topic Re: Tips and Tricks to improve credit? in General Credit Topics

Tips and Tricks to improve credit?

Anonymous — Tue, 19 Apr 2016 06:41:03 GMT

Hello,

After lurking this entire forum I still have yet to see a "tips and tricks" thread anywhere.

I just want general tips to improve it, I'm not so caught up in going to 800's or high 700's.

Just wanna have great credit, so any tips?

Re: Tips and Tricks to improve credit?

Appleman — Tue, 19 Apr 2016 11:44:45 GMT

Welcome VCAlan to myFICO!

This entire board is all about tips and tricks.

The basic tips:

1. Spend less than you earn (budget your money)

2. Pay your bills on time, ALWAYS

3. Have three major credit cards with only 1 card reporting <10% of the credit line as a balance

4. Have an additional loan product (if you can use it). The mix of credit is important to improve your score.

5. Have a goal for your credit. Look into the future 2-5 years and think about what is important. Work your credit to achieve those goals.

That is a start at least.

Not really tricks:

PenFed is good for multiple products with 1 Equifax pull if your credit is solid enough.

Want a chance at a 5 figure CL credit card? Capital One Venture or Synchrony Bank YMMV

Re: Tips and Tricks to improve credit?

elim — Tue, 19 Apr 2016 11:51:49 GMT

@Appleman wrote:
Welcome VCAlan to myFICO!

This entire board is all about tips and tricks.

The basic tips:

1. Spend less than you earn (budget your money)
2. Pay your bills on time, ALWAYS
3. Have three major credit cards with only 1 card reporting <10% of the credit line as a balance
4. Have an additional loan product (if you can use it). The mix of credit is important to improve your score.
5. Have a goal for your credit. Look into the future 2-5 years and think about what is important. Work your credit to achieve those goals.

That is a start at least.

Not really tricks:
PenFed is good for multiple products with 1 Equifax pull if your credit is solid enough.
Want a chance at a 5 figure CL credit card? Capital One Venture or Synchrony Bank YMMV

well said

Re: Tips and Tricks to improve credit?

Anonymous — Tue, 19 Apr 2016 14:15:22 GMT

If you do not have any open installment loans at all (tip #4) let us know. There is an easy cheap way to get an installment loan on your profile. For people with no open loans, this can be a significant help.

Re: Tips and Tricks to improve credit?

Anonymous — Tue, 19 Apr 2016 15:37:45 GMT

Awesome replies guys!
Also wondering you said spend less than you make right?

Well what if I wanna make a big purchased? For example a new car or a ton of new furniture for a new house?

Do I just use cash for those? Or do a loan?

Credit Utilization vs Loans is still confusing to me.

Re: Tips and Tricks to improve credit?

Revelate — Tue, 19 Apr 2016 16:00:16 GMT

@Anonymous wrote:
Awesome replies guys!
Also wondering you said spend less than you make right?

Well what if I wanna make a big purchased? For example a new car or a ton of new furniture for a new house?

Do I just use cash for those? Or do a loan?

Credit Utilization vs Loans is still confusing to me.

Spending less than you make is the route to financial happiness. No money = no bueno, eventually the bills come due; that said, when it comes to temporary big purchase expenditures, you finance them as cheaply as possible.

Finances > FICO always. If you get a sweetheart 0% financing deal, or even call it <4% on a loan, it may not make much sense to pay it off immediately. Conversely if you're stuck against 20% financing, throw your cash at it. Credit is just another financial tool really... and if you need to make the big purchase, don't worry about the short-term utilization effects.

To give a relevant personal example: I run every little bit of my financial life that I can through my credit report, and objectively I still only have $270 total debt reported outside of my mortgage. That's going to change as I'm coming up against 2 years educational expenses at UCI, and that's non-trivial cash (~30K), and since I can't realistically pay 30K right now (or even ~5K every quarter) I'm going to have to finance part of it either on a student loan at ~5% or a HELOC at 3.25%.

Hello HELOC! It really isn't more complicated than that honestly, taking the cheapest money route.

Credit card (revolving) utilization is calculated completely seperately from loan (installment) utilization. Revolving utilization is a bigger (and more complex) factor than installment utilization, but you want to maximize both ideally when we're talking optimizing one's report.

Re: Tips and Tricks to improve credit?

Anonymous — Tue, 19 Apr 2016 15:54:15 GMT

Holy crap. You just made all the sense. Thank you!
For weeks I've wanted to buy a computer but just wasn't sure if I should do financing (PayPal Credit or Apple Barclays Credit card) or just straight up cash.

Re: Tips and Tricks to improve credit?

Anonymous — Tue, 19 Apr 2016 16:17:56 GMT

There's a slight tweak that I would add personally. A washing machine or big screen TV at Best Buy, a funiture set at Rooms To Go, a computer from Dell -- it is not uncommon to get an offer of "financing" for these. You'll get that offer when you are talking to the sales person (or perhaps interacting with a virtual salesperson on a website) at Best Buy or RTG or Dell (etc.).

This is basically a loan. But these kinds of loans (see the kind of thing I talked about above, those are just a few examples) are often tagged in your credit report as a "finance company" account. These will actually harm your score -- in a way that buying the item through a major credit card would not. (Your Amex or Chase Visa or Citi Mastercard are not tagged as FC accounts.) I am not saying the FC account will do huge harm -- but they are considered negatively by FICO.

So before you decide to open this particular kind of loan, I suggest that you hop onto this forum, explain what you are trying to do and ask people if it might be considered an FC account. People here will often know. You can also use Google and other information gathering tools.

You may decide that you still want to use that specific financing offer, even if it is an FC account. (You decide that the harm to you is less than the pleasure you will get from having a new TV, or whatever.) But it's important to make informed decisions, rather than learning that it is an FC account after the fact.

PS. Buying a car with an auto loan from a recognized lender, or buying a house with the help of a mortgage lender -- these are NOT exampless of FC accounts.

Re: Tips and Tricks to improve credit?

Anonymous — Tue, 19 Apr 2016 16:22:31 GMT

Okay thank you.
So as I said in my example above

I am considering either buying a new TV from BestBuy or Conns ($1600) (BestBuy Credit or Conns Yes Money)

Or

A new iMac from Apple (PayPal Credit or BarClays)

Should I finance them? Or just buy it with cash? None of my credit cards have a big enough limit for the TV or iMac computer.

You guys rock!

Re: Tips and Tricks to improve credit?

Appleman — Tue, 19 Apr 2016 17:07:48 GMT

I can see a younger version of myself in your post. Want to buy a $1,600 TV and an Apple computer and need to finance them both.

This will come down to a want/need discussion for you and once again examining this against your long term goals. Are you going back to school, getting married or buying a house (or all three)? Every decision you make today will have a direct impact in your future self, be kind to your future self.

If your credit file is 'thin' (a file that has a short history and few trade lines) it may be difficult to make both purchases with good rates. You may want to consider doing one purchase at a time and ensure that the purchase payments fit your current budget. Remember keeping your credit card balance below 30% of the credit line will help your score from being pushed down. So a $1,600 TV would require a credit line of around $5,400 to finance the item without a big negative credit hit (Utilizing < 30% of available credit on the card)

It is always confusing that credit card companies give you credit but get spooked when you utilize said credit.

If you feel comfortable, share some of your current 'ballpark' information (I certainly don't want you to compromise your identity here).

If we have some more information about credit score, AAoA (average age of accounts), number of credit accounts it can be helpful in pointing you in the right direction.

Cars are tricky but something that I will likely always finance. This is one area where good credit can help greatly with getting the best loan rate.

Re: Tips and Tricks to improve credit?

Anonymous — Tue, 19 Apr 2016 17:14:24 GMT

Okay so I am 20 right now.
Have: Amazon Prime Card (4 months old)
PayPal Credit (6 months old)
TDECU Credit Card (exactly one year old)
Kohl's Credit Card (1.2 years old)
Firestone Credit (4 months old)
Capital One Credit Card (3 weeks old)
A couple of Affirm Accounts right now (couple months old)
$14k Car Loan with $7k left on it (one year old)

AAoA about 7-8 months

Utilization rate is about 50%
Credit Score is 649 and 655

Re: Tips and Tricks to improve credit?

Anonymous — Tue, 19 Apr 2016 17:35:20 GMT

We can help you better if we understand what your "should" means. (You write: Should I finance them? Or just buy it with cash?)

It sounds like you have the cash to buy them. But you want to know what action you should take to help your credit score. Is that right?

If so, then what you should do is to pay cash for them. You already have plenty of accounts (including a car loan) and you won't benefit by adding more. And this way you will be making sure you are not adding an FC account.

Then develop a plan to pay all of your credit cards off entirely. All the way down to $0. That will save you a lot in interest and will also help you out a huge amount with your credit score. Once you pay off all your cards, you can begin to use them naturally, just for whatever you really need, and always pay the balance on the statement in full.

Your score will benefit if you have several cards with a $0 balance and if you keep your total utilization low. (Also be sure to keep any card you do use under 50%.) Whenever you need your score to be its highest, pay all your cards to $0 except one which can report something small. Your score will go up within the next month.

Re: Tips and Tricks to improve credit?

Appleman — Tue, 19 Apr 2016 20:45:01 GMT

At this point I would not apply for financing for the items you want.

Is the PayPal account a hidden trade line (meaning do they report to the credit bureaus)? If it is and they offer a period of zero % interest that might be a way to finance your items.

The next goal should be to get that utilization below 30% with the ultimate goal of no revolving debt. There are certain levels of utilization that will improve you score as you pay down your debt.

With time your accounts will age, your scores will increase and you will begin to have new and better choices for credit. Credit is a marathon not a sprint. Sometimes it just takes time to make the climb to better scores.

Re: Tips and Tricks to improve credit?

Anonymous — Wed, 20 Apr 2016 00:30:17 GMT

Wow thanks guys.
And as for PayPal Credit I have read that they do not report to credit bureaus, which is a big shame. I have a $2000 limit on that account.

Also have Affirm which I'm not sure if they report either.

How should one eliminate their debt?

Should I try to pay them off as soon as I can? This would leave me with less money but also I would save hundreds in interest.

Or should I just pay for a few months? (More interest but I wouldn't be empty on money)

Thoughts?

Re: Tips and Tricks to improve credit?

driftless — Wed, 20 Apr 2016 00:40:37 GMT

IMHO - avoid threads like this one that you started and similar ones.. Scamming the system doesn't work. Live within your means. Get your utilization done to 1 - 3%. Get a couple of Cap One/Discovery and GROW them. PIF every card, every month.

Re: Tips and Tricks to improve credit?

Anonymous — Wed, 20 Apr 2016 03:57:06 GMT

I think he/she is a 20 year old with a very legitimate question and concern. I can see my younger self battling with this idea. The best thing if you have the money just pay for it Cash since you have lots of cards with balances on them. Financing them will require a new acct and you might not get approved for a barclay card. You can also use paypal if you need to have access to some cash and take advantage of their 0% interest but it wont help your credit score in a positive way.
Good luck and always live under your means

Re: Tips and Tricks to improve credit?

Anonymous — Wed, 20 Apr 2016 04:04:56 GMT

Thanks!

And I do not understand what scamming the system means....

I just want to know the smart choice, that was it.

Nothing more nothing less.

Re: Tips and Tricks to improve credit?

driftless — Wed, 20 Apr 2016 10:18:16 GMT

Point taken, please disregard my scamming reference.

Re: Tips and Tricks to improve credit?

Appleman — Wed, 20 Apr 2016 14:44:27 GMT

VCAlan,

You are seeking the advice of others which I believe will be helpful in the future for your credit well being. I think I see the perspective of the other poster and the scamming the system comment. It rarely works that one can borrow themselves out of debt.

Take a look at YNAB (you need a budget) for one system to start budgeting your money. There is a free 34 day trial and there are a lot of great short videos discussiing how the system works. The program will help change your perspective and/or relationship with money. Previously, open credit limit meant it was time to spend for me. I now realize that the credit score game is important and I carefully spend my money. (Note there are many such programs availble)

Don't get me wrong, I still like nice things, I just make sure I can afford them before I rack up the debt on a credit card.

You have a desire to purchase some new things for yourself. I believe putting them on the credit card or applying for new credit would likely have a negative impact on your current profile.

However, related to the hidden trade lines like PayPal, there is a way to not hurt your score.. This hidden TL allows you to finance a purchase without is negatively affecting your credit (showing as increased utilization). If you can obtain 0% financing on a hidden trade line and are committed to paying of the debt before interest kicks in, I say go for it. Just make the payment part of your budget.

Most conservative financial people will tell you to save the money and pay cash. Credit cards are indeed a double edge sword and you need to leverage them for you long term goals. It is much more fun to see cash back and points accumulate than paying interest to the CC companies each month.

Re: Tips and Tricks to improve credit?

arizonahd — Thu, 21 Apr 2016 20:50:38 GMT

One thing I recommend which is probably a total "duh" to most people on here (but I do run into people who fail to do this): make sure every credit card you have is set to auto pay. While this is not going to solve out of control balances, it at least prevents stupid late payments. Every CC I have is set to autopay the minimum due, including my store cards. One bonus is that it acts as a reminder when I review my bank account, if I see the minimum payment pulled, I will open the account and pay it off if possible.

I also have my car and utilities on autopay, the only bills I have to physically process is the mortgage, water bill (city doesn't have auto pay), and our landscaper.

But yeah, keeping utilization and inquires down is the majority of the work to get a good score.

Also, when I get a new loan, I usually do it in the spring when I do my end of year review (for tax time). Most of my inquiries happen around this time, for example, I might do a BT on a 0% apr card and by next year have it paid off at the same time. My current score is 800 and my wife's is 820 (she always wins) so it is working thus far.