1. What do you find most helpful? Give us your feedback on the 2019 SDN Member Survey to help further the SDN mission (and win prizes!)
    Dismiss Notice
  2. Dismiss Notice

Improving credit score

Discussion in 'Finance and Investment' started by moonbunnie, Feb 15, 2007.

  1. moonbunnie

    moonbunnie Member
    5+ Year Member

    Joined:
    Apr 9, 2004
    Messages:
    37
    Likes Received:
    0
    Status:
    Pre-Medical
    Hi, just looking for advice from any of you financial wizards. I would like to improve my credit score, as it is fairly mediocre, and I am wondering what actions will best serve this purpose. I will be working towards paying off as much of my balances as possible while I am working full time. I am also wondering if I should close some accounts that are not currently in use, mostly retail store accounts that have no balance and I do not forsee using again any time soon.

    Also, I was looking at my car insurance policy, and it has an attachment about my rate not being the lowest possible due to several factors, and one of these is "Lack of information reported on your oil company accounts". Anyone have any idea what an "oil company account" is?
    Thanks :)
     
  2. Sol Rosenberg

    Sol Rosenberg Long Live the New Flesh!
    Physician 10+ Year Member

    Joined:
    Feb 12, 2006
    Messages:
    3,534
    Likes Received:
    7
    Status:
    Attending Physician
    What are the reasons why your credit score is low[er]? Sites like myfico.com will report reasons why your credit score is what it is.
     
    Stop hovering to collapse... Click to collapse... Hover to expand... Click to expand...
  3. OP
    OP
    moonbunnie

    moonbunnie Member
    5+ Year Member

    Joined:
    Apr 9, 2004
    Messages:
    37
    Likes Received:
    0
    Status:
    Pre-Medical
    I know it is probably mostly because of the high balances I have on a few cards, which, like I said, now that I'm working full time I will be paying off as soon as I can. I'm sure paying off a few thousand over the next couple months will help a lot, but I am just wondering if having these old accounts, like from stores at the mall and furniture I bought and paid off a year ago, also affects my score. It would be no big deal to close them, if they make a difference.
     
  4. Tired Pigeon

    10+ Year Member

    Joined:
    Jan 27, 2007
    Messages:
    940
    Likes Received:
    4
    Status:
    Resident [Any Field]
    I have heard that generally having a lot of open accounts (even with no balance) will hurt your credit score. The reasoning is that even though you don't owe anything on these cards, you could, in theory, go out and run them up anytime. So if you're not going to use them, just close them. It definitely won't hurt.

    Don't worry so much about paying off your existing balance (in terms of effect on your credit score); as long as you're paying at least the minimum each month and your payments are on time, the exiting balances shouldn't hurt you (unless they're truly enormous).
     
  5. OP
    OP
    moonbunnie

    moonbunnie Member
    5+ Year Member

    Joined:
    Apr 9, 2004
    Messages:
    37
    Likes Received:
    0
    Status:
    Pre-Medical
    Well, I owe about 5000 between 3 visa cards, which isnt astronomical or anything, but I would like to get it paid off. I think that I'm close to the limit on two of the cards, so I think that hurts my credit score too. I think I will go ahead and close all the accounts I don't need. Thanks for the advice :)
     
  6. etf

    etf
    Moderator Emeritus 10+ Year Member

    Joined:
    Apr 27, 2005
    Messages:
    3,060
    Likes Received:
    9
    oil company card is probably a credit account you have at a gas station.
     
  7. Methyldopa

    Methyldopa Pharmacopoeia
    5+ Year Member

    Joined:
    May 13, 2004
    Messages:
    305
    Likes Received:
    3
    Remember that your fico score also depends on how long you've held that credit card account. So hold on to the oldest credit card that you have and you don't close it, unless it's too much of a temptation
     
    Stop hovering to collapse... Click to collapse... Hover to expand... Click to expand...
  8. primadonna22274

    primadonna22274 Senior Member
    10+ Year Member

    Joined:
    Jun 6, 2005
    Messages:
    2,296
    Likes Received:
    345
    Status:
    Resident [Any Field]
    An oil company account is one like Shell, Chevron, Texaco...(I grew up on the west coast, can you tell?..still figuring out what the east coast ones are). For whatever reason and I don't know what it is, having an oil company account is like having a gold star on your credit rating. For some idiot reason (um, there are no Chevron or Texaco stations in SC where I live now) I cancelled my Chevron that I have had since 1993 and actually took a minor hit on my credit score. Sheesh. Better to keep it I guess.
    Some factors to consider when trying to boost your credit score: have a couple of accounts with high credit limits but keep your balance to less than 50% of the limit. Limit department store accounts, pay off balances whenever possible, and try to keep a high debt-to-credit limit ratio among all your cards. This shows future creditors that other creditors have trusted you with high limits but that you don't abuse it and are therefore less likely to get into financial trouble. Never pay late--even one missed payment will hurt you. It takes a long time to recover from credit mistakes--a couple of years at least--I've learned the hard way after a rough divorce, but I can tell you it is very possible to bring your credit score up with hard work and showing diligence and responsibility--have brought mine up about 140 points in the last 3 years (damn, it was pristine before I got divorced). But it's better if you don't have blemishes if you can help it.
    Good luck! I hate money.
     
  9. Sol Rosenberg

    Sol Rosenberg Long Live the New Flesh!
    Physician 10+ Year Member

    Joined:
    Feb 12, 2006
    Messages:
    3,534
    Likes Received:
    7
    Status:
    Attending Physician
    Both of those factors (High balances (especially if the balance as a percentage of your credit limit is high) on revolving accounts, as well as having ANY "consumer" accounts, like furniture, etc) negatively impact your credit score. As far as the latter goes, your score won't improve until they are off your credit report, period. Yes, this is even if the accounts are paid as agreed. As far as I know, however, their impact is not as significant as most other factors, so I wouldn't worry about it too much. One thing you CAN try is to dispute something about these accounts, if they are closed/paid off. Usually, if you dispute something that is not listed as negative information on your credit report, the agency will just remove it from your file. Even if they try to verify it with the original creditor, creditors often expend minimal time/effort to verify disputes on closed accounts (especially if they are paid off as agreed.) They may just allow the dispute to go through as the path of least resistance/work. You have nothing to lose by trying something like that. I screwed up my credit while I was in college, but had it drammatically improved within 2 years after I graduated, started a job, and paid off everything I owed. I continually disputed derrogatory information, and eventually most of the creditors gave up and just let the disputes go through (and this was for accounts WITH derroratory information.) I was stuck with derrogatory information for one or 2 accounts, but that eventually dropped off after 7 years.

    Paying down your other balances and keeping them down will also help.

    As far as having a lot of open accounts with no balance is concerned: I have heard that from a lot of people, as well, but not from my credit score reports. I have a LOT of credit available to me, 90% of which is at a 0 balance. This has never been listed as negatively affecting my credit score.
     
    Stop hovering to collapse... Click to collapse... Hover to expand... Click to expand...
  10. Stroganoff

    Stroganoff Never give up.
    Rocket Scientist 15+ Year Member

    Joined:
    Nov 6, 2003
    Messages:
    40,521
    Likes Received:
    21,963
    I'm too young to have an MI, right? I heard rumors that we as future or current medical professionals -- although otherwise intelligent -- are pretty much not as informed as we need to be regarding personal finances, and the amount of misinformation and guessing I read reinforces that rumor.

    Anyways, I am in no way an expert on this stuff so don't wanna come across as a know-it-all, but I've kinda become obsessed lately with learning and reading about all this mundane stuff so I'll help with what I can.

    Closing accounts will hurt your score in two ways:

    1) It will raise your utilization. Utilization is the total revolving debt (credit cards (including store cards) and lines of credit) divided by the total credit limits. So if Credit Card A has a $50 balance on a $100 limit and Credit Card B has a $0 balance on a $100 limit, your utilization is $50/$200 which is 25%. If you close Credit Card B it will no longer be factored into the calculation, and your utilization will now be $50/$100 which is 50%. You just doubled it, and that will hurt.

    2) You'll lose account age from having an old account. Depending on how many cards you have and when you opened each one of them, this may hurt you (maybe a lot) or it may not hurt you a bit. The one thing that is guaranteed is that it won't help you a single point.

    etf's and primadonna22274's guesses sound right. Do you have any gas cards?

    Yeah, paying them down a few thousand will help a ton.

    They definitely affect your score. Pretty much everything does. And as long as there aren't any late payments or whatever, they're considered positive accounts. If you close them, it will likely hurt. One good reason to close an account is if there's an annual fee. Another good reason to close is if you already have a really good credit score with lots of trade lines reporting; then closing an account or two won't hurt at all. In other words, keep them open for now because they're helping you. Closed accounts factor much, much less into the score than open ones, even if they are inactive open accounts.

    :eek:

    If we're talking about the FICO score, having a ton of zero-balance accounts will definitely not hurt one's score. It may be viewed as riskier by an underwriter at some bank if you have like $100,000-$200,000 or whatever of available credit, but as far as one's FICO credit score is concerned, it's a myth.

    The second part about closing them not hurting is also opposite.

    Do you work for them? No offense intended, but you sound like a loan shark. Having both 1) high balances and 2) high utilization will hurt.

    Don't worry, nobody's judging you here. I got a little debt myself that's about to get destroyed soon. Anyways, it's no one's business here so it's totally cool if you wanna keep your total credit limits to yourself, but both individual and total utilizations are factored into your score, so if two are close to the limit (two cards, say at 95% each), that will hurt, as well as your total utilization (say $5000/$6000 = 83% which is considered pretty maxed out).

    The reason utilization is such a buzzword is because it makes up 30% of your FICO credit score. The three ways to help your utilization are 1) pay it all down!, 2) increase limits on current cards, 3) don't close anything!

    Really awesome advice. :) Except "high" should be "low" but you already explained why. I'm not sure if gas cards are any more positive and store cards are any more negative to one's score, honestly. 10% of the score is credit mix, so who knows...
    Don't worry, I'll take it.

    Are consumer/furniture trade lines negative? I have never heard or read any of this. AFAIK, any account that is considered positive is positive no matter who it's with: from a Platinum American Express to a Platinum Horse titty bar line of credit.

    Seconded. It's a myth, at least with FICO score. With individual loan companies and mortgages and stuff, they have their own underwriting, so it may scare some of them a little bit, but they'll tell you.
     
    Stop hovering to collapse... Click to collapse... Hover to expand... Click to expand...
  11. mshheaddoc

    mshheaddoc Howdy
    Moderator Emeritus 15+ Year Member

    Joined:
    Apr 24, 2002
    Messages:
    43,161
    Likes Received:
    82
    Dallenoff pretty much said everything I was going to say .... :thumbsup:

    And thanks for updating the sticky Dallenoff. I appreciate it!
     
    Stop hovering to collapse... Click to collapse... Hover to expand... Click to expand...
  12. Sol Rosenberg

    Sol Rosenberg Long Live the New Flesh!
    Physician 10+ Year Member

    Joined:
    Feb 12, 2006
    Messages:
    3,534
    Likes Received:
    7
    Status:
    Attending Physician
    Honestly, I never thought that they were considered negative until I pulled my FICO score about a week ago, since I'll be buying a house soon. Here's what popped up:

    In my case, the "consumer finance company loan" was a "6 months same as cash" furniture purchase (which I paid off completely within the 6 months.)
     
    Stop hovering to collapse... Click to collapse... Hover to expand... Click to expand...
  13. mshheaddoc

    mshheaddoc Howdy
    Moderator Emeritus 15+ Year Member

    Joined:
    Apr 24, 2002
    Messages:
    43,161
    Likes Received:
    82
    I love how 1 company is "a relatively high number" of accounts.

    I suppose it depends on how the consumer credit accounts of the company works. B/c usually consumer credit accounts are regarding "credit" lenders who work with people with credit issues. Lines of credit with retailers usually don't fall under that.

    Which credit company is this and did all 3 of them report it the same way? Just curious ...
     
    Stop hovering to collapse... Click to collapse... Hover to expand... Click to expand...
  14. Sol Rosenberg

    Sol Rosenberg Long Live the New Flesh!
    Physician 10+ Year Member

    Joined:
    Feb 12, 2006
    Messages:
    3,534
    Likes Received:
    7
    Status:
    Attending Physician
    Honestly, I don't know if the others are different. I went with the freebie (with trial to CreditWatch or whatever) Equifax score, but I'll eventually get around to pulling all 3.
     
    Stop hovering to collapse... Click to collapse... Hover to expand... Click to expand...
  15. medicineman1

    7+ Year Member

    Joined:
    Sep 8, 2006
    Messages:
    209
    Likes Received:
    0
    Status:
    Resident [Any Field]
    WTF to do with a FICO of 590ish with all 3 of the big agencies? Im getting married and want to buy a house as a PGY2. Shift some det to fiance to clean my credit up real quick? How quick can I bounce from 590 to 680? I dont have a bunch of late payments or anything-just a truckload of creditcard bills TRUCKLOAD! any thoughts?
     
  16. TMP-SMX

    TMP-SMX Senior Member
    Moderator Emeritus Gold Donor Verified Expert Verified Account 10+ Year Member

    Joined:
    Jun 12, 2006
    Messages:
    3,693
    Likes Received:
    97
    Status:
    Attending Physician
    Are you paying them on time and paying more than the minimum balance? If you have a large percentage of your credit limit in debt, then you will have a lower score. Whatever you can do to reduce the debt will be better for you. CCs are about as high of interest rate as you can get, so it's better for your credit score and financially to limit the debt. You need to budget your money and quit using your cards for a while.
     
  17. Sol Rosenberg

    Sol Rosenberg Long Live the New Flesh!
    Physician 10+ Year Member

    Joined:
    Feb 12, 2006
    Messages:
    3,534
    Likes Received:
    7
    Status:
    Attending Physician
    Agree with the previous poster. You also should pull it from someplace like myfico.com where they will give you the reasons for your score. I don't think a 590 will prevent you from getting a mortgage, but traditionally, most lenders wouldn't give you a mortgage if your total debt:income ratio was greater than 36%. If your cards are maxed out or close to being maxed out, you should do the math to see if, with your new housing payment, you will be approaching that number.

    Then again, it's been a long time since I have had credit cards maxed out, etc, and lenders have gotten way more loose with their lending restrictions, so this may not be an issue for you. However, low credit score + high debt:income ratio = high interest rate.

    Try to pay down your cards. Also make sure that something else isn't causing your score to be so low.

    Best of luck to you.
     
    Stop hovering to collapse... Click to collapse... Hover to expand... Click to expand...
  18. Sol Rosenberg

    Sol Rosenberg Long Live the New Flesh!
    Physician 10+ Year Member

    Joined:
    Feb 12, 2006
    Messages:
    3,534
    Likes Received:
    7
    Status:
    Attending Physician
    Very interesting postscript to my story (see above re: consumer accounts)

    I think that the factors that influence your score depend upon your score. In my case, when I pulled my FICO score a little over a month ago, it came up a 6xx, which is pretty bad for someone in my situation. The biggest factor contributing to that 6xx was a delilnquint account that was erroneously listed on my credit report (long story, but my father has the same first and last name and has a bunch of delinquint accounts, so this shows up every now and then, even though, in theory, it shouldn't.) But, a few other factors showed up, including that note that I posted about about the consumer accounts.

    Anyways, I [successfully] disputed that delinquint accounts, and it was removed from my credit report. Now my score is a nice 8xx, and, guess what, NONE of those other factors (i.e. consumer accounts, etc) show up as impacting my credit score (even though those accounts are obviously still on my credit report.) Therefore, I believe that the FICO score and what impacts that score is determined non-linearly, and that some factors are important for a certain range of scores and not for others. Maybe this was common knowledge, but I thought that I was pretty well educated about this stuff and didn't realize it until now, so I am just passing along my recent experiences.
     
    Stop hovering to collapse... Click to collapse... Hover to expand... Click to expand...

Share This Page