Credit Scoring 101 - START HERE!

[Tuscani]

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Annod wrote:
I consolidated my student loans several years ago but they all appear as separate accounts and bring my credit score down because it looks like I have so many open. Is there a way to correct this? I can't even pay on the individual accounts anymore so I don't know how to make it better.

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The student loans will not bring your score down (unless of course you are late).

[Anonymous]

I sent out some GW letters, one company said no, while the other two were asking for more information. My derogs are my fauld hence the GW letter. What next? Any help is appreciated.

I read these posts all the time and they really are informative. Thanks in advance

[Anonymous]

Also remember the advice which a lender gives you is productive for getting a loan; but not always good for the credit scores. If they tell you to consolidate and close accounts be careful how you go about this, most people's compliance usually results in dropped credit scores. You are shrinking your overall available credit limit verses your balances... so remember you don't want to hurt the utilization by consolidating and closing accounts behind you.

I just came across this situation.  I had a meeting yesterday with a potential lender, advising me to close some of my credit cards.  Presently I haven't I believe nine opened credit card accounts.  Is there a proper way to close out some of these accounts?  Also, my CR is saying I have 44 accounts.  I only had two mortgages and no other outstanding loans, so I am assuming the majority are closed accounts.  Nevertheless, they are showing up as a negative too many accounts.  I guess my question is would it be wise to get my credit cards down to 2 to 4 cards and try to get high and balances on them?

[Anonymous]

I looked for hardship programs and how they effect your credit score and the website and from reading responses, i am still a little unsure of this. I am helping my girlfriend to improve her score. BTW the information on this site looks great and looking forward to getting the numbers up. We were looking at putting one CC on a hardship. It was a 7 APR, payment was missed and 31 APR into the default penalty period. Now card is overlimit and late fees are in effect. So one of the options is a hardship program that will close account and do fixed payments at 7%. I want to verify that the hardship program will not negativley effect the credit (this is considering all minum+ payments are made and on time). The money issue will resolve itself but paying 7.4 from 31 just makes sense. I want to know that the interest rate reduction is not a trade for " we'll help you here but screw you there " and "there" you wont find out until down the road. Thanks for all your help and knowledge guys. I look forward to more discussions with so many intelligent individuals!!

[Anonymous]

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@Tuscani wrote:

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@Anonymous wrote:
I consolidated my student loans several years ago but they all appear as separate accounts and bring my credit score down because it looks like I have so many open. Is there a way to correct this? I can't even pay on the individual accounts anymore so I don't know how to make it better.

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The student loans will not bring your score down (unless of course you are late).

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I think they might harm you in terms of credit age. After consolidating my student loans, my credit age went to 2 yrs and 10 months; if you remove the smaller loans and only leave in the consolidated loan my age jumps up 4 years. Unfortunately, those smaller paid off loans remain...essentially bringing down my score I believe.

[Anonymous]

Hello All!  I want to first start by saying that I love this forum.  I am in my early thirties and have just started a business so I have really started learning about personal and business credit.  I have perfect credit save for one issue.  I had a 60 and 90 day late approx 6yrs 9 mo's ago.  It will be off my credit soon enough so I am excited about that.  I have a question about closing a revolving account.  First of all here are my scores:

I have had TrueCredit for the last two years.  It has my scores as follows:

3/23/08

EQ: 780

EX:  709

TU:  702

Here are my FICO Scores:

3/23/08

EQ: 721

EX:  688  (EX Reports my HELOC as a CC and it is bringing my score down!!!)

TU:  731

These scores do not account for the fact that I have completely paid off a quad (GEMB) for $7,000 (9k limit) and paid off $2,500 of CC debt.  This now leaves me w/ $200.00 of total debt other than my mortgage and HELOC.  The cards will update soon so I am not too worried about that.  What I am worried about is what TrueCredit said.  Under the factors affecting my score they said I have too much available credit (22K) and I should consider closing an account, and that I did not have a lengthy credit file (Average age is 4yrs 9mos).  After reading that I paid off the GEMB Honda Card and asked that the account be closed.  This was five days ago that I did this.  My reasoning for closing it was based on TC's advice and the fact that it was my newest account (opened in March 2006) and I figured it would make my average account age go up.  After reading the posts on the forum it appears that I may not have wanted to close the account.  I am confuesd about what I should do.  Should I leave the account as closed (I will never use this account again) or should I call GEMB and tell them to open the account back up?  I would appreciate any help on this topic.  Thanks!

[Anonymous]

Tuscani,

 May I place you on the highest of all pedastools?!?!  I have been to many forums for many reasons over the years, this is the first I felt truely compelled to post.  I have educated and re-educated myself this past year or so to improve my credit and create a financially healthier lifestyle.  I've done quite well on my own, however this forum and all you serve has smacked me upside the egotistical head.  I will study this massive collection of posts, then certainly become a contributing part of this community.  Thank you Tuscani for the excellent moderation.  You deserve the collective salary  (with bonuses) of every CEO of every financial organization!! 

[Tuscani]

^^^^

Thanks for the kind words!

[Anonymous]

Why is it FICO sees every time I increase a credit card balance, even $20 one time, but fails to see a decrease, even a $10,000 payment it's missed for three months?

[RobertEG]

SanDiego, any advice that you may have received that closing a CC account will improve your avg length of credit is purely bogus.  Dont close accounts in order to achieve a non-existent promise of improving your length of credit.  All accounts, open or closed, count in your length of credit history calculation, so you cannot improve  your credit history by closing an account.

And closing an account triggers two other things, neither of which is good from a FICO perspective.  First, it eliminates any open CL on that account, thus hurting your % utiil.  Second, it triggers the begin of a ten year clock on that account, which will ultimately cause it to drop from your CR entirely after ten years, then resulting in loss of ten year history on that TL in your avg age. 

The only substantial reason for closing a credit card is to avoid yearly membership charges, and that is up to you.  But from a FICO scoring perspective, it is never good.  Period.