Credit and Credit Scores: A short lesson
 

OK, So I have to give a short presentation to my bank about credit and credit scores as part of some team-building crap, who knows.

Anyways, I actually think my topic is useful and something people need to know, so I thought I'd share with a bunch of poker players who keep all their scrilla on Neteller.

There are 3 major credit reporting agencies, TransUnion, Experian, and Equifax. The 3 are all regarded as fairly accurate, however, there are discrepancies between the 3. You are entitled to 1 free credit report per year from each agency (obtainable at annualcreditreport.com), therefore, the smart consumer pulls his credit once every 4 months, each time from a different agency.

The big misconception is that checking your credit hurts your score. This is simply not true. There are 2 types of credit inquiries; soft and hard.

A soft inquiry is when you check your credit, such as your free credit report, or an employer pulls it for job purposes. These do NOT affect your credit at all and do not show up on your credit report.

A hard inquiry is when you apply for a credit card, loan, mortgage, etc. These will affect your credit if you are denied and especially if you continue to apply at other financial institutions and continue to get rejected.

The best way to maintain a good credit score is not having any 30+ day late payments, because they stay on your record for 7 years.

The best way to build credit, if you have none, is to get a CD and take out a loan against the CD, paying it off, establishing credit.

Anyone want to know anything about credit?! Manage it well and you'll be paying off that 30 year mortgage in no time.

Fox

Re: Credit and Credit Scores: A short lesson
 

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The best way to build credit, if you have none, is to get a CD and take out a loan against the CD, paying it off, establishing credit.


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huh?

Re: Credit and Credit Scores: A short lesson
 

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The best way to build credit, if you have none, is to have someone with great credit add you as an authorized user on one of their credit cards (preferably their oldest card with no delinquencies)

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Re: Credit and Credit Scores: A short lesson
 

whats the best way to rebuilding your credit?

Re: Credit and Credit Scores: A short lesson
 

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The best way to build credit, if you have none, is to get a CD and take out a loan against the CD, paying it off, establishing credit.


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huh?

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You deposit $5000 (arbitrary amount) into a 6 month Certificate of Deposit earning 6%. You go for a secured loan at a lower interest rate (may need a cosigner). You pay off the loan, and earn some small interest in the process, and increase your credit.

Re: Credit and Credit Scores: A short lesson
 

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whats the best way to rebuilding your credit?

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Get yourself a credit card if yon don't still have one, and make all your payments on time, and unfortunately, wait. You can't get those 30+ late payments off of your credit report like I said. Don't use one of those credit repair clinics. All they do is offer to remove wrong or bad info from your credit report and you can do that yourself.

Re: Credit and Credit Scores: A short lesson
 

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The best way to build credit, if you have none, is to get a CD and take out a loan against the CD, paying it off, establishing credit.


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huh?

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CD is a Certificate of Deposit where you take x amount of money and put it in the bank for x amount of time. The bank will pay you a percentage on that money. Lets say 5.0% for 1 year or something and you will make money on it yuntil that year is up. It is easier to borrow money from the bank when you have something to back it up with. This is why banks are big on Home Equity lines and loans because the home will increase in value. Hope that helps some.

Re: Credit and Credit Scores: A short lesson
 

I know what a CD is I just fail to see how borrowing against the CD is the best way to establish credit. The best rate I currently find for a 1 year CD is 5.46%. Put yourself in a 25% tax bracket and you are effectively earning somewhere around 4.25% after taxes. Where are you going to get a loan for less than 4.25%?

Re: Credit and Credit Scores: A short lesson
 

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I know what a CD is I just fail to see how borrowing against the CD is the best way to establish credit. The best rate I currently find for a 1 year CD is 5.46%. Put yourself in a 25% tax bracket and you are effectively earning somewwhere around 4.25% after taxes. Where are you going to get a loan for less than 4.25%?

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You wont get one that low now. The prime rate is 8% now. What he is saying is to build your credit and get it started its not a bad idea.

Re: Credit and Credit Scores: A short lesson
 

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What he is saying is to build your credit and get it started its not a bad idea.

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I completely agree that building your credit sooner than later is a good idea. I do not agree that spending money to increase your credit score is the best method.

Re: Credit and Credit Scores: A short lesson
 

Good Credit Info

Re: Credit and Credit Scores: A short lesson
 

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What he is saying is to build your credit and get it started its not a bad idea.

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I completely agree that building your credit sooner than later is a good idea. I do not agree that spending money to increase your credit score is the best method.

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Well you would be better off doing a CD secured loan than an unsecured loan or credit card as far as saving money goes. I work at a bank and on a CD secured loan where I am at the bank charges your CD rate plus like 4% so in reality you are only paying 4% intrest because of what you are making on the CD. Credit cards are normally in the teens unless you have good credit and unsecured loans are in the upper teens.

Re: Credit and Credit Scores: A short lesson
 

how do you go about getting a CD? whats the minimum (if there is one) that you can deposit it for?

Re: Credit and Credit Scores: A short lesson
 

How much do things like late payments to utilities or cable companies hurt your credit, yet never having a late payment on any type of loan or credit card bill.

Re: Credit and Credit Scores: A short lesson
 

PokerFox, thanks for sharing.

Re: Credit and Credit Scores: A short lesson
 

Hey Ace,

What's a decent credit score? I was recently told mine was like 760, but I had a house go into forclosure in the middle of my divorce (it was PAID right away). I know that really screwed me up. Any ideas on how to get that taken care of? Will haunt me forever? I know no one is gonna believe it was my stupid ex-wife's fault (actually, it was my lawyer's who advised me to stop paying the mortgage until she got a job).

Anyway, what's a borderline score, an average score, a good score, and a great score?

Re: Credit and Credit Scores: A short lesson
 

Is it true that if I have 10 credit cards but I NEVER use them that it won't help my score?

Re: Credit and Credit Scores: A short lesson
 

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Is it true that if I have 10 credit cards but I NEVER use them that it won't help my score?

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I believe that having this many unused cards could actually hurt your score, since having this many cards means that the potential is there for you run up large debts.

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Well you would be better off doing a CD secured loan than an unsecured loan or credit card as far as saving money goes.

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Credit cards cost you nothing if they are paid off in full each month... plus if you get a rewards card you will start earning cashback for your purchases. This CD idea is just plan stupid in my opinion. Why would you pay money to 'build' credit when you you can open a credit card and do it for no charge at all?

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I believe that having this many unused cards could actually hurt your score, since having this many cards means that the potential is there for you run up large debts.

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As long as your utilization remains low, having a large number of cards should not have an adverse effect on you score. Of course, appplying for new cards will have a short term effect on your score as the result of the hard query... as will having a bunch of newer cards as this will decrease the average age your accounts have been open.

I have 14 revolving lines of credit at the moment but keep my utilization very low and my score is plenty good (good enough for the lowest rates available).

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how do you go about getting a CD? whats the minimum (if there is one) that you can deposit it for?

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Its 2000 dollars where I work at. It may be different somewhere else.

Re: Credit and Credit Scores: A short lesson
 

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Well you would be better off doing a CD secured loan than an unsecured loan or credit card as far as saving money goes.

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Credit cards cost you nothing if they are paid off in full each month... plus if you get a rewards card you will start earning cashback for your purchases. This CD idea is just plan stupid in my opinion. Why would you pay money to 'build' credit when you you can open a credit card and do it for no charge at all?

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Thats very true but revolving credit and installment credit are two totally different things.

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You are entitled to 1 free credit report per year from each agency (obtainable at annualcreditreport.com), therefore, the smart consumer pulls his credit once every 4 months, each time from a different agency.

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Nice. It never occurred to me to do it this way. I was ordering all 3 at the time 1/year. Your way is much better.

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Don't use one of those credit repair clinics. All they do is offer to remove wrong or bad info from your credit report and you can do that yourself.

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Could anyone explain how to do this yourself? Around 98-00 I got myself into some bad credit issues. I was in college and effed it bad. I had 2 CC's, one for like $500 and one for $700. Maxed them both out and never paid them off, they went to collections=My score suxs.

About 4-5 months ago, I got a crappy CC with an annual fee and a pretty high % rate with a line of $600. Then a month later I got a better one with no annual fee but a line of only $300, then about 2 weeks ago I got a Chase card with a great APR and $2100 line, so it appears to me that my credit is vastly improving. But I will always wonder about those 2 old CC's and how to get rid of that crap so I can get a really good score going. Thoughts?

Re: Credit and Credit Scores: A short lesson
 

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The best way to build credit, if you have none, is to get a CD and take out a loan against the CD, paying it off, establishing credit.


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huh?

[/ QUOTE ]

You deposit $5000 (arbitrary amount) into a 6 month Certificate of Deposit earning 6%. You go for a secured loan at a lower interest rate (may need a cosigner). You pay off the loan, and earn some small interest in the process, and increase your credit.

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or you can just borrow $10million at a low rate, and put the proceeds into a CD. you would earn huge interest and never need to work.

Re: Credit and Credit Scores: A short lesson
 

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PokerFox, thanks for sharing.

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yea, this is a nice starters guide for people like me who haven't really bothered looking into this stuff, thx...

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You can't get those 30+ late payments off of your credit report like I said.

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this is definitely not true, the creditors have total control over their entries in your report and they have the ability to remove them.

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what about credit consolidation programs? Are they worth it and how do they afect your score?

Re: Credit and Credit Scores: A short lesson
 

In the past I know that not paying electricity and cable bills on time did not hurt your credit unless they went to collections. I have heard that this is no longer true. What is the truth to this?

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In the past I know that not paying electricity and cable bills on time did not hurt your credit unless they went to collections. I have heard that this is no longer true. What is the truth to this?

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They have to send you to collections before it shows on your credit report.

Re: Credit and Credit Scores: A short lesson
 

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I believe that having this many unused cards could actually hurt your score, since having this many cards means that the potential is there for you run up large debts.

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As long as your utilization remains low, having a large number of cards should not have an adverse effect on you score. Of course, appplying for new cards will have a short term effect on your score as the result of the hard query... as will having a bunch of newer cards as this will decrease the average age your accounts have been open.

I have 14 revolving lines of credit at the moment but keep my utilization very low and my score is plenty good (good enough for the lowest rates available).

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What's good? Do you know what your score is?

Re: Credit and Credit Scores: A short lesson
 

Actually I think potential borrowing power is very favorable to creditors, as long as you keep your balances low.

Re: Credit and Credit Scores: A short lesson
 

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Could anyone explain how to do this yourself? Around 98-00 I got myself into some bad credit issues. I was in college and effed it bad. I had 2 CC's, one for like $500 and one for $700. Maxed them both out and never paid them off, they went to collections=My score suxs.

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believe it or not it's a good thing you never paid them back. if you contact them you may be able to work out a deal where you pay back some amount (50-100%) in exchange for them removing the entry from your report.

Re: Credit and Credit Scores: A short lesson
 

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Could anyone explain how to do this yourself? Around 98-00 I got myself into some bad credit issues. I was in college and effed it bad. I had 2 CC's, one for like $500 and one for $700. Maxed them both out and never paid them off, they went to collections=My score suxs.

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believe it or not it's a good thing you never paid them back. if you contact them you may be able to work out a deal where you pay back some amount (50-100%) in exchange for them removing the entry from your report.

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Yeah I got something a long time ago from the collection agency, I may have it somewhere in my shoebox of records. Also OP said 30+ late day payments stay on record for 7 years, is it same for collections? My accounts were closed and sent to collections probably in late 2000.

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what about credit consolidation programs? Are they worth it and how do they affect your score?

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bump 'cause I need an answer

Re: Credit and Credit Scores: A short lesson
 

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The best way to build credit, if you have none, is to get a CD and take out a loan against the CD, paying it off, establishing credit.


[/ QUOTE ]

huh?

[/ QUOTE ]

You deposit $5000 (arbitrary amount) into a 6 month Certificate of Deposit earning 6%. You go for a secured loan at a lower interest rate (may need a cosigner). You pay off the loan, and earn some small interest in the process, and increase your credit.

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I think it has been pointed out already, but you will not get a loan at a lower rate. There is a spread on what interst % you are earning and what interest % you pay. My insitutions spread is 2%, so CD pays you 5%, you pay 7%.

Re: Credit and Credit Scores: A short lesson
 

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what about credit consolidation programs? Are they worth it and how do they affect your score?

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bump 'cause I need an answer

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Dom,

I am not really qualified to answer this, but I am pretty sure these programs do hurt your score.

Re: Credit and Credit Scores: A short lesson
 

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You deposit $5000 (arbitrary amount) into a 6 month Certificate of Deposit earning 6%. You go for a secured loan at a lower interest rate (may need a cosigner). You pay off the loan, and earn some small interest in the process, and increase your credit.


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Please point me to a bank that loans money at a lower interest rate than their CD's.

Re: Credit and Credit Scores: A short lesson
 

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You are entitled to 1 free credit report per year from each agency (obtainable at annualcreditreport.com), therefore, the smart consumer pulls his credit once every 4 months, each time from a different agency.

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Nice. It never occurred to me to do it this way. I was ordering all 3 at the time 1/year. Your way is much better.

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Not really. Each bureau could have different info. Some of which may not be accurate and actually hurting you. Not all credit issuers report to all 3 agencies. So, if someone happens to open an account in your name you may not know by just pulling one report. Same goes for collection accounts. You may be in collections for something you know nothing about.

Granted, these scenarios are unlikely but certainly not out of the question.

Re: Credit and Credit Scores: A short lesson
 

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Is it true that if I have 10 credit cards but I NEVER use them that it won't help my score?

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Somewhat true.

One of the factors in determining your credit score is the ratio of available credit to used credit. Simply put, it would be a concern to a lender if you had $20,000 in available credit, but only had $400 out at a time. You could easily run up the other $19,000+ credit, get in a pinch, and default on the loan you're applying for.