Credit Card Article - Page 2

poundwise · #21 (**permalink**) 10-19-2006, 10:16 PM

Well, I said "in closing" and "ultimately" but I wanted to add one more thing.

I don't claim special knowledge on this subject. I don't think anybody honestly knows all the inner-workings of a FICO score and how they work out. Fair Isaac keeps that under wraps to protect their system. In fact, I believe there is purposefully little information given out for this reason and also so that people don't easily find subjective ways to manipulate the system.

If I am incorrect, in part or even wholly, on any given point, then that's fine. I can accept being corrected. I'd like to know more about things myself, though I expect I will close what I want to as I pay my debt and manage my money, working on more of a common sense model than a following FICO one. In any case, I know that a substantial portion of what I have written here is accurate and/or/at least worthy of consideration. I hope others find it helpful.

poundwise · #22 (**permalink**) 10-19-2006, 10:19 PM

Well, I said "in closing" and "ultimately" but I wanted to add one more thing.

I don't claim special knowledge on this subject. I don't think anybody honestly knows all the inner-workings of a FICO score and how they work out. Fair Isaac keeps that under wraps to protect their system. In fact, I believe there is purposefully little information given out for this reason and also so that people don't easily find subjective ways to manipulate the system.

If I am incorrect, in part or even wholly, on any given point, then that's fine. I can accept being corrected. I'd like to know more about things myself, though I expect I will close what I want to as I pay my debt and manage my money, working on more of a common sense model than a following FICO one. In any case, I know that a substantial portion of what I have written here is accurate and/or/at least worthy of consideration. I hope others find it helpful.

poundwise · #23 (**permalink**) 10-19-2006, 10:27 PM

Quote:

Originally Posted by hrbatyfan

Quote:

Originally Posted by poundwise

Another thing to consider, in regards to having paid-off but open credit cards, is that the 'Amounts Owed' portion of your FICO score includes a component called 'Proportion of credit lines used,' which is described as the 'proportion of balances to total credit limits on certain types of revolving accounts.'

If you think getting that porportion, or ratio, down as low as possible is best, then you are mistaken. Just as having 90% utilization of your credit is a bad thing, having only 10% utilization is also bad, in terms of the effect on your credit score.

At some point, holding open credit lines for the purpose of helping your proportion/ratio is counter-productive. I have seen some commentary as to what level is best according to FICO, but I have never seen FICO detail exactly what that is. I suppose it may vary depending on other factors.

I was not aware of this, thanks for posting.

This is one of those, I may be wrong, things. That is, I have 'heard' that a person can have a too low of a ratio (as well as too low of balances) just the same a person can have too high of ratio or total balances. However, I don't know that I can substantiate it.

Now, conversely, you can Google and find lots of people repeating (in regards to utilization), "Lower is better" but I've yet to see that substantiated either.

Ima saver · #24 (**permalink**) 10-20-2006, 08:54 AM

The last time I got my report and my score, it mentioned that lack of a mortgage lowered my score. Since my score is 817, I am not going to run out and get a mortgage on my house!

poundwise · #25 (**permalink**) 10-20-2006, 09:22 AM

Quote:

Originally Posted by Ima saver

The last time I got my report and my score, it mentioned that lack of a mortgage lowered my score. Since my score is 817, I am not going to run out and get a mortgage on my house!

Absolutely. Wow, what a great score. And, I bet you achieved it without playing the games people talk about in regards to account handling. Am I right?

Regardless, the fact that a person has worked, saved, paid their bills, and eventually purchased their home outright LOWERS your score is precisely the reason I am emphatic about not being overly concerned and dedicating too much energy to credit score concerns.

JoyJoy · #26 (**permalink**) 10-20-2006, 12:10 PM

Thanks for the article, Sweeps.

In the article under "Get that free loan" - Ms. Stern states if one already has an home equity loan of credit to get a card and transfer as much as you can to the card. I assume the utilization percentage of the cc is not a factor here?

MonkeyMama · #27 (**permalink**) 10-20-2006, 02:29 PM

Quote:

Originally Posted by poundwise

Absolutely. Wow, what a great score. And, I bet you achieved it without playing the games people talk about in regards to account handling. Am I right?

Regardless, the fact that a person has worked, saved, paid their bills, and eventually purchased their home outright LOWERS your score is precisely the reason I am emphatic about not being overly concerned and dedicating too much energy to credit score concerns.

AGREED.

I think there is a big difference between raising a bad credit score and maintaining a good score.

I have done everything wrong and have a credit score in the 800s. We have credit cards that are paid off monthly, and a mortgage - that is the only debt we ever had. I go round and round with people on this all the time - you do not HAVE TO carry a lot of debt or get an auto loan, etc., etc. to get a good score. & yeah I closed 3 credit cards in the last few years. I don't think it really mattered. When a better card comes out I open a new one and close the old one. It might of dropped my score a few points but my good track record far ouweighs that. When you don't have as much credit you are less likely to screw it up, eh?

IMA - that is inspiring. I worry when we pay off our mortgage, which we intend to do in our 40s, that maybe we will have to pay closer attention to our score. I always assumed since we did everything else wrong score-wise that our mortgage saved us. Though we didn't really have a problem getting a mortgage either - I just have no idea what our score was back them - I didn't know about all of this FICO stuff.

I think overall it is good to know what affects your score and know what your score is. I don't want to overshadow the importance of that. But unless you are trying to get your score up bit by bit as much as you can, don't let it rule your life. You CAN live a cash lifestyle and come away with a pretty decent score.

#28 (**permalink**) 10-21-2006, 09:10 AM

I feel like this should be my signature but "I agree with MonkeyMama." (Plus I just like saying "MonkeyMama"

)

Everytime we get into these discussions, I simply stick to my own factual yet nonetheless anecdotal evidence rather than trying to decipher Fair Isaac's practices....

Multiple cards (3), some utilization balance (around 35% I think it was), about 17000 in available credit give or take, no car loan, mortgage, or anything else, score was floating somewhere between 750 and 780 or so.

Fast forward to the reboot, no balance, closed 2 of the three, still no car or home loan, score today hangs around 815 - 820 after more than a year of that.

My only conclusion being that my score increased "after" I stopped carrying what was by all accounts a very manageable balance. I've never missed a payment or been late, ever. That I'm sure has more to do with it than anything else.