Ask me anything about your Credit Score

[Scorpion Man]

815
Why isn't it higher?

[SossMan]

[ QUOTE ]
[ QUOTE ]
On Credit Cards is it better to leave an unpaid balance on them or just pay the full balance every month?

[/ QUOTE ]

??? Why would you ever leave a balance on a card? Pay in full, every month if you are able.

Also, Soss, you mentioned earlier that if you pull your credit report it will count as an inquiry. It's a SOFT inquiry, and does not hurt your credit score at all. Soft inquiries are the kind for job applications and personal credit pulls you do as a consumer.

Hard inquiries are for credit card apps, mortgages, loans. These will hurt your score if you have too many.

However, you can pull your own credit report as many times as you want and it will NOT show up on your report. Soft inquiries do not show.

[/ QUOTE ]

As I explained below, there could be a reason to leave a small balance on each month, depending on the cycle of the reporting.

re: soft inquiries, I was under the impression that any time you authorize someone to run your credit, it is a 'hard' inquiry, wheather it's for yourself or someone else. I'll have to check on that particular rule though. The traditional definition of a soft inquiry is one that is done without your knowledge or authorization, such as the ones that are done for the 'prequalified CC offers'.

[scotchnrocks]

Sossman,

I had a 760ish score going into my mortgage 4 months ago and have since closed 3 cards (one with 7 year history) knowing that it was a somewhat bad decision. I now have one credit card with a 7% permanent APR. I only did this to make my life simpler, and it has as far as me keeping up with when to pay off balances and keeping up with my finances in general. How long until my credit recovers or has it already since I have a mortgage? What would you estimate my score to be considering the only debt I have is a mortgage and low interest student loan debt that has been paid on time for 2.5 years?

[SossMan]

[ QUOTE ]
What kind of score do you need to get the best rate on a mortgage loan?
Assuming that you just have a credit card, which you pay in full every month, charging 10-25% of your limit each month, what will your credit score be in 1, 3, and 5 years ?

Ponks

[/ QUOTE ]

It depends on a number of factors, but all things being equal, 720, sometimes 740 and rarely 780 are usually the top tiers for the best rate on an A paper mortgage.

I would say that if you have a 720 and you are otherwise qualified, you will get the best rate at 90% of lenders.

The second question is pretty tough to answer. If you are asking if someone with zero credit gets one credit card and uses it for 1,3,5 years and does nothing else? I really have no idea since I've never seen someone with that limited amount of history for that length of time. People usually have cars or other cards or something...
I've seen really old people who have that sort of one CC thing and nothing else for the past 5 years, but they usually have tremendous credit depth prior to that and it's all just paid off. They have typically had 800+

[SossMan]

[ QUOTE ]
Soss, a couple more questions:
1) What qualifies you to make this thread? Did you work in the industry?
2) Do you think it would be worth it to get a small student loan and pay it off over a period of time to increase one's credit score? Effectively, I'd be paying money now to hopefully save on interest rates later when I buy a house.

[/ QUOTE ]

I'm a mortgage and real estate broker and I look at credit reports all day every day. I don't really do subprime mortgages if I can help it since property values are so expensive here and people with bad credit need help with it. I generally will work with them for a few months to get them into a little better loan rather than just jamming them with a high cost loan just to make a quick buck.

Also, I learned almost everything I know about credit from this woman...I'm not kidding. She's my rep at the company who pulls my credit reports.
We are working on some seminars to some of my corporate clients.

www.nadiakunich.com


Depending on the rate and size of the student loan, it would certainly help. I think a credit card and a car loan would help more, but it would be silly to get a car to help your credit. Def get a CC, but the student loan might be a little bit of a hassle unless you otherwise need it.

[SossMan]

[ QUOTE ]
SossMan,

Not sure if you've already mentioned it, but can you talk about strategy regarding closing credit cards accounts?

Say I opened first account 2 yrs. ago as an add-on to a primary acct. holder with 800's credit. Then 8 more up until now, without any cosigners and all on my own credit. Credit lines range from 20k for the 1st (as add-on when I had zero credit) to $5kish avg. for the others which are my own.

Can I close the 1st and oldest credit card (where I'm not even primary), so I don't have to worry about some error messing up my cosigner's credit? I regularly open new credit cards because of good offers / high credit lines for perhaps if I ever need it, but now its just getting to be too many cards that I have to keep track of every month. I keep hearing that closing them reduces overall unused credit, and thus lowers the score. But by how much? And what if I keep opening new ones and don't use the credit? Can I just close and replace old ones that are no longer attractive?

Thanks in advance.

[/ QUOTE ]

I sort of talked about this earlier, but this is a good question. The book answer? Never close them, so long as you are using them and paying them on time, they will only help.

The practical answer is that if you are worried about one slipping through the cracks, then you might consider consolidating. One 30 day late will wipe out whatever benefit you are getting by keeping them open.
Close the newer ones, though. Always keep the older ones open.

(from a credit score perspective...of course if a new one is 0% and the old one is 26%, it makes sense to close the older one...from a score perspective, though, the older one is better)

[Ponks]

[ QUOTE ]
[ QUOTE ]
What kind of score do you need to get the best rate on a mortgage loan?
Assuming that you just have a credit card, which you pay in full every month, charging 10-25% of your limit each month, what will your credit score be in 1, 3, and 5 years ?

Ponks

[/ QUOTE ]

It depends on a number of factors, but all things being equal, 720, sometimes 740 and rarely 780 are usually the top tiers for the best rate on an A paper mortgage.

I would say that if you have a 720 and you are otherwise qualified, you will get the best rate at 90% of lenders.

The second question is pretty tough to answer. If you are asking if someone with zero credit gets one credit card and uses it for 1,3,5 years and does nothing else? I really have no idea since I've never seen someone with that limited amount of history for that length of time. People usually have cars or other cards or something...
I've seen really old people who have that sort of one CC thing and nothing else for the past 5 years, but they usually have tremendous credit depth prior to that and it's all just paid off. They have typically had 800+

[/ QUOTE ]

Heh, as for the second question then, I'll let you know in a few years time. I just got my first credit card 6 months ago and I think that is all I will have until I get my first house. I haven't missed a payment yet and can't imagine that I will. I bought my first car last year when I was 21 and paid with a check so no loan there and my parents pay for school, so no students loans as well. I do have a debit card that I have had for the past 4-5 years, although my mom co-signed on that and I actually still think she is on it, does that count in your credit report? If so, would removing my mom from it increase my credit score? I've never had an overdraft or anything like that, but I did lose my card once. I'm hoping in a few months that if needed I will have 720+ incase I want to purchase a house, probably wont be that high though, huh? I tried to check my score online through the free credit report websites 2 months ago, but it didn't work which makes me think I have no credit yet.

Ponks

[SossMan]

[ QUOTE ]
From 18-22 I managed my credit horribly. I have around $3k owed which I can probably bargain down to $1500 or so. This is two defaulted credit cards and a bunch of stuff like a cell phone bill and other utilites that weren't paid. My student loans went into collection but are now in good standing.

For the last several years I have been fine. I got a car loan in my name and that has helped my score some. I have no credit card and nothing on my report which is good besides the two student loans and the car.

My score is some horrendous number like a 505.

wtf? How much will that go up if I pay off the 4 year old $3k?

What else can I do and how high could that score reasonably go within 6 months, a year?

[/ QUOTE ]


It's pretty hard to do a diagnosis without seeing everything that's on there, but there are a couple things I can point out.

Paying off old collections are touchy. It's probably the 'right' thing to do and you will probably eventually have to pay them if you want to buy a house (but you are probably far away from this). However, depending on if they are still reporting to the CBs, it's probably not a good idea to pay them off.

This is where a lot of people who don't know what they are talking about can really screw up someone's score. If they are not currently reporting, then those items are affecting your score less and less each day. If they haven't reported in a year, your score has been getting better (all other things equal) this year. By paying them off, they will now report to the CB that there is a zero balance and now it looks like you have a brand new collection and the clock starts over. It's akin to waking a sleeping giant.

Nothing is really going to help you but time. You should probably see if you can get a small balance CC to start some positive tradeline history. Try www.orchardbank.com . If they don't give you one, try getting a secured card through BofA. You will have to put up like $300 in a savings account and you will have a $300 credit line, but you are just using it to generate positive trade history.

There is probably nothing you can do to get it much over 600 in a year. As the bad stuff moves further into your past and the good stuff continues reporting, though, you will be in better shape.

[SossMan]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
What kind of score do you need to get the best rate on a mortgage loan?
Assuming that you just have a credit card, which you pay in full every month, charging 10-25% of your limit each month, what will your credit score be in 1, 3, and 5 years ?

Ponks

[/ QUOTE ]

It depends on a number of factors, but all things being equal, 720, sometimes 740 and rarely 780 are usually the top tiers for the best rate on an A paper mortgage.

I would say that if you have a 720 and you are otherwise qualified, you will get the best rate at 90% of lenders.

The second question is pretty tough to answer. If you are asking if someone with zero credit gets one credit card and uses it for 1,3,5 years and does nothing else? I really have no idea since I've never seen someone with that limited amount of history for that length of time. People usually have cars or other cards or something...
I've seen really old people who have that sort of one CC thing and nothing else for the past 5 years, but they usually have tremendous credit depth prior to that and it's all just paid off. They have typically had 800+

[/ QUOTE ]

Heh, as for the second question then, I'll let you know in a few years time. I just got my first credit card 6 months ago and I think that is all I will have until I get my first house. I haven't missed a payment yet and can't imagine that I will. I bought my first car last year when I was 21 and paid with a check so no loan there and my parents pay for school, so no students loans as well. I do have a debit card that I have had for the past 4-5 years, although my mom co-signed on that and I actually still think she is on it, does that count in your credit report? If so, would removing my mom from it increase my credit score? I've never had an overdraft or anything like that, but I did lose my card once. I'm hoping in a few months that if needed I will have 720+ incase I want to purchase a house, probably wont be that high though, huh? I tried to check my score online through the free credit report websites 2 months ago, but it didn't work which makes me think I have no credit yet.

Ponks

[/ QUOTE ]

Well, even if you have a score, you might still have problems buying a house with the limited tradelines. Typically you will need 3 tradelines (3 accounts) for 12 months. There are programs that have 'alternate' tradelines like cell phone or utilities, but they aren't going to have the best rates. I would get on this at least 6 months before you are planning on buying something. Go to a reputable mortgage broker and have him pull your credit and start working with you. I would hate for you to find a home you really like, only to find out that you have a few months of work to do to qualify for a loan.

You can also try some first-time homebuyer programs through local banks. They will typically have lower tradeline requirements, too.

[SossMan]

[ QUOTE ]
Sossman,

I had a 760ish score going into my mortgage 4 months ago and have since closed 3 cards (one with 7 year history) knowing that it was a somewhat bad decision. I now have one credit card with a 7% permanent APR. I only did this to make my life simpler, and it has as far as me keeping up with when to pay off balances and keeping up with my finances in general. How long until my credit recovers or has it already since I have a mortgage? What would you estimate my score to be considering the only debt I have is a mortgage and low interest student loan debt that has been paid on time for 2.5 years?

[/ QUOTE ]

Your score will generally dip for 6 months after you get a mortgage since it's a new account. After that time, it will start helping you greatly. Closing the accounts probably didn't help you, but with your score it likely didn't hurt you much either since you have the depth and the number of accounts were probably sufficient.

I'm going to set the over under at 725 with 740-750 in a few more months and 760+ so long as you keep that mortgage payment coming in on time.