 14 of 20
SouthJamaica
Mega Contributor

Re: Confused on Credit Scoring


@Anonymous wrote:

@Anonymous wrote:

We have a clean record in regards to lates (none) etc and never a BK for sure.. about 15 years ago.. I paid off all my debt and ripped up my credit cards... and found I had to rebuild our credit about 6 1/2 yrs ago in order to do a few things we wanted todo (like buy a new car).  Wasn't really hard to do - as I said I have no negatives... took a few months to get us back on track, but we are now looking to purchase a home which will have a substantial mortgage until we liquidate some property - and I wanted all to be "perfect" - but you are correct, in that my banker isn't concerned about the drop as he sees why - I just didn't want those two car loans to dimish our chances of getting the best interest rate available.  We are going to have to replace our AC (very expensive) on our current property.  Maybe I'll just finance that to get us a credit mix again, and then pay it down quickly.

 

Thank you for all your assistance -


The early payoff of the car loans is fine.  (THere's a FICO 8 scoring impact but may be none of significance for your mortgage scores.)

 

It's the decision to pay all of your cards to $0 that is unnecessary.  The right approach would have been to pay all the cards to $0 except one, on which you would leave a small amount, e.g. $5 each month.)  Paying all cards to $0 hurt your score, possibly by a substantial margin.  You will get a lot of scoring points back (for both mortgage scores and FICO 8) if you will leave $5 on one card as Sj and others have advised.

 

The sentence at the bottom of your last post is a very bad idea.  Not many people know this (except the folks who hang out here on the forum) but "finance accounts" are considered negatively by FICO, even if you make perfect payments.  You should avoid doing that.  If for some reason you really want to improve your score by adding a loan. you should do so via the way that SJ and others have advised, via the Alliant Share Secure loan approach.  You have been given a link that provides step by step guidance as well.

 

If you really want a simple thing that will raise your scores a lot and will have virtually no impact on your DTI calculation, that should be to have exactly one card reporting at a small positive balance, e.g. $5-6.


+1


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 15 of 20
Anonymous
Not applicable

Re: Confused on Credit Scoring

Thanks for the info re: the AC - I'll just pay cash for that - I'm paying all my debts perfectly - I'm going to just stop worrying about my FICO ratings.. The last thing I want to do is throw 12K on a credit card.. Yikes! I'll just pull it out of savings and take care of it that way.

 

Thanks again re: the info expecially the lein warnings.

 

 

Message 16 of 20
Anonymous
Not applicable

Re: Confused on Credit Scoring

Great choice about how to pay for the AC.

 

I still hope you will consider buying a Big Mac on one credit card so that you have one card reporting a balance.  That's all you need.

Message 17 of 20
Anonymous
Not applicable

Re: Confused on Credit Scoring

I just hate seeing balances.. LOL - anyway - I'll consider the Big Mac for sure -

 

Thanks

 

RW

Message 18 of 20
SouthJamaica
Mega Contributor

Re: Confused on Credit Scoring


@Anonymous wrote:

I just hate seeing balances.. LOL - anyway - I'll consider the Big Mac for sure -

 

Thanks

 

RW


Just be sure not to carry the balance.

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 19 of 20
Anonymous
Not applicable

Re: Confused on Credit Scoring


@Revelate wrote:

@Anonymous wrote:

I use my credit cards to pay for nearly everything.

 

While I PIF and therefor pay no interest, it is actually difficult to report a zero balance as charges are being added at least 3 times a week.  To get a zero reported balance I would need to pay in advance of the acutal due date, and even then I can get a small charge sneak in and get reported.

 

There is abolutely no need to carrry a balance over month to month and pay interest on it.

 

 


You could  just not use a given card for a week (or two even) then prepay before the statement date when you need to maximize your score.  It's actually not that hard to do, and you only lose a fractional amount of rewards anyway.  Pick the actual common use card (Sallie for me) to be the balance reporting one.  

 

That vs. getting a higher interest rate on a car, or a mortgage, seems like a small price to pay.  FWIW I agree it's annoying (I've used my cards for something like 99.99% of my transactions since 12/2011) but it's truly not that difficult given that hundreds if not thousands of members here have managed to do it. 


The topic was about "It's the decision to pay all of your cards to $0 that is unnecessary."  Which if you use your cards a lot and have autopays set up for things like utilities, isn't so easy to do and posters say it causes a score DROP. I didn't explicitly say ALL credit cards, but that was in the OP topic and what the OP said caused a score drop.

 

Since I was thinking about the drop in score when ALL cards report zero, I wante to experiement on my mother's CR.  She is over 800 FICO and her score really doesn't matter to her as she isn't getting any loans, and getting them all to zero should DROP her score assuming the majority of those who posted that are correct. I was just curious to see it happen.  A lot of the charges on her discover card are autopays for utility bills and the like,  I wanted to get a zero report just to see her score DROP as many have said it would.

 

My own scores are above 785 and I am at about 6% UTIL, I will go to maybe 8% which will drop my score a  little, but a few months ago my scores were around 800 which is when I got a car loan, which was 2.05%.  Now I don't care too much though but I expect I would still get the best rate, and  I would like them the scores to stay above 750 or so.

 

BTW, if you are married, it's even easier to affect scores, as you can move debt from one person to the other, either boosting or lowering scores as needed.

 

I do agree with you, it's worth a little effort to get a better score if you are going for a large loan, though many don't have the flexiblity to do that.  And I wonder how the new datapoint about tracking historical UTIL will affect those of us attempting to create temporay upswings in score?? It would seem to make it much more difficult.

 

AN interesting side note, all  the simulators I have seen, NONE of them report a drop in score when you report a zero balance, so it apears that is a failing of how those simulators work.

 

Message 20 of 20
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