Help Me Make a Plan of Action

[Anonymous]

Hello Everyone! I am new here. I hope this is the right forum for this post.

I would like to share my current credit/financial situation and get some input as to how I can bring my credit score up to "Excellent" (the quicker, the better).

I currently have $3,000 of credit card debt and about $10,000 of student loans. Here is the breakdown of my score:

http://imgur.com/a/NILef

(Summary: Eq: 661, TU: 679, Ex: 655, no late payments, credit relatively old, heavily using revolving credit)

I just got a job that pays well and will be able to pay off my credit card in a month (but since I will want to treat myself for getting the job, I might do it in 2 months).

What should I do to bring up my score? (other than pay down my credit card) How quickly should I pay off my student loans? Do they hurt my score a lot? Should I get a new credit card now, or wait until my debt is paid off so that I can possibly qualify for a better card? Any other tips based on my situation?

Sorry for asking a lot of questions. I just want to make sure I'm handling this properly.

Thanks!

[Anonymous]

Welcome to the board. To better answer your question, what credit cards do you have now?  Can you list them, limits and balances owed?  Imgur'ing your scores are good but isn't enough to get good responses.

Bear in mind the people here don't have your credit file in front of them but are just going by what you post.  So give us a snapshot of your credit profile for better responses.

[Anonymous]

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@Anonymous wrote:

Welcome to the board. To better answer your question, what credit cards do you have now?  Can you list them, limits and balances owed?  Imgur'ing your scores are good but isn't enough to get good responses.

Bear in mind the people here don't have your credit file in front of them but are just going by what you post.  So give us a snapshot of your credit profile for better responses.

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Thanks for the reply!

I have a Wells Fargo College Card with $3,000 of debt and a $3,000 limit. I have an Amazon Store Card with a $1,900 limit and no debt. I also got approved for a Barclays Financing Visa Card a long time ago (for purchasing Apple products). I am not sure what the limit is (probably $1500 +/- 500), but I have never used it and it doesn't seem to be incorporated into my score. My credit utilization is 65% and I have $3,000 CC debt, so it only seems to be taking into account Wells Fargo and Amazon (both of which I have used).

I hope this gives you what you need!

P.S. I had to search through my email records to find some of this information, does anyone know if there is a way to access it via myFico?

[QUAILMAN]

The only thing you can do to quickly (in the next month or two) bring your score up is to 1-Pay off that credit card debt and 2-increase the limits on your current card. Doing those two things will bring your utilization down, which is the only quick fix you are capable of right now. You want that percentage no higher than 30% (the lower the better of course). If you can wait a month to treat yourself for getting a sweet new job, your score will benefit that much quicker.

If you are looking long-term, the next thing you want to do is get a few more cards, paying them off in full each month. You will take a hit to your average length of accounts, but that will be offset within a couple years since you will have more accounts that you are responsibly managing and an even better looking utilization percentage.

[Anonymous]

YIM is an old hand here, so I am sure you'll get some good help there.

It sounds like you plan to pay off all your cards over the next 2-3 months.  Good for you.  Just pay them all off (completely down to $0) and then use one card moving forward for the next few months after that.  Keep it reporting at a very low level, enough that your total utilization is < 5%.  You want one card reporting a positive balance and all others at $0.  You will get some gignatic help there, since one of your cards is completely maxxed out.

Can you tell us the total amount that all your open installment loans were originally for?  (All loans combined: student, auto, etc.)  And then tell us how much you currently owe on your open installment loans?  (Again, all loans combined.)  Example.  You might have three loans that were originally for 4k, 6k, and 20k (30k total) with a total amount currently owed of 10k.  Don't count any closed loans.

You ask for a good way to figure out how much you owe on all your cards and what their limits are, as well as the similar status of your other accounts.  You can do that through looking at your credit reports.  It's crucial to learn how to read and understand those.  I encourage you to subscribe to Credit Karma and learn how to pull your EQ and TU reports there.  It costs nothing and will help you assess when those two bureaus are recording your credit card balances as being paid down to $0.  You can pull those reports as often as once a week.

[Anonymous]

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@QUAILMAN wrote:
The only thing you can do to quickly (in the next month or two) bring your score up is to 1-Pay off that credit card debt and 2-increase the limits on your current card. Doing those two things will bring your utilization down, which is the only quick fix you are capable of right now. You want that percentage no higher than 30% (the lower the better of course). If you can wait a month to treat yourself for getting a sweet new job, your score will benefit that much quicker.

If you are looking long-term, the next thing you want to do is get a few more cards, paying them off in full each month. You will take a hit to your average length of accounts, but that will be offset within a couple years since you will have more accounts that you are responsibly managing and an even better looking utilization percentage.

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Thanks! But do you think it would be smarter to wait until my credit score goes up from paying off my cc before I get a new card? Or will it not matter as an increase in my credit score could cause creditors increase my limits anyway?

[Anonymous]

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@Anonymous wrote:

YIM is an old hand here, so I am sure you'll get some good help there.

It sounds like you plan to pay off all your cards over the next 2-3 months.  Good for you.  Just pay them all off (completely down to $0) and then use one card moving forward for the next few months after that.  Keep it reporting at a very low level, enough that your total utilization is < 5%.  You want one card reporting a positive balance and all others at $0.  You will get some gignatic help there, since one of your cards is completely maxxed out.

Can you tell us the total amount that all your open installment loans were originally for?  (All loans combined: student, auto, etc.)  And then tell us how much you currently owe on your open installment loans?  (Again, all loans combined.)  Example.  You might have three loans that were originally for 4k, 6k, and 20k (30k total) with a total amount currently owed of 10k.  Don't count any closed loans.

You ask for a good way to figure out how much you owe on all your cards and what their limits are, as well as the similar status of your other accounts.  You can do that through looking at your credit reports.  It's crucial to learn how to read and understand those.  I encourage you to subscribe to Credit Karma and learn how to pull your EQ and TU reports there.  It costs nothing and will help you assess when those two bureaus are recording your credit card balances as being paid down to $0.  You can pull those reports as often as once a week.

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Thanks for the response.

I have two student loans of about $5,000 each (but they are both from the same provider, so I think it just counts as one). I have yet to start making payments on it, but I will need to start soon.

So do you recommend Credit Karma for EQ and TU and then myFico for just EX? Or do you recommend Credit Karma on top of the 3B report from myFico (which is what I currently have)?

[Anonymous]

Yes.  Given that you plan to pay off all your CC debt in the next three months, it would be much smarter to do that first before applying for more cards.  Your score will go up a lot when your CC debt is paid off.  With a much higher score, you will be much more likely to be approved when you so apply for a new card, and your will have a broader option of good cards to choose from with a higher score as well.

Qualilman is right that your profile would benefit from having a couple extra credit cards on it.  It sounds like you may only have two open cards right now.  The way that the FICO algorithms are set up, you get more scoring benefit if you have at least three cards.  Four may be better still.

You will benefit most from pulling your credit reports and making sure you know how to read and understand them.  It sounds from your posts thus far that this is something you may not know how to do.

[Anonymous]

You write:

I have two student loans of about $5,000 each (but they are both from the same provider, so I think it just counts as one). I have yet to start making payments on it, but I will need to start soon.

So do you recommend Credit Karma for EQ and TU and then myFico for just EX? Or do you recommend Credit Karma on top of the 3B report from myFico (which is what I currently have)?

As far as your student loans go, be sure to set up some failsafe methods so that there is no way you could ever miss a payment.

Once you do start making payments, you should also contact the loan servicer and explore your options for paying down the principal on the loan.  (I.e. making an early lump sum payment on each loan -- for example, bringing your loan balance down from $10000 to $7000)  No need to do this of course if you can see that your budget is such that you will not be able to make such an additional early big payment.  If you can, however, you will get some scoring benefit by bringing your installment debt down from $10000 to under $6899.  (That means under 69% of the original amount owed.)  I can't remember whether the breakpoint for scoring benefit is 79% or 69%.

If you can make an early payment, talk to the servicer and find out what that would mean.  Ideally you want to hear that a big early payment will do two things. 

(1)  Be applied to the principal

(2)  Extend the due date of your next payment by many months in the future. 

Ideally you should want to pay down the amount owed on these student loans (ideally to < 8.9%) but still keep the student loan accounts as "open" accounts for many years.

As far as tools for monitoring your credit reports, I recommend Credit Karma because it is free.  It can't hurt to have one more option in your toolkit for pulling reports if that option costs you nothing.  A friend of mine here on the forum recently asked me what my own strategy is for tracking my credit.  Below (in green) is what I told him.  There is no right answer and many people have different strategies. 

I use Credit Karma plus Credit.com.  This gives me free reports up to once a week on TU and EQ.  Credit.com is less detailed (not a full blown report) but it does give me a summary of my Experian data, which is enough for me to figure out if my EX is saying anything significantly different from my TU/EQ.  This approach also gives me a unified credit model (Vantage Score 3.0, range 300-850) across all three bureaus which is also enough to tell me if anything strange is happening to my reports or scores.  Not a good idea to assume a particular FICO score is the same as your Vantage, but comparing your Vantage across all three bureas is very helpful.  It's also very helpful to see whether your score over time at a particular bureau is gradually going up -- that works for any valid model (and Vantage is a very decent model).

Karma plus Credit.com is cost free.  Once a year I pull a full blown Experian report from annualCreditReport.com (for free).

To that I have a number of free FICO scores which I get from my credit cards.  I get monthly free FICO 8 Classic scores from EX (Chase and Amex) and TU (Bank of America).  I get a FICO 8 Bankcard Enhanced score drawn on EQ data from my Citi cards.

Once a year I signup for the myFICO 3B monitoring product.  I get maybe three dozen FICO scores when I do that.  That costs me $30.  About three weeks after I get all those scores, and after I get a clean bill of health from their ID theft service, I cancel my subscription.  I do this maybe once every 12-15 months.

That's just my approach.  A lot of people here on the Forum love Credit Check Total.

[Revelate]

In your case the reason codes are clear:

1) Address the revolving utilization (for a lot of reasons) first and foremost and you'll likely get a darned good bump there.  3000/3000 sucks on 2 fronts as individual card utilization is counted too, not just aggregate.  Also the interest charges on that if you're carrying a balance are not financially smart, ideally pay it down to a couple of bucks.

2) Once that's done, you can see about playing reindeer games with your installment loans as CGD suggested, but that's a lot less of a score boost typically and usually isn't the straight financial win that paying down revolving debt is.

3) Time passing, which is everybody's friend if they don't miss a payment.

You should've gotten your base reports when you signed up for the myFICO service; go look at them and see explicitly what's there in terms of number of tradelines and what not.  Each tradeline is a seperate scoring element, and typically SL's aren't rolled up into one... it's not uncommon for students to get a new SL for every single semester (or quarter) on their credit reports and that only changes if they consolidate in the future.  Like CGD I also use CK and credit.com though I do have the MF monitoring still.