topic Re: I have only 1 major credit card../general advice in Credit Cards

I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 02:06:17 GMT

Disclaimer: I am new here

I have OK credit history, the last time I saw my credit score it was just below ~720. I am looking at maybe getting a mortgage soon.

Oldest account: ~9 years ($500 credit card from store).

I have had ~11 installment loans (personal, car etc.) and paid 100% of payments on time.
I have had a few other minor revolving accounts, but stupidly closed them.

What is hurting me is debt to credit ratio:
I recently took a car loan for ~12K, and owe ~10K on it still.
I have just one major revolving credit card, limit $15K, balance $2K

In my latest free report from Equifax, my revolving card does not show, so it lists my debt to credit ratio at ~70% and I am sure this will kill my mortgage rate. My last rate was just before the car loan, it is likely worse now.

I make good money and have a perfect payment history, so I think my lack of total credit is killing my score.

I want to try to bring my score over 720 before (maybe) getting a mortgage in a few months. To make matters worse, I have one loan that was for $7k and I only owe 2 more $130 payments, so my debt to credit ratio is about to get even worse.

I read that if I just go out an get credit cards only to game the system (ie. not use them) that it can hurt my score. But I assume this means more than ~10 rather than 2 or 3. I can't raise the limit (much) on the 1 card I have now because my bank has a policy of $20K max in personal credit. I am a bit worried about generating "new" activity on my account by getting a new credit card from a new bank just a few months before applying for a mortgage, but I am thinking this will be worth it if it will be a significant enough improvement to my ratio.

I suppose I also have the option of buying my way into a better credit score by using some house down payment money to lower the amount owed on the car, but this is really plan B for me.

I know this is long and I am a pain in the ass, but I don't know anyone I can ask these kinds of questions. I do plan to sign up for the myFICO service, but I am just trying to do some research first.

I guess ideally what I would like to find out is if I can just go pick up a couple major cards with $50K or $60K limits and no annual fees so when I am using $12K in credit (for a car) it does not push my ratio to >70%.

Message Edited by iwantapony on 03-29-2008 07:06 PM

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 02:15:49 GMT

When were you thinking of buying a home?

To make any difference in your mortgage rate, you'd have to get your FICO above 760, since you're already at 720ish. If the time frame is too short, it's going to be tough to jack it up by 40 points given that you already lack baddies that might have been holding you back.

Getting cards with CLs in the $50-60K range can be tough, even if you have a good income. I think your best bet is to get 1 or 2 more prime cards with $20K+ limits, use them judiciously, and then sit back and wait for time to do its best...which still might not be enough if you're looking to buy within 12-18 months.

Message Edited by watchnerd on 03-29-2008 07:15 PM

Message Edited by watchnerd on 03-29-2008 07:15 PM

Re: I have only 1 major credit card../general advice

fused — Sun, 30 Mar 2008 02:24:17 GMT

Welcome to the forums iwantapony! Your situation does not sound bad at all. I recommend you know your FICO scores before you start apping for credit cards. You should always know where you stand before apping for a few CCs and espeically for a house or a car.

Debt-to-income is not factored in FICO scoring. However, lenders look at this very closely. Your credit file is heavily weighted with installment loans, so yes, a couple or a few credit cards will help you over time...not right away. The initial credit limits you are seeking is probably not realistic given the current circus with rising credit card debt. I wouldn't apply for mortgage if you do in fact app for a 2-3 CCs, doing so will lower your scores in the short-term.

Message Edited by fused on 03-29-2008 04:24 PM

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 06:59:14 GMT

Update:

OK, I signed up and my score was a little higher than I anticipated (751).

Here is a general breakdown:
Payment history: Great
Amount of debt: Not Good
Length of credit history: Good
Amount of new credit: Very Good

I am mid 20's, so my score is probably good for my age.

I found an error too, my revolving credit ratio is listed at 95%, but the limit on my visa card is listed as only $2k (the amount on it) instead of ~$15K, so this should make a big difference to my score.

The FICO calc estimates if I get a new card with a balance of $20K, my score will be ~801-831. This in combination with fixing the error and paying off some of the balance should place me over 760 easy.

Now the trick is finding a second major credit card worth having.. any recommendations?

Message Edited by iwantapony on 03-29-2008 11:59 PM

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 07:56:52 GMT

I am thinking a CitiBusiness Card would be a good idea for a second major CC. This would help me separate finances for a small business for taxes as well.

Is anyone doing this?

Re: I have only 1 major credit card../general advice

haulingthescoreup — Sun, 30 Mar 2008 13:06:29 GMT

@Anonymous wrote:
Update:

OK, I signed up and my score was a little higher than I anticipated (751).

Here is a general breakdown:
Payment history: Great
Amount of debt: Not Good
Length of credit history: Good
Amount of new credit: Very Good

I am mid 20's, so my score is probably good for my age.

I found an error too, my revolving credit ratio is listed at 95%, but the limit on my visa card is listed as only $2k (the amount on it) instead of ~$15K, so this should make a big difference to my score.

The FICO calc estimates if I get a new card with a balance of $20K, my score will be ~801-831. This in combination with fixing the error and paying off some of the balance should place me over 760 easy.

Now the trick is finding a second major credit card worth having.. any recommendations?

What is the major card that you currently have? (exact card name, please) Does it have "World" or "Signature" in its name? Many so-called "no-limit" cards are score-killers, because they report your highest balance as your credit limit. They ought instead to report the way that the classic old-fashioned American Express charge cards do, and not be included in your util. We have had a number of members here who have been battling the CCC's on this issue.

When you apply for a second card, it might be tough to get $20K right out of the gate, since you don't have much other current revolving history, but it might be doable. A lot might be driven by your household income.

I'm leaving the CC suggestions to other members, but when you app (and I would do this by phone, with a human!), be sure to tell them that you want to do a balance transfer. This generally results in higher CL's, although I don't know if a $2K BT will help much. If you still have any installment loans with balances, and if you find a 0% BT offer, maybe you could tell the rep that you want to BT the $2K plus another $6-7K from a loan, and that you would need a $20K CL to keep the util on the new card under control. That's getting a little complex; don't know if you'd want to do that. Remember that there are BT fees, and some cards like Bank of America don't cap them, so be aware of the cost involved. (I paid BofA $240 for an $8K BT.)

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 19:14:40 GMT

The card is a generic Visa check/debit card.

I noticed earlier that my free (annual) Equifax report was listing the CL as $0 for the card but was not sure if or how it was impacting my score. It looks like in the absence of that data the highest known balance is used instead.

The card allows what I think you guys call BT (balance transfer), so yesterday I transfered the remaining available balance on the card over to my checking account and then paid it back to where it was before. The activity may have earned me a credit frownie but it looks like I probably succeeded in making the highest balance match the actual credit limit. I disputed the CL with Equifax also, so that should be good now.

As soon as I get the last few hundred $$ paid on the unsecured installment loans I have I am going to talk to my bank about raising my CL to the full $20k they allow for the card.

I will need to do this because my remaining installment loan will be $9k of $12k. I now sort of wish I would have just taken the car loan for the full amount and paid down on the loan rather than paying down on the car..

Anyway, what is the impact to my credit when I am not using my revolving credit at all? To be honest, I prefer to not keep a balance on these accounts because the interest rates are higher than what I earn on the money in savings. Does a 250/50,000 debt to credit ratio look better than a 0/50,000 ratio?

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 19:17:29 GMT

iwantapony wrote:
The card is a generic Visa check/debit card.

I noticed earlier that my free (annual) Equifax report was listing the CL as $0 for the card but was not sure if or how it was impacting my score. It looks like in the absence of that data the highest known balance is used instead.

The card allows what I think you guys call BT (balance transfer), so yesterday I transfered the remaining available balance on the card over to my checking account and then paid it back to where it was before. The activity may have earned me a credit frownie but it looks like I probably succeeded in making the highest balance match the actual credit limit. I disputed the CL with Equifax also, so that should be good now.

As soon as I get the last few hundred $$ paid on the unsecured installment loans I have I am going to talk to my bank about raising my CL to the full $20k they allow for the card.

I will need to do this because my remaining installment loan will be $9k of $12k. I now sort of wish I would have just taken the car loan for the full amount and paid down on the loan rather than paying down on the car..

Anyway, what is the impact to my credit when I am not using my revolving credit at all? To be honest, I prefer to not keep a balance on these accounts because the interest rates are higher than what I earn on the money in savings. Does a 250/50,000 debt to credit ratio look better than a 0/50,000 ratio?

It's a WHAT? It's a debit card?

This brings up a whole other issue. Are you 100% sure?

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 19:32:30 GMT

Well technically I think it is considered an overdraft account for my checking account, so to use it without over drafting my checking account I have to log in to transfer funds. I suppose it is possible that my bank is just using the visa network for transactions/cards and they own the revolving credit account rather than Visa (see disclaimer in first message

Re: I have only 1 major credit card../general advice

haulingthescoreup — Sun, 30 Mar 2008 19:38:06 GMT

edit to add: wow, I just saw what Peas caught. The card status definitely needs to be clarified. You might not have any revolving credit at all! On your Credit-at-a-Glance screen, what dollar figure does it display under revolving?

Sharp-eyed Peas! Can't get anything past a middle-school teacher, that's for sure.

- - - - - - - - - - -

original post:

What you want to do with revolving credit is show that you're using it, but just barely. And you certainly don't want to carry a balance. You might experiment with it one time showing a balance, and then one time showing $0. You're in an unusual position with just one card and high scores, so the usual advice might not apply.

Anyway, here's how you control what reports to the credit bureaus. Check which day of the month your statements have dropped over the last 4-6 months. (Many vary by a day or two each month.) When you figure out when it's due to drop again, pay your balance down or off 4-5 days before it drops. Let it report under (not at) 10%, and once it does, go ahead and pay it off. In that way, you choose what util reports, and you never pay interest. You can pay your balance multiple times during the month, depending on the issuer, and members here routinely run $2-$3K worth of charges through a $1K CL card every month, and it never reports a penny. Everyone wins.

Equifax displays credit limits on secondary reports like TrueCredit strangely. But when I look at the util percentage shown on my FICO EQ, or on a real EQ report, I can see that it's being crunched properly. Does your FICO EQ util show on screen two as a positive or negative? If so, what figure does it show? And I think you realize this already, but the util figure that everyone worries about it on your revolving credit, meaning CC's, many unsecured lines of credit, and some home equity lines of credit. FICO looks separately at the util on your regular installment loans, and it doesn't carry nearly as much weight as revolving util.

Message Edited by haulingthescoreup on 03-30-2008 12:38 PM

Re: I have only 1 major credit card../general advice

MidnightVoice — Sun, 30 Mar 2008 19:40:48 GMT

iwantapony wrote:
Well technically I think it is considered an overdraft account for my checking account, so to use it without over drafting my checking account I have to log in to transfer funds. I suppose it is possible that my bank is just using the visa network for transactions/cards and they own the revolving credit account rather than Visa (see disclaimer in first message

My debit card is NOT a credit card, and is a Visa.

Is yours a real credit card? Does it report to the CRAs with a CL?

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 19:53:38 GMT

MidnightVoice,

So I guess it is just an overdraft account and not a "real" credit card, but it still reports as revolving credit on my score.

haulingthescoreup,
The "Credit At-A-Glance" only gives me the balance but not the CL. It says Total balance of: "Your revolving accounts ~$2k"

Re: I have only 1 major credit card../general advice

atlastontheroad — Sun, 30 Mar 2008 19:57:38 GMT

My debit card is a MasterCard, my debit card from my CU is a Visa. They're "logo-ed" but they're not revolving credit, they're "same as cash" cards.

My first thought was "Geez, I wish my debit card reported as revolving." In that same second, I shuddered. I'm going to have nightmares about this one.

When I read this the first time, I thought it was a typo. WhirledPeas gets the kewpie doll!

atlast....

Re: I have only 1 major credit card../general advice

haulingthescoreup — Sun, 30 Mar 2008 20:00:17 GMT

@Anonymous wrote:
MidnightVoice,

So I guess it is just an overdraft account and not a "real" credit card, but it still reports as revolving credit on my score.

haulingthescoreup,
The "Credit At-A-Glance" only gives me the balance but not the CL. It says Total balance of: "Your revolving accounts ~$2k"

OK, that does show that it treats it as revolving.

This card is an odd duck! And you're sure that it's a debit/ overdraft card, and not a credit card that serves as overdraft for your checking account? I'm not doubting you; I'm just trying to get my brain around this.

I have an USAA card linked to my checking account as overdraft protection, but it's definitely a straight-forward CC, and it reports the correct credit limit.

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 20:02:55 GMT

i just obtained a od loc from cdc fcu and it just hit my reports as cdc fcu visa and reports the limit. haven't got my debit/checkard in the mail yet, so i can't tell if the account numbers correpond.

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 20:03:00 GMT

tytyty-

I'm still perplexed by the issue of the 2k CL.

On your CR what is the name of the lender? This might help us figure out exactly what the revolving credit is. If this is too personal, I'm sorry -- just curious.

I'm thinking how cool it WOULD be if overdraft lines reported - I'd have an extra 3k or so of util to play with!

Did you pull all three reports or just one? This might help to figure out if one CRA is erroneously reporting your TL.

HTH-

-P

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 20:05:07 GMT

Here's what I think, FWIW:

The Visa is just a debit card, and it's not reporting at all.

The entry on the CR is for an OD LOC with a $2K limit, that has nothing to do with the debit card.

That's just my theory, and I'm stikcing to it.

Re: I have only 1 major credit card../general advice

Anonymous — Sun, 30 Mar 2008 20:07:33 GMT

cheddar wrote:
Here's what I think, FWIW:

The Visa is just a debit card, and it's not reporting at all.

The entry on the CR is for an OD LOC with a $2K limit, that has nothing to do with the debit card.

That's just my theory, and I'm stikcing to it.

I'm leaning toward that too.

Of course the lil apper in me wants OP to app via BofA or someone who's nice!

Re: I have only 1 major credit card../general advice

atlastontheroad — Sun, 30 Mar 2008 20:10:57 GMT

Cheddar,

I was kinna thinking the same thing after HTSU's post. And now I'm going to have to wander into the nice CU branch near work this week and see about that OD LOC, as well as the potential for a HELOC and auto loan in the next six months. No harm in cultivating a relationship with a real person, yanno?

Ok, those things are on my wish list, but the CRAs need to work with me first. Oh, and San Diego needs to fall into the Pacific (no offense intended to anyone but Midland).

atlast....

Re: I have only 1 major credit card../general advice

haulingthescoreup — Sun, 30 Mar 2008 20:17:49 GMT

@Anonymous wrote:
Here's what I think, FWIW:

The Visa is just a debit card, and it's not reporting at all.

The entry on the CR is for an OD LOC with a $2K limit, that has nothing to do with the debit card.

That's just my theory, and I'm stikcing to it.

OK, but then what is this $15K CL on iwantapony's original post?

"I have just one major revolving credit card, limit $15K, balance $2K"

Do you get a physical card when you get a LOC, and so you're thinking that OP has a $15K LOC with a current $2K balance on it?

Sorry, OP, I know you love being discussed as if you were invisible!