topic Re: How to move to next level after 750? in General Credit Topics

How to move to next level after 750?

Anonymous — Wed, 07 Oct 2015 21:09:31 GMT

As some of you know, I have improved my credit score tremendously during the past 2.5years (from 458 to 771).

Current scores:

TU: 771

EX: 744

EQ: 753

I have a new Amex ($10,000 CL) that has not reported to any of the bureaus yet so I expect a decrease soon. I do not have any negative information on my accounts though. Other than waiting on "time," are there any additional steps that I can take? I have 7 credit card accounts totaling $43,000 in CLI. Six of the cards are reporting a $0 balance and one of them is reporting a $100 balance. I noted that my EQ account decreased 9 points whenever I paid down the debt on one of my cards while my TU increased about the same number of points. Is playing around with utilization rate the only proactive thing that I can do at this point? If so, what percentage should I aim for? Or does this vary from bureau to bureau?

Thanks!!!

Re: How to move to next level after 750?

Anonymous — Wed, 07 Oct 2015 21:12:57 GMT

Add a $500 installment loan with a 24 to 48 month term.

Re: How to move to next level after 750?

redbeard — Wed, 07 Oct 2015 21:26:43 GMT

Let me ask a question.... and I'm serious.....

Why????

Your scores at this point will get you pretty much the best rate on any loan you need. At least, with a bit more time they definitely will.

So why????

Why do you want to chase a higher score?

I'm okay with the answer being 'because I can', since that would be my answer. I'm just curious what drives others when there is little to be gained by the effort. I've finally gotten my scores and reports to the point that only time will heal them. I still keep trying, but I realize its a futile attempt sometimes. Maybe I'm just looking for some encouragement on keeping up my search for higher scores.

Okay, I gotta admit, the 'why' to me would be bragging rights, but I'm curious what your 'why' is.

Dan

Re: How to move to next level after 750?

Anonymous — Wed, 07 Oct 2015 21:35:36 GMT

Part of the reason is bragging rights lol. It is also something that I am now accostumed to given the hard work that I have put into rebuilding my credit over the past 2.5 years. I now check the myfico app multiple times a day, etc. : )

However, I also want to purchase a home late next year and want to build a buffer if possible in case something unexpected happens. Of course, I intend on paying all my bills, not drive up my debt, etc. Yet credit scores sometimes do not act "rationally" either. Who knew that by paying off some debt one of my CRA scores actually decreased?

It is a combination of these things that motivates me.

Re: How to move to next level after 750?

EW800 — Thu, 08 Oct 2015 04:56:47 GMT

458 to 771.... That is amazing!! Congratulations!!

Re: How to move to next level after 750?

Anonymous — Thu, 08 Oct 2015 06:09:05 GMT

Captool is on target. It sounds like you have no installment loans. "Types of Credit" is roughly 10% of your score, and you are getting almost no points from this category (since your proifile consists of only one type of credit).

Furthermore, the category Amounts Owed (30%) considers a factor -- which is your ratio of installment debt owed to the total amount amount of all original installment debt taken out. By adding a small 4-5 year installment loan and then quickly paying much of it off, you would be getting points from this factor too. (Just keep it open the full term.)

Note that the special credit need you have described on the horizon is buying a house -- i.e. a huge installment loan. Establishing that you can manage an open installment loan (and pay it down a good deal) will be especial interest to the underwriters and to the mortgage flavor of the score.

Finally, you already achieved 4 cards and are adding more. (I think you may have added three more for a total of 7.) As you add each additional new credit card (beyond four) you get no increase to your score (FICO gives a person no extra points for having 7 cards than for having 3-4). On the contrary, you are taking a hit to your AAoA and adding inquiries, both of which lower your score. It doesn't mean you shouldn't keep adding cards if you like having them -- it's just that you should realize that it doesn't raise your score and in fact lowers it. (For what it is worth, I think you did fine by adding some extra lines -- I am just observing that if your sole interest was having a high score, you didn't need to do it.)

My advice is that, if you want to prepare for the possibility of a home purchase in 1-2 years, you should stop opening any new lines of credit, except for a $500 Share Secure loan with a CU that will let you pay off most of it early on and still keep it open for the life of the loan (4 years or 5).

The result over the next year or two will be an increased AAoA and all inquiries dropping off (due to not applying for more cards) and a benefit from the installment loan. I'd expect a significant score increase.

Re: How to move to next level after 750?

bada_bing — Thu, 08 Oct 2015 06:02:44 GMT

@Anonymous wrote:
Add a $500 installment loan with a 24 to 48 month term.

A shared secured loan (or two) from a credit union is a very low cost

way to keep the installment part of your file maxed out. Credit cards alone

will only carry you so far. A shared secured loan can be tweaked in ways

that real "legitimate" loans aren't, and because of that can be remarkably

effective in a fairly short time.

I can vouch that managing/tweaking your FICO score can become an

addiction that feeds on itself. You can become trapped by your score

and loose track of the overall purpose of having a high score. Above

760 there is nothing but a buffer zone or a personality disorder. I'm a

bit into the disorder part myself, but I recognize it.

Re: How to move to next level after 750?

Anonymous — Thu, 08 Oct 2015 11:34:46 GMT

Re: How to move to next level after 750?

Anonymous — Thu, 08 Oct 2015 11:47:05 GMT

@bada_bing wrote:
@Anonymous wrote:
Add a $500 installment loan with a 24 to 48 month term.
+1

A shared secured loan (or two) from a credit union is a very low cost
way to keep the installment part of your file maxed out. Credit cards alone
will only carry you so far. A shared secured loan can be tweaked in ways
that real "legitimate" loans aren't, and because of that can be remarkably
effective in a fairly short time.

I can vouch that managing/tweaking your FICO score can become an
addiction that feeds on itself. You can become trapped by your score
and loose track of the overall purpose of having a high score. Above
760 there is nothing but a buffer zone or a personality disorder. I'm a
bit into the disorder part myself, but I recognize it.

Re: How to move to next level after 750?

takeshi74 — Thu, 08 Oct 2015 12:59:04 GMT

@Anonymous wrote:
As some of you know, I have improved my credit score tremendously during the past 2.5years (from 458 to 771).

Tremendous gains come from addressing signfiicant deficiencies with one's credit. Like any other curve on any other matter, once you get to a certain point it takes much more effort for every bit of gain. You can certainly aspire to keep improving but make sure your expectations are reasonable.

@Anonymous wrote:
I noted that my EQ account decreased 9 points whenever I paid down the debt on one of my cards while my TU increased about the same number of points.

While revolving utilization is a signficant scoring and risk factor it is not the only one. To determine the cause(s) of any scoring change you have to very carefully review reports from before and after the change and you cannot just assume causality like this. If your score dropped with lower reported utilization then there were other factors at play that had more of an impact than your reduced utilization.

Additionally, I recommend setting a much higher threshold for worrying over scores changes -- at least 20 points. Scores typically have some fluctation and variance from month to month due to activity and changes in the reports.

@Anonymous wrote:
If so, what percentage should I aim for? Or does this vary from bureau to bureau?

The FICO models belong to the Fair Isaac Corporation, not the CRA's. The CRA's just manage your reports. A given FICO model evaluates the data in a report and generates a score based on that data.

Standard advice with revolving utilization is do not exceed 30%. If you want to eke out every possible point then allow only one balance to report at 10% or less. Lower is generally better as long as you're not reporting all 0 balances. You'd have to do some testing to see what % is ideal for you and where you'll see signficant versus minor gains.

That said, there's not much benefit to doing this unless you're apping and want the best possible score. Since revolving utilization is only based on your current balances and limits as indicated in a report you can adjust utilization just prior to apping. However, there are plenty that constantly micromanage their revolving utilization so it's your call whether you want to do that as well.

@Anonymous wrote:

However, I also want to purchase a home late next year and want to build a buffer if possible in case something unexpected happens. Of course, I intend on paying all my bills, not drive up my debt, etc.

In that case, make sure you're looking at your mortgage scores.

@Anonymous wrote:

Yet credit scores sometimes do not act "rationally" either. Who knew that by paying off some debt one of my CRA scores actually decreased?

Plenty of us knew though there are certainly many that do not. Nothing wrong with not knowing as none of us started out knowing anything. The "I just paid X, why did my score decrease?" threads are fairly common here.

https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&es_th=1&ie=UTF-8#q=paid%20score%20dropped%20site%3Aficoforums.myfico.com&es_th=1

Not all debts are assessed the same or seem as having the same risk and, therefore, scoring impact. Additionally, paying collections can have unintended consequences in some cases given how they report and are assessed. Not understanding the cause of scoring change does not mean that the model is irrational. The models are rational and consistent. They do not just artbitrarily generate numbers.

Re: How to move to next level after 750?

Anonymous — Thu, 08 Oct 2015 12:48:55 GMT

Just make sure to keep theloan open to FULL TERM

Re: How to move to next level after 750?

Anonymous — Thu, 08 Oct 2015 13:14:10 GMT

Just another newbie question... why full term? What is the benefit vs. paying it off in say six months? Other than the obvious of not having a installment loan. And, once you have an installment loan, and it's paid, I'm guessing it doesn't count for ten years like a credit card would if closed??

So much to learn.... **sigh**

Re: How to move to next level after 750?

redbeard — Thu, 08 Oct 2015 13:57:36 GMT

For credit mix, an open account is different then a closed account.

For AAoA, a closed account is fine for FICO (not Vantage 3).

Many different parts.

Dan

Re: How to move to next level after 750?

Anonymous — Thu, 08 Oct 2015 14:09:03 GMT

Yup

Re: How to move to next level after 750?

Anonymous — Thu, 08 Oct 2015 14:30:13 GMT

@Anonymous wrote:
Just another newbie question... why full term? What is the benefit vs. paying it off in say six months? Other than the obvious of not having a installment loan. And, once you have an installment loan, and it's paid, I'm guessing it doesn't count for ten years like a credit card would if closed??

So much to learn.... **sigh**

Three reasons. First, you get more FICO points for having an open installment loan than having a closed one -- even if you owe a lot on the loan. This factor belongs to the "Types of Credit" category (10%).

Second, you get points for having most of your total installment debt paid off. This factor belongs to the Amounts Owed category (30%). FICO calculates this in a way that is analagous to total credit card utilization. It adds up the amounts you currently owe on all your open non-mortgage installment loans and compares it to the sum of all the original amounts. So by keeping it open but also having paid off much of the principal you are getting some nice points from this category.

For reasons 1 and 2, as soon as the loan is paid off, you that FICO benefit.

Third, and this reason will only help you way down the road, it will improve your AAoA ten years from now if you carry the loan out. Compare two installment loans taken out on the same day, each having a term of five years. Loan A is paid off after six months. Loan B is paid off at the end of five years. 10 years after loan A is paid off, it vanishes from your credit reports, giving you no further help with your AAoA. And even in the last year, it was helping you only as a ten year old account. But, in the 4.5 years after Loan A vanishes, Loan B is still chugging along, helping you as an 11 year account, then a 12, then a 13, then a 14, all the way up to being a 15 year old account before it finally drops off.

Re: How to move to next level after 750?

kuku4koco — Thu, 08 Oct 2015 16:26:26 GMT

CreditGuyInDixie: Great explanation of the share loan and it's effect 'long term' on reporting....OP: I think I read somewhere on the forum where REVELATE was able to note those data point thresholds (best percentage of loan paid and when... in relation to ekeing out the highest scoring, while keeping loan open for full term). I can't find the post right now, but if I do, I will pin it... (unless someone else finds it first).

Re: How to move to next level after 750?

Anonymous — Fri, 09 Oct 2015 00:31:53 GMT

Thanks for the explanations!!