Starting Over from Scratch

[sassyat38]

My fico states that my fico scores are:

Experian -702, Transunion - 682, and Equifax - 698, now how are these below average, and are they really? Well, I can say I'm proud of myself. When I first started working on my credit almost a year ago, my scores were: Exp -545, TU - 530 and Eq - 515.

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edit to add: these posts were split off from "How are these scores below average" over on Understanding FICO Scoring. I'm editing each of the moved posts to provide the new thread title, but I haven't changed any of the message content. --hauling

Correction: the original thread's title was "What DOES it take to reach 800? Age?" The thread title had been changed at the very end.

Message Edited by haulingthescoreup on 08-31-2008 07:06 AM

[haulingthescoreup]

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@sassyat38 wrote:

My fico states that my fico scores are:

Experian -702, Transunion - 682, and Equifax - 698, now how are these below average, and are they really? Well, I can say I'm proud of myself. When I first started working on my credit almost a year ago, my scores were: Exp -545, TU - 530 and Eq - 515.

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That's fantastic success in less than a year! The nice thing is that once you do your necessary clean-up, if you can resist getting a lot of new credit, those scores will just keep going up.

Message Edited by haulingthescoreup on 08-31-2008 07:00 AM

[sassyat38]

Well Fico recommended opening up a cc account and I did with USAA for 8,000, and my equifax took a hit about 10 pts, is this normal and will I see an increase later? I didn't have a revolving acct and I guess that is what I needed. This is my only credit card, and I haven't charge on it since it is so new. Any advice?

Message Edited by haulingthescoreup on 08-31-2008 07:00 AM

[haulingthescoreup]

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@sassyat38 wrote:

Well Fico recommended opening up a cc account and I did with USAA for 8,000, and my equifax took a hit about 10 pts, is this normal and will I see an increase later? I didn't have a revolving acct and I guess that is what I needed. This is my only credit card, and I haven't charge on it since it is so new. Any advice?

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In that case, forget what I said, you're doing right! USAA is great to work with, and that's certainly a fantastic initial CL.

I'd say you'll have those points back in a month or two, as the presence of a revolving account helps your mix, and after that, your score will keep going up. I don't know whether it's better, with only one card, to have it report or not, so you might try both. The figure that's reported to the credit bureaus is the balance that's on your statement each month. So definitely use the card, but don't let it report a high figure. Even if you turn right around and pay it off, it makes it look like you're carrying balances.

What other open tradelines (credit accounts of all types) do you have? --mortgage, car loan, etc. You will eventually want to add one or two cards, but there isn't really any hurry unless you are shooting for a certain score by a certain date.

It sounds like you're building back up from scratch. If that is so, the general consensus seems to be that the ideal mix is 2 or 3 bank cards, one purely retail card (no Visa, MC, etc logo, just the store), and a loan. Despite my love for USAA, the scoring formula regards it as a CU card, and it carries a bit less weight than cards from the major national banks like Citi, Chase, Discover, Bank of America, etc. So when you look to add a second card, you should keep that in mind and look for one of those.

Message Edited by haulingthescoreup on 08-31-2008 07:00 AM

[sassyat38]

You are right I am starting from scratch. I have a car loan with Chase, and I only owe abou 3,000 on a 15,000 car loan, and of course I have the 54,000 in student loans that I'm consolidating to take out of deferrment to start paying, and now the credit card. That is all that I owe. I'm so scared of applying for credit and having my credit take hits. I know I need another credit card. Do you know any store credit card I can apply for or maybe some other major credit card that I can apply for that will just look at my score and not at my past negative accts; although they are all paid. All suggestions would help and thanks! Oh, I did have other signature loans that were taken out but paid back in full/never late and it is showing on my cr.

Message Edited by haulingthescoreup on 08-31-2008 07:01 AM

[haulingthescoreup]

What are the negatives that are on your reports? Different lenders shy away from different credit problems --bankruptcy, charge-offs, collections, and so forth. How long ago did each occur, and so forth? Which lenders did you have problems with?

All this determines where your best path is.

(Many of us feel shy when we first start posting about airing our dirty laundry. But we really have seen it all already, I promise!)

[Anonymous]

I have heard  that if you ask your cr cd company to raise your limit, that it will raise your score ! I assume that is of course you  keep a low balance still loke 25 % ut ? IS this true- has anyone done this here?

[Anonymous]

I heard if I ask for a higher limit  while still only using a low monthly % of avcailable credit, (like 25%), that this will raise my score??? Is this reliable info?

[haulingthescoreup]

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@Anonymous wrote:

I heard if I ask for a higher limit while still only using a low monthly % of avcailable credit, (like 25%), that this will raise my score??? Is this reliable info?

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It can help your score, if they give you the CL, of course.

A third of your score comes from how much of your total credit (mostly revolving credit) is being used. This is called utilization, or util. Add up all the balances that reported to the credit bureaus (generally, this is the balance that is printed on your statement, whether you then go ahead and pay it or not. Add up all the total credit limits of your cards. Divide total balances by total credit limits. That's your overall util, expressed as a percent. Individual card util is scored too, and you just do the same division, one card at a time.

So if you currently have a total of $500 due on cards with a total of $1000 credit limits, your util is 500/1000 or 50%, which is much too high. If your CCC's increase your individual card limits to where your total CL is $2000, then the same total balance divided by the new total CL is $500/$2000, or 25%, which is getting better.

Util generally has to cross certain breakpoints to result in a change of score. We don't know for sure what they all are, but it seems to be something like under 50%, under 30%, under 20%, and under 10%. There's one for no-longer-maxed-out, probably somewhere around under 85%. Some people might also get score bumps for going under 5%, but most won't.

And "under 50%" means exactly that: not 50%, but 49% or less, and so forth.

So as for your question, yes, if you get CLI's, it might help if it makes your util drop under one of the break points. It's much better to reduce util by paying down balances, though. The goal is 1 - 9% on a few cards, with the rest reporting $0.