How does a person get a good credit score?

[Paulie]

Your credit score is basically a measure of two things...
1) Your ability and history of paying debt back.
2) Your willingness to take on debt.

A person who makes $150k a year, has no credit card debt..paid off his/her vehicle early and makes double payments on their home will actually have a lower rating than someone who makes $100k, has $5000 in CC debt and only pays minimums, gets a new car every few years and never pays early or more than payment - and never pays early on mortgage - in fact has a 2nd mortgage. But awlays-always makes payments.

The 2nd person is more desirable by creditors because they use their services more and regulary recharge their debts - thus always paying higher interests.

Almost all of what you said is totally false. Those 2 situations you mention don't take into account how much available revolving credit each person has. You can't just say someone has $5k in credit card debt and that automatically should make their score lower.. If they have, say, $30k in available credit then that means their utilization rate is only 17%, which FICO sees as favorable.

You were wrong about the 2 factors too. Average age of accounts is one of the factors in the algorithm. The longer you've had credit, the more favorable it is. In some situations that can even outweigh a potential bad stretch of payment history you may have had, in comparison to someone else who's had immaculate credit but only for a couple years of total history.

Also, paying your card balance off every month as opposed to carrying debt and paying interest on it does not hurt you. The only factor in credit card debt is what your utilization rate is. No one knows for sure what the actual percentage is that it needs to be at or under, but it's pretty widely accepted that 20% or less utilization is healthy for your credit score.

I don't understand why people don't know this considering how important it is. Any credit help website will tell you all this. I gained 200 points in my credit score in exactly a year from this month taking into account all of these factors. If you actually know what REALLY affects your score it's pretty easy to make it increase.

 

[Paulie]

I am trying to figure out why my credit score is high when I am $3500 in debt, close to be over the limit on 2 of the credit cards. SO just can't figure how my credit score is over 700 when I still have a high balance I owe. I was recently approved for the apartment I applied for the next day.

What all determines a good credit score?

They look at the percent of available credit you are using
Negative credit reports
Number of loans you have had
Any bankruptcies

This guy knows.

 

[Paulie]

Once you actually understand what factors are involved in your credit score it actually makes perfect sense why it's scored like that. It's actually not unfair at all. The only thing about it that's unfair is the fact that there is virtually no competition with FICO, and in fact we have something like 10 or more different scores depending on what lender is using what score. There's older versions of FICO that mortgage companies use rather than the newest version, and those scores tend to be lower than your newest FICO score because of the different way the scores were weighted in that version.

But besides that, overall the way scores are calculated is a pretty fair way to weigh you as a potential credit risk once you understand it.

 

[iamwhatiseem]

Your credit score is basically a measure of two things...
1) Your ability and history of paying debt back.
2) Your willingness to take on debt.

A person who makes $150k a year, has no credit card debt..paid off his/her vehicle early and makes double payments on their home will actually have a lower rating than someone who makes $100k, has $5000 in CC debt and only pays minimums, gets a new car every few years and never pays early or more than payment - and never pays early on mortgage - in fact has a 2nd mortgage. But awlays-always makes payments.

The 2nd person is more desirable by creditors because they use their services more and regulary recharge their debts - thus always paying higher interests.

Almost all of what you said is totally false. Those 2 situations you mention don't take into account how much available revolving credit each person has. You can't just say someone has $5k in credit card debt and that automatically should make their score lower.. If they have, say, $30k in available credit then that means their utilization rate is only 17%, which FICO sees as favorable.

You were wrong about the 2 factors too. Average age of accounts is one of the factors in the algorithm. The longer you've had credit, the more favorable it is. In some situations that can even outweigh a potential bad stretch of payment history you may have had, in comparison to someone else who's had immaculate credit but only for a couple years of total history.

Also, paying your card balance off every month as opposed to carrying debt and paying interest on it does not hurt you. The only factor in credit card debt is what your utilization rate is. No one knows for sure what the actual percentage is that it needs to be at or under, but it's pretty widely accepted that 20% or less utilization is healthy for your credit score.

I don't understand why people don't know this considering how important it is. Any credit help website will tell you all this. I gained 200 points in my credit score in exactly a year from this month taking into account all of these factors. If you actually know what REALLY affects your score it's pretty easy to make it increase.

Pretty funny, you say I am wrong...but then go on with an explanation that agrees.

 

[Paulie]

Your credit score is basically a measure of two things...
1) Your ability and history of paying debt back.
2) Your willingness to take on debt.

A person who makes $150k a year, has no credit card debt..paid off his/her vehicle early and makes double payments on their home will actually have a lower rating than someone who makes $100k, has $5000 in CC debt and only pays minimums, gets a new car every few years and never pays early or more than payment - and never pays early on mortgage - in fact has a 2nd mortgage. But awlays-always makes payments.

The 2nd person is more desirable by creditors because they use their services more and regulary recharge their debts - thus always paying higher interests.

Almost all of what you said is totally false. Those 2 situations you mention don't take into account how much available revolving credit each person has. You can't just say someone has $5k in credit card debt and that automatically should make their score lower.. If they have, say, $30k in available credit then that means their utilization rate is only 17%, which FICO sees as favorable.

You were wrong about the 2 factors too. Average age of accounts is one of the factors in the algorithm. The longer you've had credit, the more favorable it is. In some situations that can even outweigh a potential bad stretch of payment history you may have had, in comparison to someone else who's had immaculate credit but only for a couple years of total history.

Also, paying your card balance off every month as opposed to carrying debt and paying interest on it does not hurt you. The only factor in credit card debt is what your utilization rate is. No one knows for sure what the actual percentage is that it needs to be at or under, but it's pretty widely accepted that 20% or less utilization is healthy for your credit score.

I don't understand why people don't know this considering how important it is. Any credit help website will tell you all this. I gained 200 points in my credit score in exactly a year from this month taking into account all of these factors. If you actually know what REALLY affects your score it's pretty easy to make it increase.

Pretty funny, you say I am wrong...but then go on with an explanation that agrees.

How does that agree?

 

[Paulie]

Don't take my word for it. Look it up on FICO's website. Or any other credit website.

 

[iamwhatiseem]

How does that agree?

Simple.
fbj thought that owing someone money makes your credit score low...what does that tell you? It should tell you his depth of financial knowledge is quite shallow. Therefore giving him a 14 point, 5 paragraph dissertation will do him no good. He needs a simple answer...simple and broad.
I said...
"Your credit score is basically a measure of two things...
1) Your ability and history of paying debt back.
2) Your willingness to take on debt."
#1 is as simple and broad as it gets...your ability and history of paying debt back...that would include income, history of paying debt, debt-income ratio etc.
#2 - equally simple, and when combined with #1...covers it pretty well when the person you are talking to will likely only ready the first 15 words.

 

[iamwhatiseem]

I have not had any credit cards ever since debit cards came out. I find absolutely no reason to have one/any.
As you get older - unless bad luck has befallen you, you get more financially secure and you carry a certain amount of liquid assets for emergencies and when you want something - you save for it...as well as you have learned over the years that their are better uses for your garage than storing all those "gotta have it's" you forgot about a week after you bought it.

You're letting an opportunity go to waste. You can get a cash back credit card and use it the same way you would make purchases with your debit card, but pay the balance in full before the statement rolls over, and they will actually be paying you to have their card in your wallet. The only reason to be against credit cards is because you don't trust yourself.

I am not so tight, or need the money so bad that I care about the amazing few dollars a month or so I would get cash back. No thanks.

 

[Paulie]

How does that agree?

Simple.
fbj thought that owing someone money makes your credit score low...what does that tell you? It should tell you his depth of financial knowledge is quite shallow. Therefore giving him a 14 point, 5 paragraph dissertation will do him no good. He needs a simple answer...simple and broad.
I said...
"Your credit score is basically a measure of two things...
1) Your ability and history of paying debt back.
2) Your willingness to take on debt."
#1 is as simple and broad as it gets...your ability and history of paying debt back...that would include income, history of paying debt, debt-income ratio etc.
#2 - equally simple, and when combined with #1...covers it pretty well when the person you are talking to will likely only ready the first 15 words.

I get your point but willingness to take on debt has nothing to do with your score. Let's make it equally as simple, but give him the right info:

- Debt payment history
- Average age of total credit accounts
- Rate of utilization of available revolving credit (credit cards, other lines of credit such as home equity LOC,etc)

Those are the factors that the scoring algorithm uses

 

[Asclepias]

I am trying to figure out why my credit score is high when I am $3500 in debt, close to be over the limit on 2 of the credit cards. SO just can't figure how my credit score is over 700 when I still have a high balance I owe. I was recently approved for the apartment I applied for the next day.

What all determines a good credit score?

Paying your creditors on time mostly and using your credit wisely.