Posted on 04/22/2008 5:11:17 PM PDT by shrinkermd
As Lenders Tighten Standards, Potential Borrowers Focus On Ways to Raise Their Ratings; Joining the '700 Club'
...So when Mr. Sheldon was shopping for an auto loan last fall, he first compared rates online. Then, he allowed only two lenders to pull his credit report because he knew that lots of inquiries could drag down his score. Now, he's making extra payments so he can pay off the five-year auto loan in 3½ or four years. He figures the lower debt level will boost his score, which already is near the upper end of the 300-to-850 range of the FICO score, the widely used measure of consumer creditworthiness.
"It's a game you have to play," Mr. Sheldon says. Once every few months, he charges something on one of his lesser-used credit cards because he fears that issuers will close inactive accounts, reducing his total available credit and damaging his score.
The behavior of credit-score strivers can appear bizarre to the uninitiated. Many rejoice over joining the "700 club," feverishly apply for new credit cards they don't need, keep drawers full of old credit cards they barely use and fight for the removal of the smallest blemish on their credit reports.
Even consumers with good credit, like Mr. Sheldon, are pushing to improve their FICO scores -- and with good reason. Whereas just a year or so ago a score of roughly 680 to 720 would qualify for the best rates from many lenders, that bar has now been raised to 720 to 750, credit experts say.
Many lenders are demanding higher scores because they've been burned by rising delinquency rates. In the fourth quarter, consumer credit delinquencies hit their highest level since 1992, according to the American Bankers Association.
"The rules have definitely changed," says John Ulzheimer, president
(Excerpt) Read more at online.wsj.com ...
Try and have someone explain how you get to 725-750 and nobody will tell you. Nobody even will tell you how they rate people.
I have equifax and I really don’t have the faintest idea how they judge. I have yet to miss a payment on my card, I keep a fairly low balance, but when I say charge 200 buckso n my 1300 dollar card, my score drops twenty points, even if I pay it off within a few weeks.
Should I start opening more damned cards so I have a bigger limit to work with?
There is more to the Credit Score game than meets the eye. We have a new industry, where one’s loan payment record are collected the sold to the lenders, so higher interest rates can be justified. Hell you can’t rent a car without a credit check and they won’t take a cash deposit for more than the cost of the rental. What gives?
I recommend striving for the 800 club myself.
“Should I start opening more damned cards so I have a bigger limit to work with?”
NO- They’ll just rip you off more.
As best I ave been able to determine, it’s based on how much the credit issuer stands to make from you.
If you have a good score, they will lend you large sums of money at decent rates. Obviously the larger the amount and the longer the term the more they stand to make from you.
Since you pay off your card balance every month, then they aren’t making a lot of money from you.
IT seems that if you carry a large balance and maek the minimum payment or even a little more than that then your score goes up.
A mix of debt, income, willingness to carry balances, and ability to pay.
Just seems like the more $$ that the banks can make from you the better your FICO score.
Bookmark.
The scoring methods don’t make sense really. It’s all in their favor and has nothing to do with any individuals credit history. Not only that, if you are late on one credit card, other cards can change their interest rate on you.....go figure that one out.
Bottom line is that if you keep excessive balances, utilize all your available credit, pay bills late, or your used credit exceeds what your income can support, you will have a lower score. I don't know the exact metrics of how they score credit, but the negatives are pretty obvious IMHO.
How about not using credit at all? Howz that for a concept???
So, you basically have to be in a tenuous middle ground to keep a good credit score: Just as bad as having a lot of delinquent credit card accounts is having a lot of zero-balance credit card accounts.
Besides, credit card customers with zero balance in their accounts are more likely to close these, so that’s less money for the credit card customers.
Ah, the wonderful world of revolving credit.
FICO score ping!
Am I the only one thinks putting a score on ones worth to buy and sell is “unamerican”?
They make the rules behind closed doors and cant not be open and truthful about how they apply the score.
FICO's *NEW* credit scoring system for 2008...
FICO Speeds Rollout of New Product to Meet Lender Demands
The credit scoring system is being tweaked again as Fair Isaac Corporation, developer of the FICO credit score rolls out a new model dubbed FICO 08.
The new product was originally announced back in June but was not due to be finalized for a while. A demand by users in the wake of both rising mortgage defaults and consumer credit delinquencies for a better way of analyzing risk has pushed FICO into speeding up the release. It is expected that FICO 08 will begin to roll out by late spring.
Last year the three major credit bureaus announced credit score packages of their own, probably having seen the success FICO was having in charging consumers for information on their credit scores. FICO, however, remains the product used by most lenders not only to grant credit but to set interest rates and other loan terms. FICO scores are also factored into credit decisions by insurance underwriters, cell phone, and utility companies and are sometimes used by employers to evaluate prospective employees.
FICO predicts that the new scoring system will help lenders reduce default rates on consumer loans between 5 and 15 percent. FICO 08 will supposedly go easier on consumers who make the occasional slip while coming down harder on those with multiple offenses. For example, it will give a slightly higher score than previously to a borrower who is late on one obligation but current on multiple other accounts. Those with several delinquent accounts could find their credit score has dropped.
Scores will still range from 300 to 850 and will take into account the same factors as the old version such as timely payment history, length of credit history, amount of debt, ratio of debt to available credit, type of debt (credit cards good, finance companies not so good), and any excessive amount of recent new credit. There will also be a premium placed on the debt mix; that is a consumer with revolving and installment credit will fare better than one with nothing but (revolving) credit card debt.
Among the big changes FICO is in the area of evaluating "authorized users." An authorized user is one who is not responsible for paying a credit card, but that card's history is reported on the user's credit as well as on the owner's credit. Parents have for years made children authorized users of their cards in order to help them build credit and many spouses derive all of their credit histories from being authorized users of their husband's or wife's card.
This form of credit improvement, commonly called "piggy-backing," however, became an article of commerce. As we reported in June, a whole industry had grown up to broker improved credit through authorized user status. Credit card owners with healthy FICO scores could make significant income by renting authorized user status to those seeking to improve their scores. The broker would manage the rental transaction (in which the renter would never have access to the actual account) paying the owner a fee of perhaps $150. Since the transaction has an almost immediate effect on the renters score the broker can fairly quickly remove that name from the account and recycle it to another renter, generating another $150 for the owner. The new credit information remains on the first renter's credit report forever.
Lenders became alarmed about this practice as it seemed to undermine their attempts to contain risk so FICO 08 will eliminate any impact of being an authorized user. This will not only affect the authorized user for a fee but also the college student hoping to build his credit on the foundation of his parents'.
A number of websites have sprung up in an effort to prevent FICO from implementing FICO 08 but most of the complaints are those that have long been leveled against credit scoring and credit reporting agencies. Critics have long questioned whether scores are valid measures of risk, complained about a lack of transparency about how scores are calculated, and postulated that minorities are unfairly penalized by the systems. The new version of FICO has prompted anger over the elimination of the authorized user category claiming that it will unduly penalize women who are more likely to have that status on their husbands' card than vice versa.
One website recommends that authorized users of spouses accounts open a few new ones either jointly with the spouse or in their own names and advises persons who are about to be married to retain their own credit cards even as they are added as an authorized user to the spouses credit lines.
As much as it would be nice to live in a world where people lived within their means, the lending and credit card industries has made it next to impossible.
When people check your credit score to get a job in the first place, and paying for all your expenses cash puts you in the same place as the 9/11 terrorists and the Unabomber, using credit is almost a societal duty.
Sad as it is, it’s reality.
It’s the opposite of what you think
The worst your credit score the more they can gouge you.
Sorry doesn’t work ... prospective employers check credit now ... and you can’t rent a car or even get DTV or DISH cause they check credit. If you don’t use credit your score will be VERY low. People like that are known as “ghosts” in the industry
We pay cash for everything, with the added bonus that the powers that be have no clue about our buying habits or history. I despise those VISA commercials which portray a well-oiled cafe consisting of swiping VISA cardholders, and then along comes the evil cash user to screw everything up. There is something vaguely fascistic about those ads. I don't want the government or industry knowing what, when, or where I buy things.
There is a danger in AGING your credit. Whatever last account you open, they use that date to determine how old your credit history is. If it is not old enough then they penalize you some points.
It necessary doesn’t always hurt. I have 30+ cards and charge different ones all the time. I pay them off almost all every month. Sometimes in couple of months. My score is pretty good so I am guessing charging and paying off helps for sure.
It’s pretty amusing. I work with cellphones and a class Z (as they define it no credit history) warrents a 750 dollar deposit, and someone with terrible credit history often gets away with a 500 dollar deposit. Of course I’m talking At&T
sprint, if you don’t give a social security number (aka illegals) its an automatic 150 dollar deposit, less than the cost of a new cellphone.
I love how the system.
How about not using credit at all? Howz that for a concept???
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Nice goal but not really practical in todays world.. without credit you will be asked for $300-$500 deposits on a basic cell phone, double the deposit amounts on electric power , water and home phone accounts... you cannot rent a car , you will be denied jobs as the employer will assume the years without credit report entries were spent in jail or possibly living under a false identity (identity theft perp) or you’re anti-social or weird in some way...
Should I start opening more damned cards so I have a bigger limit to work with?
Actually, yes. With consumer credit, they want to see less than a 50% utilization of **each** card...if you have 5 zero balance cards with $2000 limits and one with a $10,000 limit that’s charged to 80%, it is scored derogatively vs. if you had the others all sitting with a balance of $1000 and only $5000 on the bigger one.
So if SS card is stolen and apply for a new one, what happens with my score?
A couple of times, it has taken 10 days from when we dropped the payment off at the post office until it was credited. Of course, it was late with fees and fines.
We called them up and they grudgingly removed the fees. As if they are doing us a favor.
We have had the credit card for over 20 years.
We are canceling then credit card.
Don't know if this is a game to make more money or if they are just incompetent boobs.
that’s why I do all my banking online. Paycheck comes in, 100 bucks on the card it gets applied within 48 hours, longer on weekends. It’s really tough for them to charge late fees if it’s done digitally.
“How about not using credit at all? Howz that for a concept???”
I think that’s a wonderful concept myself. After finally paying off our house about ten years ago after thirty years of monthly payments we took the extra money and payed off our other debts. We have one credit card and it’s a Home Depot card.I would imagine my credit rating is less than a 100 if that’s possible but I don’t care. I don’t want any credit and when I need a better car I shop around for a very good used car, save up my money and pay cash. Being debt free is better than having a pocket full of credit cards that have to be paid every month and knowing I’m being ripped off in interest and other fees.
It's not a score that measures the ability to buy and sell - it's a score that measures ones' ability to borrow and pay back.
See if your bank has online bill paying. You can schedule an automatic transfer from your acct to the credit card company on the due date, and your bank provides a record of the transfer.
I have an automatic recurring payment set up to pay them a minimum a week before the due date. And then I set up an additional payment (you can do multiple payments to the same company per month)
Thats what the lady told us to do. That or send our payment in 15 days before it is due.
Will see how things go with the new credit card company.
We don’t carry a balance so it is easy to change. Probably another reason why they don’t value us as customers. They make money from the sales but they don’t collect any interest.
We use our credit card almost exclusively now. No checks, very little cash. Would have never done that 10 years ago.
Ding! Ding! We have a winner - in more ways than one.
There are many different scoring systems (FICO's by far the most important), but most average the ages of all your accounts. So if you open a new account, it will LOWER generally your score, especially if you don't have very many cards.
FICO® TIPS
■ Keep balances low on credit cards and other “revolving credit.” High outstanding debt can lower your FICO® score.
■ Pay off debt rather than moving it around. The most effective way to improve your FICO® score in this area is by paying down your revolving credit.
■ Don’t close unused credit cards as a shortterm strategy to raise your FICO® score. Owing the same amount but having fewer open accounts may lower your FICO® score.
■ Don’t open a number of new credit cards that you don’t need, just to increase your available credit. This approach could backfire and actually lower your FICO® score.
■ Avoid credit repair agencies that charge a fee to improve your FICO® score by removing negative, but accurate, information from your credit reports. No one can force credit reporting agencies or lenders to remove accurate information from a credit report. Credit repair companies often take your money without delivering what they promise, or provide only temporary improvements of your score, sometimes by removing accurate information that will reappear later.
Understanding Your MyFico score (booklet on pdf):
http://www.myfico.com/Downloads/Files/myFICO_UYFS_Booklet.pdf
FICO's *NEW* credit scoring system for 2008...
http://www.mortgagenewsdaily.com/172008_FICO_08.asp
Don’t put it past a CC company to take their time processing a payment to harvest fines. Sorry to sound so cynical, but I sure wouldn’t. And though for many it’s hard to stomach, I’ve been doing online banking & making payments online for years. I’ve never had a problem. But then I’d stay away from Internet Explorer for anything like that.
I do believe canceling the credit card is not advised. However, some of the same people who would advise against that would advise that you pay your bill off in full every month. If the only money the CC company makes from you is on the merchant/service end, the less they tend to like you, scam-ish fees or not. I resist the temptation to do that & always leave $50 or $100 every month just so they’re at least making a couple or a few dollars from me.
I realize that seems odd, but it’s less odd, at least in my experience, than some people who make decisions based on credit reports. The wrong person in human resources or in some other decision-making capacity might respond differently than some might expect. I knew someone who was fired from their job because their credit was too good, and another turned down by a property owner for an apartment rental. Why? Most people like the idea of paying off their credit card bill in full every month, but it never seems to happen for this or that reason. Something always comes up, some unexpected expense, some unforseen event or circumstances that leave people with some revolving balances, and I’m not talking about irresponsible CC holders or people who live paycheck-to-paycheck. It’s just the way it is for a lot of people.
Some view people, for whatever reason, who pay their balances off in full every month as people who are, paradoxically, untrustworthy. As though they’re breaking some unspoken rule regarding human nature, or something. Or perhaps they’re viewed as anal-retentive. I don’t know. It makes little sense on the face of it, but it definitely exists.
I have one credit card with a $500 limit. I use it only for internet, DirecTv and cell phone billing. I have it set up for automatic payment every month. They hate me...;-)
My goal is to one day be in the same position. I want a horribly low credit score but still have a credit line to draw on whenever I need it.
Sincerely,
JoMa
"If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your FICO® score if you don’t have a lot of other credit information. Even if you have used credit for a long time, opening a new account can still lower your FICO® score."
http://www.myfico.com/Downloads/Files/myFICO_UYFS_Booklet.pdf
“I have one credit card with a $500 limit. I use it only for internet, DirecTv and cell phone billing. I have it set up for automatic payment every month. They hate me...;-)”
Your know as a “Dead Beat” in the industry for doing that ... and so am I (though I don’t and never will have automatic withdrawals from my checking account).
Quick question for anyone who might know the answer.
I got divorced, the ex got awarded the vehicle. She was to maintain the payments and get a loan to get it out of my name and into hers. She never did and it got reposessed. I updated all of the payments and am keeping it and the payments current.
Could I get that reposession off of MY credit if I were to go to the Credit Union with a copy of the court order that said she was the one obligated to take care of the vehicle?
Not being cynical at all. I wonder how many people don’t know or don’t care that it is happening. The bank is probably hoping...
Interesting and strange at the same time.
BTW, our credit scores were around 780 if I remember correctly, think mine was over 800 when we applied for the new credit card.
Might drop after we cancel the card. But, what the hey.
Why would you need to know and lose sleep over some "credit score"? Beat them at their own game, as I have been doing for over 20 years, borrowing money at 0% rate then repaying it with a loan from another bank at 0% rate. Bought cars, equipment, paid taxes that way, and the offers are still coming. Suckers!
I haven’t used credit cards in several years. I make most purchases on a credit/debit card, I haven’t had a car loan in five year and, I pay a extra $300 dollars on my mortgage each month. This qualified me for the best rates when I stared looking for a new house.
i read the article today and got all my credit reports.
I put everything I buy each month on the card, clothing, gas, entertainment, groceries, dry cleaning, everything ... It gets up into the thousands ... then I pay it all off each month without being late.
I even put $50,000 on it when I was remodeling the kitchen and paid it off the next month.
I think that helps.
I even tried to get a Zappos [shoes online] credit card lately and I called the bank [Chase card services] with whom I buy my monthly stuff [also Chase with Amazon,com] ... with some fast talking they gave me a card with a $40,000 limit. I’m going to max it out when I go the masterbath remodel and told them so. They were delighted.
Are they FICO scores? Scores can vary a LOT depending on which system it is. And FICO is by far the most widely used by creditors.
http://www.myfico.com/Downloads/Files/myFICO_UYFS_Booklet.pdf
FICO's *NEW* credit scoring system for 2008: http://www.mortgagenewsdaily.com/172008_FICO_08.asp
Don’t know if this is a game to make more money or if they are just incompetent boobs.
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When I worked for Sprint (local/long distance landline service , not the cell side) they would always let the mail age a few days, it was never processed on the day it arrived.
1)First you need no lates, or at least nothing larger than 1 30 day at least a year ago. This makes up around ~35%
2)You need at least 3 years worth of active history
3)You need a variety of types of loan. Having a mortgage, a revolving (credit card) and another installment (either car or student loan) all open over a year and still active helps
4)You need a LOW utilization rate. Under 20% is the best. Under 5% is better. So if you put $600 on your $1000 credit card, even if you pay it in full, it looks like when it reports a 60% utilization rate briefly. Utilization is looked at two ways--your overall utilization rate of revolving credit and individual card utilization rate. Utilization makes up ~35%
I highly recommend getting at least one card with a near $10k limit.
My parents, who have a mortgage (open 12 years no lates), a car loan (open 3 years no lates) and $50k in revolving credit lines (only have monthly purchases of maybe $500 total on it) have about a 815 credit score. YMMV slightly.
Pay digitally. You’d be surprised how often it’s the mail’s fault.
I have a friend, a member of this forum who couldn't rent a car with cash, even with the price of the car as a deposit.
Thanks!
The scores didn’t make any sense. Especially since my score was different from my wife’s. We share everything, both our names are on everything.
Dont cancel, either - that will ding your score too. Pay it off, and forget about it.’
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