Ask me anything about your Credit Score

[SossMan]

[ QUOTE ]
I have an old line of credit for 7,500 opened in 1994. Never used. It's at 11.75%, so I would never draw on it. Lots of credit available much cheaper these days.

Two questions.

I want to close it down because I have been trying to do some credit card arbitrage with 0% interest offers. I assume that if I leave it open, it will reduce the amount of credit card issuers are willing to extend, because it shows on the credit report as high interest credit that I could tap.

Second, if I remove it, will it hurt my score because it has a long history and reduces my credit limit to used credit ratio. Or will it have no effect because I have never drawn down on it?

Thanks!

[/ QUOTE ]

It's probably not even reporting anymore, so go ahead and close it if you want. If you used it a little, it would certainly help your score. I would only do that if you are planning on making a large purchase in the next year or so and you need to get a higher score. If you are getting the 0% offers, though, you are probaly 740+ so it's likely not a big deal.

[xx44]

Great thread Soss,

Anyway I received my fico score via transunion. It said that a negative factor is my debt/credit ratio. However it said mine was 27% while the avg is 36%, why then wouldnt this be a positive?

[squiffy]

Follow up question on my credit line from 1994, with 11% interest and credit limit of 7500. You mentioned I can improve my score by using it, because it would add to the length of my credit history.

Since it's such a high interest rate, I wouldn't want to borrow much or use it very long. Could I possibly just borrow say $100 for one month. Would that be enough to improve my credit for one year?

Any suggestions?

[SossMan]

[ QUOTE ]
Great thread Soss,

Anyway I received my fico score via transunion. It said that a negative factor is my debt/credit ratio. However it said mine was 27% while the avg is 36%, why then wouldnt this be a positive?

[/ QUOTE ]

I have no idea...that seems odd. I tend to ignore the negative factors as they are almost always useless.

It could be that 27% is the total, but you are over 50% on one card and way under on another card. It's better to be under 30% on both, even if the total is under 30%.

[SossMan]

[ QUOTE ]
Follow up question on my credit line from 1994, with 11% interest and credit limit of 7500. You mentioned I can improve my score by using it, because it would add to the length of my credit history.

Since it's such a high interest rate, I wouldn't want to borrow much or use it very long. Could I possibly just borrow say $100 for one month. Would that be enough to improve my credit for one year?

Any suggestions?

[/ QUOTE ]

Borrow $50 and carry the balance for a year. It will cost you $5 in interest and your score will definitely go up. Keep in mind that there is no need to do this unless you are going to have a major purchase in the near future and you need all the points you can get. If you are already at a 790, don't bother with it.

Using it then paying it off for one month will have a very minor effect on your score.

[Statutory]

national city charged me $6/day for an overdrawn checking account which I refused to pay because they never notified me and let it run to $200+ in fees.

I had an ankle injury for which many bills got turned over to collection agency, long story.

I have no intention of ever paying these and assume they are dragging down my credit.

Will that last forever?

I have done well with poker. Have funds available to buy most anything I want. (I don't want extravagant things) I may wish to get a mortgage some day.

Do I really need to get the score fixed?

[SossMan]

[ QUOTE ]
national city charged me $6/day for an overdrawn checking account which I refused to pay because they never notified me and let it run to $200+ in fees.

I had an ankle injury for which many bills got turned over to collection agency, long story.

I have no intention of ever paying these and assume they are dragging down my credit.

Will that last forever?

I have done well with poker. Have funds available to buy most anything I want. (I don't want extravagant things) I may wish to get a mortgage some day.

Do I really need to get the score fixed?

[/ QUOTE ]

The $200 overdraw is probably not on your credit. I'm not sure NatCity's policy, but some banks keep these and try to collect themselves, and some sell them to collection agencies.

The other collections will stay on your credit for as long as the agencies continue to report it. Eventually they will give up and discontinue the activity, at which point the 7 year clock will start. It may have already started...I would have to see your report to know for sure.

Like I said previously, your credit score is more important than just being able to get stuff on credit...many employers and other people can check credit as a source of information about personal responsibility.

[squiffy]

Actually, although I believe my creditworthiness is excellent, my score was remarkably low, last time I checked at 701. So I must be doing something wrong, and I am trying to figure out what it is.

I own two homes one in TX bought in 1993 for 183K (now worth about 230K) and one in CA bought in 2002 for 200K, (now worth about 350K). I have never missed a payment on any of my mortgages, but I have done refis. Could that have hurt my credit rating?

Also, I was in the habit of cancelling old credit cards every 3-5 years, whenever I got an attractive new offer, never thinking that it might help to keep one card for 20 years to maintain a long history.

Would it help to try to reactivate an old card? I see a Chase card that I opened in 1999 and closed at some point. Could I reopen it to establish a longer credit history?

I really cannot figure out what is holding down my credit score? Is it possibly having too much debt?

My net worth is about 700K. My annual salary only 82K. Another 49K earnings from stocks last year. And rental property brings in rental income, plus some appreciation from my home and rental property.

I just don't understand why my score is only 701. I still am able to get very decent interest rates. But I feel I should be in the first tier with credit, and clearly am not.

I am in the habit of opening a lot of accounts to get the free $50 offers and to get the 10% discounts, etc. Then I will close them. Perhaps I am opening and closing too many accounts. Or perhaps I have too much debt or open credit lines for a person with 82K salary. The thing of it is I never miss a payment and never borrow more than I can pay back.

What gives?

[SossMan]

[ QUOTE ]
I am in the habit of opening a lot of accounts to get the free $50 offers and to get the 10% discounts, etc. Then I will close them. Perhaps I am opening and closing too many accounts. Or perhaps I have too much debt or open credit lines for a person with 82K salary. The thing of it is I never miss a payment and never borrow more than I can pay back.

What gives?


[/ QUOTE ]

This pretty much sums it up. A 701 score with zero derog and long history is fairly uncommon, but it sounds like you have a combination of too many new accounts and too many inquiries and not enough long established active accounts. I bet your credit report is 6 or 7 pages long, but it's a bunch of closed accounts.

Also, things that are commonly mistaken for having any correlation with the credit score:

amount of money in the bank
net worth
income
employment (or lack of)
length of checking account history
utility payments
cell phone payments
bounced checks (unless they go to collection)

[squiffy]

I just printed out my Experian free report at that website and it is 30 pages long.

In addition to carrying $50 on that LOC from 1994 at 11.25%, could I try reopening an old credit card, or could I try carrying say a $25 balance on two existing credit cards that I don't use regularly for purchases?