Helping to Increase my FICO Scores and UTI Help!

[Anonymous]

Hello,

How do I get started improving my credit score? My utilization is a high at the time.

Card1) $9,950/$12K limit @ 4 years old

Card2) $5,800/$10K limit @ 6 years old

Card3) $10,000/$13K limit @ 3 years old

I have a maximum credit line of $51K across 9 cards total. I also have a student loan at $8K and a joint auto loan at $13K. This puts me greater than the 50% credit utilization. I have never been late, no derog comments, and credit score is currently mid 600s. Any constructive advice would be appreciated!

[Anonymous]

This should be your order of priority:

(1)  Never be late on any payments.  EVER.

For your cards:

(2)  Always pay at least $2 more than than the minimum payment every month.  Never pay only the MP.

(3)  Pay each card down to under 87% of its credit limit.

(4)  Pay each card down to under 67% of its credit limit.

(5)  Pay each card down to under 47% of its credit limit.

Then use whatever payment strategy you like to pay off all CC debt.

Finally, allow a small balance to report on one card with the others reporting $0.

When you have accomplished all that, you can begin getting advice on whether and how to pay off your loan debt.  But first focus solely on CC debt.

[SouthJamaica]

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@Anonymous wrote:

Hello,

How do I get started improving my credit score? My utilization is a high at the time.

Card1) $9,950/$12K limit @ 4 years old

Card2) $5,800/$10K limit @ 6 years old

Card3) $10,000/$13K limit @ 3 years old

I have a maximum credit line of $51K across 9 cards total. I also have a student loan at $8K and a joint auto loan at $13K. This puts me greater than the 50% credit utilization. I have never been late, no derog comments, and credit score is currently mid 600s. Any constructive advice would be appreciated!

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I agree with @Anonymous 

I would add:

1. The precise answer depends on which FICO scores you want to improve. E.g., the FICO 8 and FICO 9 scores behave very differently than the mortgage scores.

2.  Do not lump the installment loans and the revolving credit together for utilization analysis, because aggregate revolving utilization and aggregate installment loan utilization have different effects, and sometimes different effects on different scoring models.

3.  Without knowing more about your existing profile, I can say as a general rule that you will improve your score significantly if you

(a) concentrate on paying down the revolving accounts

(b) keep the aggregate of reported revolving balances at 9% or less, 6% would be even better

(c) do not let any reporting revolving balance exceed 28%

[Nayola]

CreditGuyInDIxie, you said "For your cards:

(2)  Always pay at least $2 more than than the minimum payment every month.  Never pay only the MP."

How does paying a little bit more than minimum help? (other than reducing the amount owed faster)

[SouthJamaica]

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@Nayola wrote:

CreditGuyInDIxie, you said "For your cards:

(2)  Always pay at least $2 more than than the minimum payment every month.  Never pay only the MP."

How does paying a little bit more than minimum help? (other than reducing the amount owed faster)

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Paying the minimum is a red flag to a lender which they often treat as a sign of financial distress.

[Nayola]

SouthJamaica, makes sense.  Thanks.

[SouthJamaica]

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@Nayola wrote:

SouthJamaica, makes sense.  Thanks.

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I don't think it makes sense But it is what it is.

[Nayola]

SouthJamaica, I meant you explained it well :-)  But I agree.  A lot of FICO's rules are mysterious and strange indeed!

[Anonymous]

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@Anonymous wrote:

I have never been late, no derog comments

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This is a huge positive that will make your job of building your credit much easier. Good job!

CreditGuy and SouthJamaica always give great advice, and this is certainly no exception. And if you're a "left-brained" kind of person who likes an analytical step-by-step approach, then what CreditGuy suggests is perfect.

Here's another way to look at it. Your FICO score is just a formula that considers behaviors that predict the likelihood you're going to get into trouble with credit and reduces them to a number.

For instance, people who are occasionally late with a payment are statistically more likely to get into credit trouble than people who go for years without ever being late. People who over a period of time have spent more money than they've made are statistically more likely to get into credit trouble than those have always been able (and willing) to pay back what they've spent. People who pay the bare minimum each month are statistically more likely to get into credit trouble than people who manage to pay more. People who have recently sought new credit are statistically more likely to get into credit trouble than those haven't needed (or wanted) to pursue more credit for a while.

Your FICO score basically takes evidence of those kinds of behaviors, quantifies them, and uses them to produce a number.

So if you want to raise your credit score, you need adopt the behaviors that highly credit-worthy people have.

The great news for you is that you already have one really important behavior. You've been really conscientious about never being late, and you don't have any delinquencies. Keep that up! And now start adding to that the other really important credit behavior: always pay more than you spend (and significantly more, if possible) until you are down to a token balance. Then continue to pay off what you buy (consumer spending every month, and if you must finance larger purchases, then in a timely manner).

It's really just a broad view of exactly what CreditGuy is describing, but it emphasizes credit-worthy behavior and recognizes that this will ultimately be reflected in your score.