Credit Cards

[Chris_]

I must have played the game right.  I wasn't attempting to work the system, but my FICO score is pretty high.

It was 803 before I co-signed the loan for my son's car.  It dropped to 797 when I did that.

Sounds about right for someone who pays everything off and has a long credit history.  There are a lot of factors that go into the FICO, but paying your debts promptly is the biggest.  Length of time of credit history is #2, type of debt #3, ratio of available credit to use is #4.  This is approximate.

I think my advice is more for the younglings who are reading this.  Jumping cards, for example, to get a good interest rate or to get a free t-shirt is a pretty bad idea.  Stick with the same cards, pay them to zero every month and you will find your credit rating is good -- anything above 650 is considered to be pretty good, 700 great, 750, excellent, 800 stratospheric.  In today's credit market. In today's market anything below 650 probably won't get a loan or will pay a hefty premium.

My best FICO was 820 but it hovers around 800 these days after I bought my car.  The strange thing was it went to 800 and stayed there even after I paid off my care (2 years early).

I wonder what it will do when I pay off my house in 2 years?

[Chris_]

You all should "opt out" with the credit bureaus to stop getting those unsolicited offers.
Trouble is, I think you have to do it every 4 months.

If you sign up for Lifelock or a service like it, they do it for you.

Opt out doesn't work for companies you do business with.  That is why I get affinity cards sign and sends and can't stop them.  Almost all other junk snail mail has stopped since I opted out.

I also suggest everyone invest in a good cross-cut shredder.  I shred everything that has my name on it.

[Baruch Menachem]

I am in a pretty bad fix, but I am a lot better off than I was last year at this time.

Now I am down to two cards.  Both with excessive balances, but with low rates.   Comparitivly speaking.   It will take forever to get out of last years hole. but I am working on it.

[rich_t]

I have 5 of them.  I use two and pay off the balance entirely every month.

One of the ones I don't use has a ridiculous limit on it...$80000.

Should I close that one?  I haven't even used it in 9 years.

If you haven't used it in 9 years it probably isn't helping your credit score, but it may not be hurting it either.

I know my score went up a bit after I closed several CCs that I hadn't used in a long time.

[Lacarnut]

You still owe property taxes... you don't really own your house.  They just want you to think you do.

</DUmmy>

The state of Louisiana has some of the lowest property taxes in the nation. The taxes on my $140k home are $84 per Year; being a senior citizen that amount is frozen and will never go up. 

[Chris_]

I have 5 of them.  I use two and pay off the balance entirely every month.

One of the ones I don't use has a ridiculous limit on it...$80000.

Should I close that one?  I haven't even used it in 9 years.

Keep it!!! -- if you have a lot of CCs close the YOUNGER ones.  This card helps you 2 ways:  Your credit history depth (time) is longer and your available-credit to used-credit ratio is low.

The longer you have credit history, the more the score goes up.  The less you use of your available credit, your credit score goes up.  Canceling this card would probably cost you 20 points or so (guessing).

[rich_t]

Keep it!!! -- if you have a lot of CCs close the YOUNGER ones.  This card helps you 2 ways:  Your credit history depth (time) is longer and your available-credit to used-credit ratio is low.

The longer you have credit history, the more the score goes up.  The less you use of your available credit, your credit score goes up.  Canceling this card would probably cost you 20 points or so (guessing).

How so?  It is a card with no recent "history" of paid as agreed.

I am not contesting what you are saying, rather I am asking you to expand a bit.

I've always thought that current "paid as agreed" accounts work better than older no-use accounts.  I am basing this on several articles that I have read over the years.

I've already posted my credit score went up after I cancelled credit cards that I had not used for several years.

[Chris_]

How so?  It is a card with no recent "history" of paid as agreed.

I am not contesting what you are saying, rather I am asking you to expand a bit.

I've always thought that current "paid as agreed" accounts work better than older no-use accounts.  I am basing this on several articles that I have read over the years.

I've already posted my credit score went up after I cancelled credit cards that I had not used for several years.

What happened is a little odd and no one knows the EXACT scoring method (I suspect even the developers don't).  I am just saying the trends that are followed to come up with the FICO score.  You are probably right about "paid as agreed" is a little better, but it needs to be balanced against longer history.  Likewise a good available-credit-ti-used ratio needs to be balanced against the available-credit-to-income ratio.

80K is a little high but the fact it has been carried as available for so long IMHO helps more than hurts.  But I am sure others might have different experiences and advice.

I really study this -- don't ask why -- but is is an art much more than a science.

[debk]

According to lenders that I have worked with....one of the worst things is all the small store cards....like GAP, Banana Republic, Victoria's Secret, Limited, etc.

It's better to have MC, Visa, AmEx or Discover ...even if you have 2 of each "brand" ...than one at every single store.

Even if they aren't used...they will take down the credit scores because they are all over the place and most of them will increase the limit frequently which is the biggest problem with them.

Also, the cards need to be used. Paying them off each time they come in, gives a good payment history, but does not necessarily up the credit score. It's better to keep a very small balance, so the interest doesn't knock your socks off, but timely payments is the best thing for improving credit scores.

[Chris_]

According to lenders that I have worked with....one of the worst things is all the small store cards....like GAP, Banana Republic, Victoria's Secret, Limited, etc.

It's better to have MC, Visa, AmEx or Discover ...even if you have 2 of each "brand" ...than one at every single store.

Even if they aren't used...they will take down the credit scores because they are all over the place and most of them will increase the limit frequently which is the biggest problem with them.

Also, the cards need to be used. Paying them off each time they come in, gives a good payment history, but does not necessarily up the credit score. It's better to keep a very small balance, so the interest doesn't knock your socks off, but timely payments is the best thing for improving credit scores.

The "small cards" are called "revolving accounts" and are, indeed, the least help -- even Sears.  And that goes towards "available credit" vs "income" ratio -- as I stated upthread.

Yes, you should use your Visa, AMX and MC cards -- even a bit (gas, groceries, whatever) -- but pay them down to zero every month.  It is the use that matters.  Carrying a balance does you no good and puts unnecessary interest money into the CC's hands.
 

[debk]

I've quit using mine about a year ago, and just use a debit card....keeps my spending habits under control, plus all my spending is printed out on one statement, instead of having to keep track of several, for the lovely IRS.

On the other hand...my credit score has dropped....because of it.  I need to start using a couple of cards, if nothing else to buy a tank of gas a month.

[RobJohnson]

You are only liable for the 1st $50 on a lost or stolen credit card with most CC companies.

Even less with some bank cards that offer zero liability.

Of course the phone solicitors trying to sell you protection will tell you otherwise...

Years ago a guy was trying to sell my dad a package that would limit him to a $50 liability on each card...of course, he already had that for free!

[Chris_]

I've quit using mine about a year ago, and just use a debit card....keeps my spending habits under control, plus all my spending is printed out on one statement, instead of having to keep track of several, for the lovely IRS.

On the other hand...my credit score has dropped....because of it.  :censored: I need to start using a couple of cards, if nothing else to buy a tank of gas a month.

You need to prove you can USE credit well, not avoid it.

[RobJohnson]

I only use debit. I have a credit card that I keep in case of emergency. But have not had any emergencies lately that I did not have the cash to cover.

I really don't care what my credit score is.

[Chris_]

I only use debit. I have a credit card that I keep in case of emergency. But have not had any emergencies lately that I did not have the cash to cover.

I really don't care what my credit score is.

You will, my dear,you will.

Use your Credit card, but us it SPARINGLY -- a $10 or $12 grocery run -- NO MORE and then pay it down. You get rare chances to learn from others and build credit up properly.  That debit card does you well, but it does not help your credit rating.

Your ability to buy your first car will significantly be based on how you use your credit now.  A few years of sparing use of your credit card with a complete paydown every month will do wonders.  It could mean literally thousands of dollars.  And with auto mfg's being in the doldrums for probably the next 2 or 3 years, your patience will be rewarded.  You, who vouchsafed your credit will be handsomely rewarded.

Your decisions now will affect you for the decades to come.  I wish I would have had me to advise me when I was your age.  Please, please, don't make my mistakes of not understanding what credit is and how it works.  It meant 10 years to me before I was able to buy my house.  Don't waste a decade when you have so many here to help you.

[RobJohnson]

You will, my dear,you will.

Use your Credit card, but us it SPARINGLY -- a $10 or $12 grocery run -- NO MORE and then pay it down. You get rare chances to learn from others and build credit up properly.  That debit card does you well, but it does not help your credit rating.

Your ability to buy your first car will significantly be based on how you use your credit now.  A few years of sparing use of your credit card with a complete paydown every month will do wonders.  It could mean literally thousands of dollars.  And with auto mfg's being in the doldrums for probably the next 2 or 3 years, your patience will be rewarded.  You, who vouchsafed your credit will be handsomely rewarded.

Your decisions now will affect you for the decades to come.  I wish I would have had me to advise me when I was your age.  Please, please, don't make my mistakes of not understanding what credit is and how it works.  It meant 10 years to me before I was able to buy my house.  Don't waste a decade when you have so many here to help you.

I had a feeling that would stir you up a bit. 

I have bought a few cars both with loans and cash. For years I drove new & almost new cars owned by car dealerships as part of my compensation or because I had to take them home to repair and paint on the weekend. That was fun and I would change cars monthly, weekly and sometimes daily! It drove my neighbors nuts. 

I'm just thankful that I have not needed any commercial loans for several years, and I think I will keep it that way.