Improving credit score

[moonbunnie]

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

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[Sol Rosenberg]

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.

 

[moonbunnie]

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.

 

[Tired Pigeon]

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).

 

[moonbunnie]

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

 

[etf]

oil company card is probably a credit account you have at a gas station.

 

[Methyldopa]

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

 

[primadonna22274]

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.

 

[Sol Rosenberg]

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.

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.

 

[Stroganoff]

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.

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.

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.

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

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

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,

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

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.

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.

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.

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.

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).

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.

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

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!

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.

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...

Good luck! I hate money.

Don't worry, I'll take it.

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.

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.

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.

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.

 

[mshheaddoc]

Dallenoff pretty much said everything I was going to say .... :thumbsup:

And thanks for updating the sticky Dallenoff. I appreciate it!

 

[Sol Rosenberg]

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.

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:

You have a relatively high number of consumer finance company accounts being reported

According to your credit file, you have 1 consumer finance company loans. 24% of U.S. consumers have a consumer finance company account reported on their file. Click here to review your Accounts Summary.

Research shows that consumers with consumer finance company loans appearing on their credit report represent higher risk than those with no consumer finance loans. (Note that after a consumer finance company account is closed, it will not disappear from the credit report immediately. Research shows that the presence of consumer finance company accounts on the credit report, whether open or closed, is still predictive of future repayment risk; thus they will still be considered by the score.)

The best way to improve your credit rating is by managing all of your accounts responsibly, not missing any payments, and not opening new credit accounts you don't need.

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.)

 

[mshheaddoc]

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 ...

 

[Sol Rosenberg]

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 ...

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.

 

[medicineman1]

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?

 

[TMP-SMX]

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?

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.

 

[Sol Rosenberg]

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.

 

[Sol Rosenberg]

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.