So my middle credit score is 688. I used a simulator and even if I pay off all my debt, my score would be 719. WTF? If I pay off everything, shouldn't my score be perfect? How else to raise a score if there is no debt? If your score is really good, like 800 and above, how did you do it?
It's a Kafkaesque system. Do something good in one area and you get penalized in another area. Pay off debt and get dinged for not having debt. One of the big issues I have is how secretive the credit rating companies are about how they rate you. It's a crooked business and they pay much more attention to businesses at the expense of regular people.
Last time I checked I think I was in the 780's. You can always go to www.creditkarma.com to get a general idea, but that is what's known as a FAKO score. If you want your actual credit score, you will have to pay. That will be either your Equifax or Transunion score. There's a third score, but I can't think of it off the top of my head. You can't get that one anymore. As far as what affects your credit score: Have you paid bills late? If so, that massively hurts you, and it takes 7 years for them to come off, although they usually stop hurting your score before they actually come off. Do you have more than 4 or 5 hard inquiries? A hard inquiry is when you sign up for a new credit card, apply for a loan, or anything like that. An exception is when you're trying to get something like a home loan. They realize you will go to multiple locations, so they will consider all of the inquiries within a 30 day period a single inquiry. It takes 2 years for these inquiries to drop off of your record, although I've heard they stop affecting you after 1 year. When you pull your report, it is known as a soft inquiry, so it has no effect. It's ok to have hard inquiries, just don't have too many. What is your credit to debt ratio? You want this to be 30% or less. So if your total available credit between all of your cards is 20k, then you want your total balance to stay below 6k. A good way to help this is to either open new cards, or ask for increases in your credit limits (usually they won't give you these until you've had your card for a year). Also, in regards to debt, this doesn't take into account debt like a mortgage or student loans. Those are known as "good debt". What is the length of your credit history? How old is your oldest card? Don't close your accounts, even if you're not using the card. They also look at the average age of your open accounts, so by opening new cards, it lowers the average age. Filing for bankruptcy can really hurt you too. I may have left something out, but I'm going off of memory here. If you go to that site I listed above, I'm sure it can give you a lot more information.
Yes. I do. Don't pay everything off at once. It doesn't help you. Leave a few with a bit of balance. If you pay everything off at once, it makes it seem like you've won a large sum in a lottery ticket, gotten an inheritance, or something that could pay it all off. Make the credit bureaus know you're doing better financially because of good employment, good payments, you know how to spend your money wisely, etc.
If you have a bad one it isn't easy to fix it. Plus, look at who are credit aware and who aren't. If your parents had money and educated you in what consitutes a good credit score, well, chances are you have a good one too. If your parents weren't as lucky, chances are you aren't either. Of course there are exceptions, but for the most part this maintains. You're bound to a poor credit score, it's harder to buy a house, it's harder to buy a car, and essentially things end up costing you more (because of the added interest) just because your score is lower. It binds you and keeps you from doing some of the things you want to do. Credit scores and student loans can really keep a lot of people in an endless cycle of high interest and mountains of debt. If that isn't slavery I'm not sure what is...
Although I do agree with you, one way to help out your credit score is to pull your free yearly report (I think it's annualcreditreport.com? not 100% sure) and contest all of the negative items you see. You'll be surprised at how often they end up dropping off, even when you know they belong on there. As far as student loans go, like I mentioned earlier, that's actually considered good debt, for multiple reasons: 1) the most obvious, getting an education is very useful (well, most of the time) 2) if you make 60k or less, you can deduct up to 2.5k of your student loan interest, between 60-75k it starts to phase out, and if you're above 75k, you can't deduct any of it. That's if you're single, if you're married, just double those numbers. So, if you make less than 60k, it's basically a free loan. 3) even if you make more than 75k and you're single (which means you can't deduct any of the interest), student loans tend to be low rates, I think nowadays they max at 6.8%(?). Stocks, over the years, average 8-10%. So you can technically get that loan, invest the money, and make a profit. These are the reasons I only pay the minimum on my student loans, mostly #3. I would rather invest in my retirement and (assuming over the 30+ years I have until retirement) gain the average of 8-10% on that extra money instead of giving it up toward my student loans, which average about 4%. Of course, some people just don't like having debt, but like I said, this is considered good debt, so it doesn't affect your credit score.
It helps to have a very small amount of credit card debt. You want to have a couple of cards, but not more than a couple, and you want as high a credit limit as you can manage. You look better if there's a big limit and a small balance. It helps to have a long history of on time payments. Car loans aren't really considered "bad" debt, not like credit cards. Heck, they pretty much expect you to have a car note. If you have a house note, what matters is the percentage your monthly payment is of your monthly income. The lower the %, the better you look.
You make some amazing points, and I will submit there are definitely ways to pull yourself out of a poor credit score if you know what to do. Luckily I have zero credit card debt, all my debt is basically tied up in student loans. I know I should probably look to get a credit card and build up my credit, but a lot of my ignorance to credit stems from my parents. I was always told pay things off and don't hold any debt. I just look at it like we force our kids to take classes like foreign languages and economics but in high school there is no real class like understanding credit. Without a course like that I feel like it just perpetuates the cycle of ignorance and dependance. I also agree, students loans are not terrible. However, it does stay around for quite some time, and while it doesn't choke you like credit card debt does it can weigh you down a bit. Not all student loans are equal as well. This was another area that was never explained to me. Approxiamately 4/5 of my loans are public loans, but unfortunately one of my loans is a private loan. In that private loan my interest rate is higher and even though I am in grad school I've already had to start paying that one back! Yet another thing I was ignorant about, and sure, a lot of it is my fault. Here's the thing, you go buy a box of cigarrettes it has a warning, beer, also has a warning, but when someone hands you money there is no warning to it. I think as a society that needs to change.
I have a average score of 805ish from the credit agencies. The best thing that helps you is age and a loan with monthly payments. It took me about 10 years to get my score from 660 to 805. Car loans and mortgages surprisingly will boost your credit score a lot. Also stop opening up anymore accounts. Store cards are just hseless and kill your credit. Constantly ask your credit card companies to raise your limit via a "soft" credit check. Most importantly...pay everything on time.
I can understand where you're coming from. I grew up around drug users. We were constantly moving, I would come home to find my stuff gone (it had been pawned), and we never had money. Somehow this taught me though. What I learned? Do the opposite! lol I'm not saying you should do the opposite of what you were taught, but maybe you should venture out a bit. The best advice I can give you before I head off for the night would be to get a credit card asap, just so you can get your credit history going. Like I mentioned earlier, they look at how old your oldest account is, and they also look at the average age of your accounts. So getting a card now, even if you don't plan to use it, is advantageous. Of course, it's best to use it at least once per month so you can make monthly payments (in full!), which can also make you look good like Deckard mentioned, although that's not mandatory. At the bare minimum, I would get a card, and at least use it a few times per year. In the long run, you'll be glad you did. Have you looked into consolidating your loans? That may help. Also, if you put them on automatic payments or pay on time for certain lengths of time they will lower your interest rates. At least, that's what Sallie Mae did for me.
I'm sorry, but a credit score is not slavery at all. Keeping a good credit score doesn't require any work. Do you believe that people you are asking for money should have a way to see if you've been good with money in the past? This is what dings credit scores: Paying bills late, going into collection on debts, having way too much credit for your income or bankruptcy. Now there are legit reasons why each of those things can happen, but that is the minority and if you get dinged for something where you have legit cause you can normally get it fixed. I know wealthy people with terrible credit and I know low income people with good credit. The thing that sets them apart is not their education or their parents, it's their level of responsibility. Now like I said, it's not ALWAYS true that a person with bad credit has themselves to blame, but it's so far from modern "slavery" that the comparison should be offensive. Edit: By the way, the person who taught me about credit was Papa Internet. No parents invested in teaching me.
WTH? SRSLY? I came to the U.S. in 1987. Neither of my parents had good financial skills, nor did I. We were poor in the sense of not owning any luxuries, not even a house. I finished high school, went to college paying for it on my own. I only had Foley's or small store credit cards. I charged them and filled them up. I was in ruins. I knew DIDDLY-SQUAT about money. I was in debt in college because I went wild with Discover, charging that iSht everywhere, paying only the minimum. And when I got together with my wife, got married, had a family, etc., I grew up FAST. I LEARNED how to take care of my money because I said "NO MORE." I repaired my credit without those companies that consolidate them, I did it on my own with my wife's help and learning myself. The thing here is that if you continue to think it's a scam, that people are out to get you, that the credit bureaus only interest (mind the pun) is for themselves, and approach it that way, you'll never fix your financial problems. I recently purchased my wife a Highlander with 0% interest rate and 0% down because of my good credit. I used to say "financing" but there's no financing now, only borrowing money... and I don't pay more interest than I ever have to. I move credit card balances around to pay the least. Maybe you should look into that. Live in slavery if you want to, or liberate yourself. It's YOUR CHOICE, not anyone else's. *I STILL DON'T SEE HOW IT IS SLAVERY or "a link" of it.* What are those things you "want to do"? I bet you they're luxuries you don't need (a HUGE TV, rims on your car, a BMW instead of a gas-saving Corolla?).
Like I said, there are exceptions. There are people who have credit knowledge and they learned from the school of hard knox. You need credit to do practically anything. If it isn't slavery then it's indentured service. You need a house? Credit. You need a car? Credit. I'm not looking for a cool new BMW, or a $300,000 house, but without any real credit and making a measely $24,000 a year in grad school I can't say I won't say I'll get a great interest rate. I'd sure love to buy a house or at least get a car. It is what it is. The problem I have with the system is that once your debt is paid you should be back at square one. That isn't the case. Let's say you mess up, you screw up your credit. You might pay it back with interest, but that isn't good enough. They hold you to a score that they assign and you have no say about, no control, no impact at all. You're locked in, and the only way out is to jump through hoops until they beleive you're worthy of credit again. Oh, and to find out what these hoops actually are you have to dig and find out on your own. Honestly, having bad credit is like being a criminal in our society. That's nuts in my opinion.
I guess this is semi-redundant but like I said in my other post my major beef isn't that they track you, or that the system exists. My beef is that once the debt is paid you should be back at square one or at least somewhere near it. You aren't. It doesn't work like that. Your debt still isn't full repaid. Paying back the money you owe is not near enough. It's showing a behaviour, a pattern that some foreign agency feels is good enough. That's the flaw.
If I could buy a house or a car straight cash I would. I wish this was the way of the world. Right now I have neither and that probably won't change until well after grad school.
My credit score is around 810-820 last i checked. I didnt even have to work for it. Just paid my bills on time. Dont have any car loans or debts outside of my mortgage..
