I am a first year medical student and I wanted to get some advice on building credit while in training. I approximately have 8-10 years before I will be earning a full doctor's salary (I'm 24 now; 4 years of medical school-taking out $26,000 in federal loans per year; then 3-7 years of residency/fellowship where my income will be $50-60k). My goal is that when I do finally become a physician, my credit will be asset and I can start living/enjoying my hard work.
Currently, my credit scores are 743 TU/744 EQ. I have two credit cards AMEX Every Day (CL 14,200) and Capital Venture One (CL 8,000). Right now, my utilization is 10%, but I always pay off the cards before 0% APR is over. I have 9 accounts (7 student loans, 2 CC) and average age of history is 2 years and 10 months. Oldest account is 6 years.
What should I be doing while in school and then in residency to have a high credit score down the line? Is applying for a new credit card yearly to take advantage of introductory 0% APR too often? The biggest struggle I have is length of credit history. Does it make sense for me to have more accounts now, so that my length of credit history will long in 10 years?
You give your credit scores as coming from TU and EQ. My guess therefore is that you are getting them from Credit Karma. I am a big fan of Karma -- it's a great tool for pulling your reports. But its scores are Vantage Scores, rather than FICO 8. Nothing wrong with tracking your V-scores, but you should perodically pull your FICO 8 scores too. We can suggest some extremely cheap ways of doing that (a few dollars per year).
I like your idea of steadily adding more cards over time. Have you thought about adding them not based on 0% offers but based on signup bonuses? The amount of money you are saving by having a 0% card is small. My guess is that its the equivalent of having 10k in a high interest (1%) savings account for an entire year. That's $100 (before taxes). You could make a lot more in tax-free money from CC bonus offers. You could use your tuition bills to meet the minimum spending requirements and make a ton of bonus money.
You are also clearly thinking about what looks good on your credit for the very long term -- what is going to look good 5 years from now or even further. Carrying CC balances every month (that's what you do with a 0% card) will look bad in the credit scoring models of the future. It's called being a revolver. That's contrasted with transactors, who are people who pay their cards in full each month. Transactors have been shown to be much less risky than revolvers, statistically. So many lenders moving forward will be analyzing your reports to see if you have been more of a revolver or a transactor -- not just that month but also month by month stretching back several years.
Incidentally if you want some extra scoring points in the run up to applying for a new card, you should have one card reporting a positive balance, all others reporting $0 and your total utilization < 8.99%. I don't know how your loans work, but if the lender establishes your interest rate partly on your scores, then that's one more reason to keep your CC balances low. You are getting new loans every year, right?
The good news is that you will be in great shape down the road as far as your credit scores You will never have missed a payment, you'll have a great Age of Oldest Account and Average Age of Accounts, and your cards will all be paid off. Sweet.
PS. There is one thing you are really well poised to help the folks here on the forum look into, and that is the effect of something called the SS loan technique on a person who only has student loans (especially if they are all in deferment). The technique (if it works for you) would give you an additional 30 points on your score. Let us know if you want more info on that.
Thank you for your response! Yes, I am getting my scores from credit karma.
I've thought about going for rewards, but I'm not sure that I spend enough. I don't pay tuition (large scholarship), so my loans cover living expenses (rent, food, fees). I think I'll have about 2k extra at the end of year that I'll either use to lower some of my undergrad loans (6k total; 1k at 6.8%) or save for emergencies or invest (about to open a Roth IRA with my tax return). I was thinking about the Discover IT for my next card to take advantage of the doubling 1% cash back after 1 year.
I never really thought about the idea of being a revolver vs. transactor. Definitely something I will keep in mind. I try to pay my balance each month, but because my loans are dispersed in August, January, and April, there are some months in between where I can't.
My interest is fixed--federal unsubsidized loans (5.3% this year). And yes, I am taking out a new loan for each of the four years. That's really good advice regarding my balance before applying for my next card.
I would be very interested in the SS loan technique. All of my loans are in deferment.
A great low-cost source of your FICO 8 scores is the $1 trial offer at CCT (Credit Check Total). It's churnable, which in the trade means you can get it, cancel it, get it again a while later, cancel it, etc. Some people here use it a dozen or more times each year. My personal feeling is that is overkill, and the more people that do that the greater the chance that CCT will plug up that loophole.
But a conservative use of the $1 trial would be to use it once a quarter. If I were you I would time it so that you pull your CCT scores and your Karma scores within an hour of each other. Then keep a running record of them in a spreadsheet. Over time you may be able to predict what your FICO 8 scores are from your Karma scores, simply because of that record -- e.g. your EQ Vantage score may be consistently 10 points higher than your EQ FICO 8 (say).
Another great free source:
It gives you your credit report and FICO 8 score drawn on Experian data -- each month.
Here is a writeup on the Share Secure Loan technique:
You only need to read the first 2-3 posts. Let me know if you decide you want to pursue it and I will help you out.
The Discover card is a nice one for students. And it will get you a free FICO drawn on TransUnion data each month. The Bank of America Better Balance Rewards might work well for you too. The BBR pays you $120 a year (tax free) to use the card. No kidding.
I signed up for freecreditscore.com. Says my score is 741.
Read through the posts. Definitely interested in trying it out. Will attempt after I get back from spring break.
I really like the Bank of America Better Balance Rewards benefits. Would be a nice card to use for small, daily expenses and just pay off every month.
Delighted to hear that you want to give the Alliant SS loan a try. I will send you a PM. I'd like to walk you through a few things you can do to prepare your credit profile for it, so that we get a sharp unambiguous answer about whether it help people with student loans or not.
Additionally, since you have federal student loans, it is important to be aware of the very strict implications of delinquent federal loans, and make sure you do not become delinquent.
Under the Higher Education Act, there is no statute of limitations, delinquencies have extended credit report exclusion periods, and delinquencies have mandatory reporting requirments.
Once you begin making repayment, be sure not to become delinquent......
Op. Congrats for getting accepted into US medical school. I am sure once you complete your school there will be several options available to you to sign up for the service and they will wipe out your educational debt. You are lucky you got accepted into state school with good scholarships. I am studying in a Caribbean Medical school now and have to borrow against my credit card to pay school which ended up being very very very expensive for me. Good luck. You'll do fine. What speciality do you want to go into when you graduate?
In a very similar situation here - not medical school but graduate school (which is slightly better because I can report my stipend as income). I found a lot of the answers here helpful. Going back to the revolver vs transactor debate, does that mean one should never take advantage of intro 0% APR offers? Often I like to finance a big purchase on a new credit card so I may pay in installments without paying any interest. Is that bad from a credit score perspective (assuming I compensate other balances so that overall utilization < 10%)?