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New Member
freecredit
Posts: 5
Registered: ‎02-26-2008

Making money means lower credit scores!

[ Edited ]
I have a number of issues that I would like explained/answered/some general enlightenment.

First of all I got my first CC when I was 19 and I am now 23 with 5 cards. My first limit was pretty low, I think 500 or 700 dollars and I pretty regularly used the card so I was up to a balance of as high as 600 at times. But I never went over my limit and I ALWAYS paid my balance before the due date. Not just the minimum due.

Eventually I got a rewards card with a much higher limit and as a result I've used it for everything. I use it for every single purchase I make except for rent, car payments and student loans (I would if I could for the reward points, but I can't). As a result this uses a good chunk of my total credit percentage.

I do not pay the bill until right before the due date. This means I usually have about a month and a half of expenditures worth of debt up until I pay it off. Why do I wait so long? I prefer to keep my cash in my savings account where it earns a decent amount of interest, instead of prematurely paying my bill. Still, before the due date I pay my balance due for that period in its ENTIRETY and not just simply the minimum due.

So since I use my CC trying to earn points and interest, my credit takes a hit even though for 4 years I have never missed a payment, even during drastic changes in my credit card charges (graduating from college, getting a job, getting a plasma, etc).

I also recently (about 6 months ago) signed up for another credit card that gave me no interest for a year on all transfers and convenience checks. I received a high limit (13k) and wrote myself checks for cash, which I deposited in my savings to earn interest over the year until the offer period ends, in which I will repay every cent I took out with no interest.

At this point I am using about 70 percent of that credit line alone to earn interest in savings. I would be using more but I knew its bad to get too close to my limit.

I also recently received an AMEX Corporate card. I believe this has no pre-set spending limit, so I'm not sure how that factors into my total credit available. I have heard that they just take whatever the max balance was for that card. However I have spent about 8 dollars on that card ever because I don't earn points with it. So this means I have a card with a "limit" of 8 dollars and since this month I haven't paid it off yet I'm at 100 percent for that card? Seems silly to me.

Last year I bought a car and when they ran my credit I had scores in the 705-725 range. Since then I received the 13k limit card, the AMEX and another 5k limit card.

Recently my car was stolen and I will need to purchase another one, however I am worried because of my habits and the obnoxious FICO system my credit will take a hit and I will be forced to pay a significantly larger monthly payment for essentially the same vehicle (I was paying 270/mo on 15,800 loan with gap insurance).

Sometimes I buy silly things and make odd purchases (plasma, xbox 360, etc) but I have always paid my entire monthly balance and never been late for a payment in my short credit card history. I think its silly that my methods of trying to earn interest and points result in a lower credit score even though I have never shown a pattern that a lender should be worried about, other than the fact they have never received payments on interest from me.

Message Edited by freecredit on 02-26-2008 12:11 PM
Moderator Emeritus
masdeocho
Posts: 2,050
Registered: ‎04-17-2007

Re: Making money means lower credit scores!

Welcome!
 
You've learned how to work the system to earn money via cashback and advances.  Now it's time to learn to work the system to maximize your score.
 
It's great that you have paid on time consistently.  FICO loves that.
 
But forget about the fact that you pay your balance in full.  FICO doesn't care.  It only cares about your balance on the day that your CCs report to the CRAs.  If your Visa reports your statement balance, even if you pay it one day later it will calculate your util and therefore your score based on the outstanding balance.  Your score will take a hit if your util is high.  Banks think that high util = high risk, and that's all the FICO score helps them predict -- the likelihood that you will/will not pay back what you owe.  Someone maxing out their available credit raises a red flag.
 
On the bright side, FICO has no memory about utilization.  You could max your cards out every month for a year, and then one month before you apply for your car loan, pay down the balances so they are 1% - 9% of the CL.
-----------------
Bartender, bring another round of FICOtinis please!

9.4.2011: TU 805. EQ 815.
Moderator Emeritus
cheddar
Posts: 6,794
Registered: ‎09-29-2007

Re: Making money means lower credit scores!

To add to masdeocho's excellent response above:
 
FICO can only use the information that is on your credit reports to generate a score.  If your credit cards are reporting your balance on the statement date, as most of them do, then it seems to me you have a beef with the credit card companies and the way they report more than you have a beef with FICO.
 
----------------------------
App free since 7/11/08.
TU 744 / EX 710 / EQ 694 (Starting to slip. :smileysurprised: )
New Member
freecredit
Posts: 5
Registered: ‎02-26-2008

Re: Making money means lower credit scores!

Also that same initial credit card I had, the one with the 500 dollar limit. That was raised to 1000 but I stopped using it when I got the rewards card. Just last week I canceled it because it was a student card and I never used it. Of course that was my oldest account and now my credit will take a hit for getting rid of a crappy card I never use?

So if I plan to buy a car, how long between the time I take action in the accounts and the time the motherly credit unions decide they can update my information? I'm willing to sacrifice 50 dollars in interest if it saves me a few hundred on what I would owe in loan interest.

Should I try to take out another high limit card (10k+) that I won't ever use to decrease my util?
Super Contributor
MidnightVoice
Posts: 8,158
Registered: ‎03-25-2007

Re: Making money means lower credit scores!



freecredit wrote:
Also that same initial credit card I had, the one with the 500 dollar limit. That was raised to 1000 but I stopped using it when I got the rewards card. Just last week I canceled it because it was a student card and I never used it. Of course that was my oldest account and now my credit will take a hit for getting rid of a crappy card I never use?


It will be there for 10 years
 


freecredit wrote:
So if I plan to buy a car, how long between the time I take action in the accounts and the time the motherly credit unions decide they can update my information? I'm willing to sacrifice 50 dollars in interest if it saves me a few hundred on what I would owe in loan interest.

Should I try to take out another high limit card (10k+) that I won't ever use to decrease my util?

I would allow 6-8 weeks.  And if you are earning $50 in a savings account in that time, just buy the car outright!  :smileyvery-happy:
The slide from grace is really more like gliding
And I've found the trick is not to stop the sliding
But to find a graceful way of staying slid
New Member
freecredit
Posts: 5
Registered: ‎02-26-2008

Re: Making money means lower credit scores!

As I said before a huge chunk of what I have in savings is money I took from a No APR period from a CC I opened with in the last year. So in a few months I will owe a large part of it back. I don't look at it as real money and so I don't spend it.

If I get a car now (somewhere in the range of 16-19k, used, 6.25-6.75% over 63 months) would it hurt my credit to refinance it in less than a year, when I no longer have that huge chunk of credit util. hurting-interest earning cash in my account?
Moderator Emeritus
cheddar
Posts: 6,794
Registered: ‎09-29-2007

Re: Making money means lower credit scores!



freecredit wrote:
As I said before a huge chunk of what I have in savings is money I took from a No APR period from a CC I opened with in the last year. So in a few months I will owe a large part of it back. I don't look at it as real money and so I don't spend it.

If I get a car now (somewhere in the range of 16-19k, used, 6.25-6.75% over 63 months) would it hurt my credit to refinance it in less than a year, when I no longer have that huge chunk of credit util. hurting-interest earning cash in my account?

Refinancing a loan that is less than a year old may hurt a bit, mainly due to an additional inquiry for the new loan and due to the new account lowering your average age of accounts.
 
Improving your CC utilization should more than make up for that, however.
 
----------------------------
App free since 7/11/08.
TU 744 / EX 710 / EQ 694 (Starting to slip. :smileysurprised: )
Member
ChumChurum
Posts: 46
Registered: ‎08-07-2007

Re: Making money means lower credit scores!



freecredit wrote:
Also that same initial credit card I had, the one with the 500 dollar limit. That was raised to 1000 but I stopped using it when I got the rewards card. Just last week I canceled it because it was a student card and I never used it. Of course that was my oldest account and now my credit will take a hit for getting rid of a crappy card I never use?

So if I plan to buy a car, how long between the time I take action in the accounts and the time the motherly credit unions decide they can update my information? I'm willing to sacrifice 50 dollars in interest if it saves me a few hundred on what I would owe in loan interest.

Should I try to take out another high limit card (10k+) that I won't ever use to decrease my util?


Call back and ask to re-open that old card.
Established Contributor
Shnapple
Posts: 837
Registered: ‎02-27-2008

Re: Making money means lower credit scores!

I think you just need to re-time your payments. Find out what day of the month your CCs are reporting to the CRAs and pay before that date, not before your due date, just make sure you're paying [3] weeks instead instead of [1] week late!
FEB '08 FAKOs: TU 628 | EX 650 | EQ 584
JAN'09 FAKOs TU 686 | EX 705 | EQ 664
EQ FICO: FEB '08 646 | APR '08 678 | SEP '08 679
Senior Contributor
smallfry
Posts: 4,831
Registered: ‎04-20-2007

Re: Making money means lower credit scores!



freecredit wrote:
As I said before a huge chunk of what I have in savings is money I took from a No APR period from a CC I opened with in the last year. So in a few months I will owe a large part of it back. I don't look at it as real money and so I don't spend it.

If I get a car now (somewhere in the range of 16-19k, used, 6.25-6.75% over 63 months) would it hurt my credit to refinance it in less than a year, when I no longer have that huge chunk of credit util. hurting-interest earning cash in my account?


Open an account with Pentagon Federal and get a nice limit on a credit card and possibly a sub 5% rate on your car purchase.

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