NoSoup

In America, your credit is based on credit history. The longer you have credit, the more prompt your payments, and the lower your balances, the better credit you will have. Unfortunately, having no credit is usually just as bad - and in some cases worse - than having bad credit.

Why Credit is Important

It seems that the old days of paying for everything with cash are gone. Doing so these days will actually cost you additional money - potentially thousands of dollars. Your credit - like it or not - plays a huge role in many things that you do. It affects your insurance rates, is utilized by many apartment complexes to approve tenants, obtain credit cards, vehicle loans, and mortgages. Recently, quite a few employers have recently started screening for potential employees by examining their credit. The fact is, it is hugely advantageous to have a high credit rating, and likely will make life much easier on you - not to mention much less expensive in the long run.

The difference between good and bad credit on large purchases is tremendous. A person with a poor credit rating will generally pay tens of thousands of dollars more in interest than someone with average credit, and a person with excellent credit will pay even less.

The Credit Reporting Agencies
There are three main credit reporting agencies. Some institutions use what are called tri-merge bureaus, which is pulling information from each bureau and combining it into one. Others use individual CRAs, which usually vary by the area. In the Midwest, for instance, if we are using a single CRA, we use TransUnion.
You can get more information about each Credit reporting agency, as well as order your credit report to check your score and/or accuracy at these websites:
www.transunion.com
www.equifax.com
www.experian.com

Types of Tradelines

Basically, a tradeline is simply an open line of credit. There are several different types, which we will discuss.

Revolving
Usually the most common type of tradeline out there, it simply means that it is an open-ended line of credit. You can borrow money on it, pay it back, and then re-borrow without having to reapply for the tradeline. The most common revolving credit lines out there are credit cards, although some institutions do offer revolving lines of credit and other products. These types of tradelines usually have payments that increase or decrease according to the balance of the loan. These types of loans are generally frowned upon by potential borrowers.

Installment
This tradeline is a type of loan that you borrow $X on and pay it off over a set timeframe. An example of this type of loan would be a vehicle loan. These types of loans generally have fixed payments.


Mortgage
Basically, any type of loan using real property as collateral is considered to be a mortgage. These are typically installment loans, but there are other revolving products out there, such as lines of credit. These types of loans help your credit the most and damage your credit the least.

Obtaining Credit

Basically, it is usually very difficult to obtain credit when you have no credit history. The easiest ways to obtain credit would be either with a secured loan, secured credit card, or a co-signer.

Secured Loan/Secured Credit Card
Getting either a secured loan or credit card is probably the easiest way to get credit without help from others. Basically, with both a secured loan and a credit card the lending institution is lending money out to you because they have collateral. Collateral is something that is used to guarentee payment - common collateral are vehicles, homes, and funds. In most cases, these credit cards and loans will secured by funds - that is, cash you have in the bank. Generally, you will be required to deposit $X into an account with the institution. In this example, we'll use $500 as $X. Once your $500 dollars are in the account, they put a freeze on it - making it impossible for you to withdraw those funds until the account is closed or the funds are released. The institution will then issue you either a credit card or a secured loan, using those frozen funds as collateral.

If it is a credit card - secured or unsecured - never, ever charge over 50% of the credit limit, even if you pay the card off in full each month. The reasoning behind this is because potential lenders like to see that you still have funds available on your open lines of credit - that you are being responsible with it. The reasoning you can't ever do it is because the company that holds the credit card reports to the Credit Reporting Agencies (from now on known as CRAs for the sake of typing less) only once per month, effectively taking a "snapshot" of your current balances. If you are maxed out, even if the check to pay off the balance is in the mail, it will reflect poorly on you.

If it is a secured loan, although it may be tempting because it is costing you money to pay interest, don't pay it off early unless you have found a better alternative. Credit history is exactly that - history of your payments. The longer you have the loan, the better off you'll be in the long run. Look at the money you are paying in interest as an investment - maybe even the best you have ever made. With good credit, you will save tens of thousands of dollars in interest on big ticket items, such as a house.

To obtain either a secured credit card or a secured loan, I would suggest checking with your local banks or credit unions, and avoiding any cards with an annual fee. As long as you pay your balance off on full each month on credit cards, you do not have to pay any interest.

Cosigner
A cosigner is basically another individual put on the note ( oan) that is also responsible for payments. The cosigner is 100% responsible, they don't have any less responsibility than the actual borrower. If the payments are late or the loan defaults, the cosigners credit will be damaged just as much, if not more, than the borrowers. Using a cosigner will often allow you to obtain credit that you normally wouldn't be able to obtain without any other credit history. Lower interst rates, longer terms, or even just getting approved are some examples as to how cosigners can help. Having a cosigner on a note doesn't really matter as far as building credit goes, it will either increase or decrease as if you were on the debt alone.

Maintaining Credit

Basically, once you have obtained credit, maintaining it will be the key that will eventually unlock the "excellent" credit door. Time is both your friend and enemy - it will, after a number of years, erase any poor credit you may have, but it will also take a while to build good credit.

The key to maintaining and improving credit comes from six main factors. These factors are:
Payment History
Length of time accounts have been established
Keeping your balances below 50% of the limit
Having little unsecured debt
Having low outstanding balances
Number of Tradelines

We'll examine them a bit further

Payment History
This is by far and large the most important factor, and one of the biggest contributors to either helping or damaging your credit rating. Having a flawless or near flawless payment history is the best way to keep excellent credit. Payments are reported late only if they are 30+ days delinquent. Not that I would recommend it, but that means you could be 20 days late every month on your credit card payments and still have perfect payment history - although I would imagine you would be paying quite a sum in fees and interest.

Length of Time Accounts have been established
The longer accounts have been open, the better it will reflect on you. A credit history of 10+ years is very, very good.

Keeping your balances below 50% of the limit
This is important because the CRAs keep track of the highest balance you have ever carried on your revolving credit - aka credit cards or other revolving lines. Fortunately, however, if you were near or over your limit, the more time that passes the less it affects your score. If you recently went near/over your limit, a quick fix to this is to simply increase your credit limit and don't every go above your previous high balance.

Having little unsecured debt
The less unsecured debt you have the better off you are going to be. Unsecured debt is basically debt that you have that does not have any collateral attached to it - the most common unsecured debt is credit card debt, although there are other unsecured products out there.

Having low outstanding balances
Basically, this is regarding your total debt. Mortgages don't seem to have a whole lot of effect on this, but credit cards, vehicle loans, and other installments loans do play a role in this total. The less the debt, the better the credit

Number of Tradelines
The ideal situation is to only have 2-3 credit cards out there for unsecured debt, maybe a vehicle loan, and a mortgage. Believe it or not, you are actually penalized for not having any revolving credit lines out there - which would include credit cards. Many people have dozens of open accounts and never use them. There is absolutely no reason to have 10-15 or more credit lines open, even if you have no balances, the amount you could potentially borrow plays a role in calculating the score. Also, when closing accounts, make sure you actually contact the institution to close it, simply cutting them up and throwing them away isn't actually closing the account.

The Credit Score

Your credit score is simply a score assigned to you by the CRAs. They calculate your FICO score based on a variety of criteria, much of it is mysteriously shrouded. C'mon, you know everyone likes being graded on things where the rules aren't given to them, right?

Hopefully this will shed a little light on the topic...

Basically, the higher the score is, the more likely you are to repay your outstanding debts. By following this guide, you should attain a high score with relative ease - and keep it that way. However, there are a variety of little nuances that also affect it that many people are unaware of. For instance, applying for credit actually damages your score. If you often apply for credit and have a lower score than you feel you should, this is likely the reason. If you want to inquire about interest rates with several different companies, call them all on the same day. Several inquires lower your score far less if they are made the same day than those same inquiries spread over several days or several weeks. This is to allow the consumer to be able to shop around for rates and what not, without taking the full impact of applying at each place. Other factors include things I have mentioned above, and likely several others that I am unaware of.

Credit Myths and Legends

Paying extra payments/the account off faster helps your credit
False - Credit History is simply whether or not you make your payment on time or not. It doesn't actually show the amounts that you paid, simply whether or not it was on time - No more, no less.

It is good to have many accounts with no balances
False - Having many open accounts will actually reflect negatively on you. Potentially Lenders look not only at your current balances, but the actual amount you can borrow at any given time

A higher income will give you better credit
False - Nowhere does your income report to your bureau - it certainly will be a factor when trying to get approved, but doesn't actually help your score

Staying at the same Job Helps your Credit
True - If you are employed at the same place for more than 5 years, it will have a trememdous positive impact on your scores

Only older people have good credit
False - Young people can have good credit also, although admittedly, it is much harder to get your scores up due to the lack of activity

It only takes 2-3 months to get good credit when first starting out
False - It actually takes 6 months of continuous reporting before you even get a score, most lenders won't touch someone who does not have a score without a cosigner

Being an authorized user on someones card helps your credit
True - Usually, it will report to the bureau exactly like a card on your name - although of course, it will not be helpful if the person is near the limit or late on payment

It's ok to charge up to the maximum limit on credit cards as long as you pay it off each month
False, see above where I explain how the reporting works - the "snapshot" of your credit doesn't necessarily reflect if it is paid in full each month or not.

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dpezzo

Wow! I had no idea on some of these myths! Thank you for helping me see the light...

Shirtninja

Thanks for the info. It explained a lot of little questions I never really asked.

quadro2000

Fascinating! Thank you for taking the time to post all of these - I have already forwarded it on to a few people who could use it.

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sandeep

Although I'm in Canada, a lot of this still applies.

I always appreciate these types of tips and advisory notes, because I'm 20, and seem to be prepetually concerned with my credit. I have 2 credit cards, one of which usually carries little or no balance, but has recently gone upto about 50%, my other card, is usually manged well, but has recently gone up quite a bit, to about 80-90%. I know this is hurting me, and it will be fine in a few months, but I'm still always conscious of it.

Thanks for the post though.

jorgelito

Once again Mr. NoSoup unleashes his bank of knowledge. You really should put a book out.

I would like to add, if I may, one more thing.

Starting in December, Federal law requires the top three-credit reporting agencies

www.transunion.com
www.equifax.com
www.experian.com

to provide free credit reports once a year.

https://www.annualcreditreport.com/cra/index.jsp

They will be available on a rolling basis starting with the West coast in December. Check it out. The report is a good start in understanding and improving your credit especially when taken with the info outline above by NoSoup.

And it's free. do not confuse it with the other Free Credit Reports: those want you to buy a service etc. This one is free to us by law.

Slavakion

A teacher once told me this. Please tell me whether or not she was right.
To help build up good credit, you should use your card often. Even if you're buying a pack of gum. Just make sure that you pay it off when you're supposed to.

NoSoup

Well... She was kinda right, I suppose...

How often you use your credit card doesn't really matter - if you bought a pack of gum, as long as you do it once a month, that would be enough to report to the bureaus that it was active and that you made a payment on it.

Paying it off in full will typically save you a bundle in interest, but you still want to keep the balance well below the credit limit, as the credit reporting agencies keep track of the highest balance you had ever carried. Under 50% of the limit is a good rule of thumb, even if you pay it off in full each month.

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MichaelFarker

I really appreciate the info! It was very useful.

Key

just some quick clarification questions ..

1) regarding the payment history... does that mean that you can pay simply the minimum each month and it won't hurt your credit score? that you would just have to pay the interest from the credit card?

2) the balance.. say you spend $500 in credit. you pay it off in full after you receive your bill, and after the "snapshot" has been sent to the CRA saying you had a balance of $500. next month, you spend another $500. is that the same to the CRA as: instead of paying off the $500 in the first month, you only pay $20... bringing the balance to $480. you spend another $20 to bring the balance to $500 again.

3) less unsecured credit is better... so does that mean a $200 credit card is better than a $2,000 credit card? if that's the case, would it make sense to request your credit line to be lowered to the lowest minimum possible?

4) if i wanted to close an account or two... does it matter if i haven't had it for very long? should i hold onto them for a while before i close them, or will it look bad if i close them very quickly after getting them?

thanks !!

FngKestrel

Thanks for the info. Time to work on my credit...I'm a bit overdue. I've avoided credit cards for a long time, but I guess while that keeps me out of debt, it's not helping my credit rating.

JStrider

lots of good info... ive been usin my credit card for books and movies and whatnot... always pay it off in full... dont think ive gone above half my available more than once...
*shrug*
ive been really curious about what my credit rating is at... so its cool we get to see it for free soon...

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FngKestrel

I tried the annualcreditreport website. Out of the three reporting agencies, only experian successfully gave me a credit report via the web. The other two agencies asked me to submit a mail request. But I did get some info, thanks!

NoSoup

1)Yep, as long as your payment is on time, it will help your credit no more or no less if you pay the minimum payment or pay additional funds each month, providing that the balance of the credit card is under 50% of the limit.

2) Yes, unfortunately, it would look the same to the Credit Reporting Agencies.

3) It depends on what you keep your balances at, and if you have enough cash saved up for any emergencies that would arise. It makes sense to have a lower limit if you know, for certain, that you won't need to charge more than 50% of that limit. Ideally, you want to have a balance less than 35% of the total of all your unsecured credit limits. So, if you have a grand total of $1000 total with 2 different credit cards, you wouldn't want your total balance to go over $350.00.

4) It likely won't really affect much of anything. Obviously, if you can have accounts open for a longer period of time, it would help your credit, but if you are going to just close it anyway you may as well get that out of the way, as long as you have enough reporting tradelines to not damage your score due to lack of credit.

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Mobo123

NoSoup that is an absolutely excelllent thread. As a bankruptcy attorney, i amgoing to impart some or most of what you wrote to my clients. Well done.

I've been doing Ch 7 and 13's for almost 18 years and it never fails to astonish how people can be so reckless, ignorant or just plain dumb about their credit standings. Again, well done.

CityOfAngels

NoSoup, I reallllly appreciate your help by posting this thread! I'm 20, without a credit card, and reading all this gave me a better understanding of how everything works. Upon my next paycheck, I think I'm going to apply for a secured card. I really want to build my credit; I'm tired of paying $500 deposits.

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soma

Question: I got a credit card with my bank recently, and I pay it very frequently (it's all online which makes me happy). This is so I know just how much money I have in my checking account so I won't overspend. Now, because each month, I carry a balance of $0, does that mean I'm not building any credit history?

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NoSoup

Not necessarily. Your credit card company should be reporting that you carried a balance and have made the payment on time for that month. To be extra safe, though, you could pay down most of the balance, leaving a few dollars on there instead of paying it off completely, waiting until you get the monthly statement to pay if off all the way. I would imagine you could still have a pretty accurate figure as to what your checking account balance will be at the end of the month if you know that you only have approximately a $5 balance on your card.

If you have any more questions, just let me know!

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AVoiceOfReason

NoSoup, you're doing a good work here. Like Mobo, I am an attorney that does some bankruptcies, and I'm continually astounded at how folks don't seem to understand that a credit card charge is a loan from a bank. No, papers don't have to be filled out each time money is advanced, but for cryin' out loud, it has to be repaid. Using a credit card for anything other than convenience, and failing to pay it off each month is extremely irresponsible. The interest rates charged on that new TV or stereo drives up the cost of the great deal you think you just go.

Bottomline: If you don't have the cash in the bank to pay for it when the bill comes in, the card shouldn't be used (yes, I know there are some limited exceptions, but those should be treated as such).

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herostar

Thanks alot! I'm 20 and about to get started building my credit. I don't really need to take any loans out for anything, so how would you suggest I begin?

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AVoiceOfReason

NoSoup will assuredly have better information than I do on this, but I'll share with you what my dad did with me in 1976. He took me to the bank (the one where he was known by all there) and had me fill out the forms to borrow $100. I took the money home and put it in a drawer. There months later, I came back and paid it plus whatever the interest was. Presto--I had a credit rating begun.

It's funny, but in order to establish a credit rating, you have to first use credit. Get a low-limit credit card, and when you fill up the tank with gas (if you live where you drive), use the card instead of cash a couple of times a month (put the cash back where you will have it at the end of the month, of course). Buy something you were going to buy anyway at Best Buy and fill out the application for a credit card--then pay it promptly.

Little things like this can make a big difference.

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A Voice Of Reason, not necessarily the ONLY one.

NoSoup

Remember, even if you don't need money right now, I'd still start building your credit ASAP. Think of the interest you pay right now as an investment - and you don't even necessarily need to pay interest. If you get a credit card (secured or unsecured) and pay the bill in full each month, you won't have to pay any interest.

Hope this helps!

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Nunquam_Idem

This has been a really terrific thread. Thanks a ton NoSoup, you made a really good article and lots of great information.

Thanks also for the link to the annual credit report, I had been meaning to check on that.

https://www.annualcreditreport.com/cra/index.jsp

It looks like all 3 are now working on the web, I got my reports. I actually look pretty damn good, only one '30 days late' on an account a couple years ago. I think it was because we moved and I didn't get the statement.

I just wish the score itself was free because I don't know what mine is...

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elsesomebody

NoSoup, I'm not sure I understand your logic for this. If I have a loan that I'm paying interest on, and I have saved up enough money to pay off the debt, and my savings interest rate is substantially lower than the loan's interest rate, I don't see any reason why I wouldn't want to pay off the debt. I have a great credit score, and would like to make it better, but I don't consider it worth paying for. Perhaps what you are trying to say is correct, but only in certain situations?

Also, with the AnnualCreditReport, can I get my credit reports once every calendar year, or if I get them in December do I have to wait 12 months to get them again? Also, I'm looking at the las ttime I got an equifax report via the free annual credit report, and I don't see where my score is listed anywhere, it just has all the information that I believe is normally used to generate a score. Is there a free way to find your credit score?

iccky

What he's saying is that the longer you are making regular, on-time payments on a loan, the more evidence banks have that you can make regular on-time payments and the better your credit score will be. So while it might cost you now, it will be made up for when you take out a home mortagage or some other large loan where a few tenth of a percentage point in interest can mean thousands of dollars.

NoSoup

I would recommend this practice to anyone currently trying to improve their score or establish credit history - if already have a very high score as well as a decent or long amount of history, I would agree with you. However, it is much more economically viable to pay the interest on a secured $500 dollar loan over the course of a year and get anywhere from .25% - 3% better on a $30,000 car loan, or even moreso on a $250,000.00 mortgage. It certainly will cost you a few bucks in the short run, but once you make a large (financed) purchase, it has the potential to save you thousands - maybe even tens of thousands of dollars. More than worth the interest paid on the small loan.

Although I am not 100% certain, I believe it is only once per 12 months. I would recommend staggering your reports so that you have a good idea if something begins reporting incorrectly - a different companies report every four months should do it.

Unfortunately, there isn't really any free way to see your score. You could certainly apply for a loan (the loan officer would likely be happy to tell you where you stand) but when you do so it does ding your score a bit. The information is more useful to you by ensuring that everything is reporting accurately - knowing your score won't help you improve it. You can go directly to the credit reporting agencies directly and purchase a report with the scores on it, but they aren't necessarily all that inexpensive. However, using this method your score won't be damaged.

Precisely.

I would like to add, however, that it isn't just a mortgage that it can make a real difference on - mortgages are the most likely candidate, but vehicle loans, or really any loan out there for a significant amount, as well as insurance are all typically based on your score as well.

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NoSoup

Make no mistake, though - you are paying for it, it's just a question of when, and how much...

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Silverbrain

Fantastic read NoSoup, it makes quite a bit of sense to me. I shall certainly be leading friends to this post, thanks!

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NoSoup

Thanks Silverbrain - You're welcome to bring as many people to the TFP as you like

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Jonnypops

NoSoup,

This weekend I am looking in to opening my first credit card(s) in order to build my credit rating. When choosing a bank, what things should I look out for? Also, how many would you advise for me to open?

IsuGuy

I would like to add this point, as I was not sure about it myself.

You can check your own report as many times as you want and that will not hurt your score or even show up. Also any accounts you currently have open can also check your report monthy without hurting your credit.

The initial inquries by companies are what hurts your score. Also i believe you have 7 days to "shop around" where you can have companies check your score and only get dinged once. Say you are shoping for Mortg. rates as an example.

NoSoup

Sorry about the delay in getting back to you...

As you may find out, it is difficult to qualify for a decent credit card with no credit history. The easiest way to begin building credit is by getting a secured credit card - to get one, just go to a local bank or credit union and see if they offer them - most do. You will likely have to open an account and deposit $X - the collateral for a card. In return, you'll get a card with a credit limit of $X. After a period of time you'll likely be able to qualify for other cards without collateral, but this is probably the best way to start, with the exception of possibly a cosigner.

When choosing the bank, I would call around first. I would heed the advice in the original post as far as how high you bring your balance, but always pay the card off in full to avoid paying interest. Make sure that you get a card with no annual fee - other than that, simply pay attention to the interest rate and any other miscellaneous fees that may be associated with the card.

Since you are just beginning to build your credit, I would suggest getting two credit cards - preferably with two different banks/credit unions.

Again, I would avoid Capital One due to them not reporting the credit limit when they report the balance owed on the card...

Good luck, and if you have any more questions, please let me know! I'll do my best to answer in a bit more timely fashion


Be very careful...

This is true...

This is false.

Any credit inquiries that you authorize, even from current account holders, shows up as an inquiry on your bureau and will damage your score. The only inquries that don't are the ones that you pull yourself from a credit reporting agency (typically you have to pay for them) The free annual credit report that the government enacted, and broad based credit summaries purchased by credit companies - typically the source off all the junk mail you get when it says you are "preapproved."


This is also false.

You only have a brief period to shop around when searching for mortgages, and on occation vehicle or other collateralized loans, depending on the institution doing the lending. If you apply for several different credit cards within a short period of time, your score will be reduced accordingly.

Additionally, I believe the period is five days, although it may have recently changed.

The moral of the story is this - even if you are shopping around, don't shop around excessively. If you are interested in getting a ton of different quotes, simply purchase a copy of your credit report and bring it to potential lenders and ask them what you would qualify for providing that the copy they would pull is relatively the same.

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Jonnypops

Thank you very much Mr Soup! This has helped me a lot and I will start to trace down some credit cards.

Check your PMs

Supple Cow

This is invaluable advice. I think this is probably the most useful thread I've ever read and ever will read. Thank you for your generosity, NoSoup. Now I have a lot of questions...

I was under the impression that being an authorized user didn't give you any credit at all... in the past, I've been turned down for credit cards (I thought) because I didn't have any credit myself. How much can this help or hurt compared to having your own credit line? Say my mother (who has me as an authorized user) is too close to her limit - how does that compare on my credit score with myself having a line of credit that is charged too close to the limit? And does the comparison hold true the other way, namely for good behavior (under 50% of limit and timely payments) on her part versus mine?

Also, where do student loans rate in all of this? I have both federal and private loans. The federal ones are consolidated and I'm making regular on-time payments for that. I can't consolidate my private ones yet because I never finished my degree and I can't find anybody who will consolidate them. I'm in forbearance on those and unable to make even partial interest payments right now because of my meager income. What will this do to my credit score?

Does this mean 50% in each credit line or 50% of the total credit limit? I mean, does it matter if I max out my $2000 credit line (because of the 0% introductory APR) when I need to pay for classes in January and then only use my $3800 credit line for the spill over costs ($200-$300)? Is that different from spending $1000 from the $2000 credit line and $1300 on the $3800 credit line? (Side note: thank god for somebody on the TFP who can answer this question... I don't know anybody else who can.)

I wait with bated breath... many, many, many thanks in advance.

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NoSoup

You're most welcome. Bring em on


It actually depends on the company that the card is from. I would say that the majority of the cards will put you on as though you were actually just one of the account holders of the card. What that means is that it will affect your credit in exactly the same manner as if it were your own card. Whether it is a card that you are an authorized user on or it is your own card, having a card too close to the limit would negatively impact your score just the same - providing, of course, that the card company is reporting that you are an authorized user. The same goes for both "good" and "bad" behavior - it could certainly have a positive impact as well if there is a low balance and payments are made on time.

It is difficult to say where student loans fall into the mix. Different lenders weight them differently - especially if you still haven't been required to begin repayment. They do report to the credit reporting agencies, but I would probably have difficulty suggesting how much they affect your score, as I don't think I have ever run across anyone with no other debt other than student loans. However, when you do become delinquent on them, they do negatively impact your score like any other tradeline.


50% for each credit line - the percentage of total credit doesn't matter, unless, of course, you're over 50% on all of your tradelines or have an excessive number. For instance, say you have three credit cards, each with a $1,000.00 limit. For whatever reason, you need to charge $1,000.00 total.
The best course of action (providing the rate, payments, penalties ect are the same on each card) would be to charge $333.00 on each, keeping your balance to limit ratio as low as possible on each individual card. Overall, your total credit limit is still $3000 between the cards, but how you dispurse that $1000.00 will impact your score. Had the person in question charged it all to one card, their score would be relatively severely impacted for being maxed out on a credit card.



You're welcome. Let me know if you have any more questions

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Just in case you were wondering...

Supple Cow

Thank you so much! One more question while I'm in here... some of this still sounds like Russian to me because I don't have any experience with it...

Sometime in the next year, I might be shopping for a car.

Does this mean that every time I asked about financing options, they would run a credit report? And doing that too many times is a no-no?

__________________
"I've missed more than 9000 shots in my career. I've lost almost 300 games. Twenty-six times I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed."
(Michael Jordan)

Jonnypops

NoSoup, could you please check your private messages :X! Cheers

Supple Cow

Okay, WHOA new developments. When you have the time, Mr. NoSoup, I am truly indebted to you...

In my frenzy to obtain credit this last several weeks (any credit at all), I applied for a bazillion cards (most before seeing this thread) and got a bazillion noes. Apparently, a couple of them were not noes, they were just we-can't-tell-you-onlines. I didn't know this, and in my mail this week, I got two more credit cards. This leaves me with 4 cards (plus I am an authorized user on my mom's... making 5). I really just need two - the AMEX because of the 6-month 0% APR and the current necessity to keep a balance for a few months, and one other because the AMEX limit is very low and I want to have a higher balance in case of emergency. That's the background.

Remembering what you said about having excess credit cards that aren't in use, I called up to cancel one of the Visa cards today (I hadn't even activated it yet - just got it in the mail a few days ago), and the guy told me some interesting stuff and talked me into activating and keeping it for 3 months before cancelling. Now I want to know if he was full of crap so I can cancel it if I need to. He said that because I had just applied for the card (probably about two weeks ago), that my credit rating (I think he mentioned the snapshot the rating agencies take) would take a bigger hit if I cancelled it now than if I kept it with a low or zero balance for three months and THEN cancelled it. Is this true?

If so, will it also be true of my 4th credit card? I have only that last one which has yet to be activated because I haven't received it yet. I also applied for it only weeks ago (probably about 3-4 weeks through my bank), but I know I definitely don't need that one. Should I call and cancel it now or should I wait to get it, activate it and then wait 3 months to cancel it?

(I notice that a lot of people are PMing with presumably more sensitive information. I know that I'm being kind of obnoxious with my questions, but I ask so many partly because I figure others can benefit from the answers as well. So thanks again, in advance!)

__________________
"I've missed more than 9000 shots in my career. I've lost almost 300 games. Twenty-six times I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed."
(Michael Jordan)

NoSoup

I wish there as a black and white answer, but....

It depends. If the dealer works with institutions where the dealer is set up to pull a credit report and forward that report to each lender to see what you qualify for, since they aren't pulling a new report each time, it doesn't matter. If the dealer simply forwards your application to several different lenders and they each pull credit reports, I would try and limit the number of institutions to a maximum of three. I have seen dealers forward credit applications to 20+ lenders, dropping the FICO score by well over 100 points in a day. If you're just looking at different options with a specific lender that already has your bureau, you should be fine as well. For example, if the lender pulls a credit report and you check into a 36 month term, a 48 month term, and a 60 month term, generally they will be using the same report to calculate what you'd qualify for...

Hope this helps

Done and Done

Not a problem at all - that's what I'm here for


I would agree that two (and the authorized user) is enough to establish credit history. Remember to use them both.

However - a word of caution. Depending on the limit of the AmEx card and the balance you are going to carry, it may be better to split the balance between the two cards - be sure you are following the no more than 50% of the limit rule. Even if you end up paying a bit of interest, a few buck now for potentially savings tens of thousands on a mortgage is worth it...



He took you for a ride. Your credit was damaged by the intially look at the application, but cancelling it so quickly vs cancelling it after three months will make very little (if any) difference. Remember, his job is to get you to keep the card open and active...

If you're going to cancel it, go ahead and cancel it immediately - three months will not make any noticable difference.


You're definately not being obnoxious with your questions - some people just prefer a bit more private council. I appreciate you being so candid - Hopefully your sitution will help answer some questions that others may have.

You're very welcome - if you have any more questions, don't hesitate

__________________
I have an aura of reliability and good judgement.

Just in case you were wondering...

cadre

This is a great thread, I learned alot so far. So do I have the credit card thing right? That being that the secured credit cards basically use an account with a set amount of money as collateral but you can't use the money in the account. Then unsecured credit cards don't have collateral? Is it easier to get approved for a secured credit line and if so, would you suggest going through the same bank that I already do my banking with?

Also, do things like cell phone payments affect your credit score? If so, is it a big deal if I pay mine two or three days after it's posted or does it matter?

Thanks for all your help!

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