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Thread: Credit Score .. ways to improve?

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    #1

    Credit Score .. ways to improve?

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    So I've recently become a little obsessed with finding ways to increase my credit score! At the beginning of the year my FICO score was hovering around 775, but after neglecting things, it dropped down to around 730 (because I stopped using two store cards and the company automatically closed them without my knowledge). My account mix is poor - 4 credit cards (I'm an authorized user of two) and 2 student loans. My husband just applied for another card (since we are doing very well managing our finances we are entering the rewards game!) and I have been added as an authorized user. The CL is pretty good - $17,900. We have also just been approved for a CL increase on one of the other cards to $16k. The other cards have relatively low CL's; $4800, $1900 and $2250. My credit utilization is around 22%, although we are paying down balances and this is not accounting the new card or the increased CL (CC balance is around $2k and we are about to pay it all off). Does anyone have any suggestions on how I can help boost it back up? Or will the steps that we have recently taken and will be taking be all I need? As I said, my account mix is considered poor, but I'm not sure how I can improve on that, especially as I don't have any personal income. Thanks!

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    700s is quite good!
    From what I heard, it's the debt ratio that matters. How much you make vs. what you are allowed to borrow (credit limit). For example if you make more than what you are allowed to borrow then you'd look good for new loans and your credit score would also go up. If you make less per year than 40% of your total debts then your score goes down. If you want to up your credit score a little, you could close one of the cards and lower your debt ratio. Credit card debts over 40% of what you make will lower your credit score because there is no asset attached to it, its a revolving debt, whereas a home loan or a car loan has an asset attached to it, so if you fail to pay the bank will just repo your asset. Revolving debt should be no more than 40% of your income (school loans would count as revolving debt). Also every credit score inquiry made by any company lowers your credit score a little bit.

    So what they look at is that at any given time you could be 17,900 + 16000 + 4800 + 1900 + 2250 + your school loans + car loans down the hole. << that wouldn't necessarily drop your credit limit but it might not approve you for a big loan if your income doesn't cover 40% of that possible debt ratio. And as long as you pay on time credit card companies will increase your limit in order to get you to spend more and owe them more interest. It doesn't really have to do with how good your credit score is (they are out to destroy us )

    Hope this helps! I had to get a home loan not too long ago and had all this explained to me by my loan officer. We needed to get my score up just a bit more in order to be approved for my loan.
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    Quote Originally Posted by tofuface View Post
    700s is quite good!
    From what I heard, it's the debt ratio that matters. How much you make vs. what you are allowed to borrow (credit limit). For example if you make more than what you are allowed to borrow then you'd look good for new loans and your credit score would also go up. If you make less per year than 40% of your total debts then your score goes down. If you want to up your credit score a little, you could close one of the cards and lower your debt ratio. Credit card debts over 40% of what you make will lower your credit score because there is no asset attached to it, its a revolving debt, whereas a home loan or a car loan has an asset attached to it, so if you fail to pay the bank will just repo your asset. Revolving debt should be no more than 40% of your income (school loans would count as revolving debt). Also every credit score inquiry made by any company lowers your credit score a little bit.

    So what they look at is that at any given time you could be 17,900 + 16000 + 4800 + 1900 + 2250 + your school loans + car loans down the hole. << that wouldn't necessarily drop your credit limit but it might not approve you for a big loan if your income doesn't cover 40% of that possible debt ratio. And as long as you pay on time credit card companies will increase your limit in order to get you to spend more and owe them more interest. It doesn't really have to do with how good your credit score is (they are out to destroy us )

    Hope this helps! I had to get a home loan not too long ago and had all this explained to me by my loan officer. We needed to get my score up just a bit more in order to be approved for my loan.
    Thanks for the insight Oh wow - so I'm all confused! I was told that high CL but low utilization is key .. but it is also bad?! And if I wanted to reduce a CL or close an account, then would also be bad! I feel as though there is no winning with credit lol

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    It's such a careful balancing act, really.
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    Don't worry about your score. They are mostly meaningless.
    Different types of lenders get different scores from the same report.
    Each credit reporting agency uses different formulas.
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    #6
    7 Simple Ways to Improve Your Credit Score | Bankrate.com

    This was a great start.

    We were always told that your credit to income ratio was the most important. The CL is good too; but, you should pay off your CC each month. Also, lots of CC open isn't a good look either.

    Instead of having more CL, I would focus on paying it off. Making payments on time and not missing is big.
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    Quote Originally Posted by Tamzyn View Post
    Thanks for the insight Oh wow - so I'm all confused! I was told that high CL but low utilization is key .. but it is also bad?! And if I wanted to reduce a CL or close an account, then would also be bad! I feel as though there is no winning with credit lol
    High CL can count against you only if you try to get a big loan in the future. But it's about balance. And if you can keep the balances at 0 most of the time then it might not count against you, depends on the bank you ask for a loan. But with credit cards it's rarely at 0 for most people. We actually use them. keeping your credit score above average is fine. You don't need a perfect score.

    You could ask some of the credit cards to lower your CL as well. They don't really tell you that but you can cap it so they stop automatically increasing too.

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