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Best Ways To Build Credit?

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  • jiM_Mi
    replied
    Originally posted by disneysteve View Post

    That's true, that nobody really knows the algorithm. Everything I've ever read has supported that carrying a balance isn't beneficial. In fact, I've often seen it suggested that you pay your bill right before the billing date so that you have no balance on the day they report your account info.

    I guess FICO wants to keep it a secret to prevent people from figuring out ways to game the system.
    The challenge is not all cards are on same billing cycle, and not all bureaus pull info the same day

    so if a person has 3 cards, due on the 10th, 20th and 30th of each month
    and the cards themselves report on the 5th, 15th and 25th, the balances get reported as well as the last payment.

    If the balance was reported on the 15th but bill was due on the 20th, there is a gap for the current month- the previous months will be reported correctly, but the current month may not be correct. This is why evidence over time is more important than what was reported this month.

    This is clear if you pull the report from the bureau
    It won't be clear from a site like credit karma

    Leave a comment:


  • amastewa93
    replied
    Originally posted by disneysteve View Post

    It would be nice to be able to have things included that aren't traditionally counted.
    I've always been annoyed that rent payments aren't reported to credit bureaus. That would have had a great impact on my score when I was in college and still getting my finances together.

    Leave a comment:


  • scfr
    replied
    Originally posted by jiM_Mi View Post

    I think the guidelines to build credit would be similar (see previous post of mine).
    Not necessarily. When my DH immigrated to the US, he had zero established financial history in the US (no verifiable income or credit history because it was all overseas). He couldn't even get a gas station card. I added him to one of my accounts as a joint account holder to help him start building credit history.

    Leave a comment:


  • disneysteve
    replied
    Originally posted by QuarterMillionMan View Post
    According to Experian's website, "People across America are seeing instant boosts to their credit score." #BoostAmerica. Sounds too good to be true.
    https://www.experian.com/lp/boost-america.html
    That's interesting. It would be nice to be able to have things included that aren't traditionally counted.

    Leave a comment:


  • disneysteve
    replied
    Originally posted by jiM_Mi View Post

    clearly the best personal decision is pay off the balance each month. Clearly good behavior is rewarded in the credit score. But I am always weary of people saying they know how the score is calculated. We know the inputs, we don't know the specific formula.
    That's true, that nobody really knows the algorithm. Everything I've ever read has supported that carrying a balance isn't beneficial. In fact, I've often seen it suggested that you pay your bill right before the billing date so that you have no balance on the day they report your account info.

    I guess FICO wants to keep it a secret to prevent people from figuring out ways to game the system.

    Leave a comment:


  • jiM_Mi
    replied
    Originally posted by disneysteve View Post

    Yep. People can't seem to understand that the credit bureaus don't care at all if you carry a balance or not. They don't even track that information. They strictly look at your payment history and your utilization ratio. So your CC company reports on the billing date what your balance is and if you are current on payments. It doesn't matter if you pay the bill in full the next day or not.
    Do not use credit karma as the gauge for what is reported. I pulled my transunion report yesterday, and the report has the monthly balance and total monthly payment I made each month. While I don't know if the balance is used to calculate the score, there is a portion of score as to what % of available credit is used- is it better for that ratio to be lower (with zero being best) or is a higher score given for a non zero low value?

    There is a difference as to what is on the report
    and what is used to calculate the score
    The balance is on the report (that is very obvious) and the report has a month by month tracking of what the balance was for each account.

    **edit to add**
    clearly the best personal decision is pay off the balance each month. Clearly good behavior is rewarded in the credit score. But I am always weary of people saying they know how the score is calculated. We know the inputs, we don't know the specific formula.

    Leave a comment:


  • QuarterMillionMan
    replied
    According to Experian's website, "People across America are seeing instant boosts to their credit score." #BoostAmerica. Sounds too good to be true.
    https://www.experian.com/lp/boost-america.html

    Leave a comment:


  • mumof2
    replied
    I think it depends on the country...my hubby and I have always had good credit...nothing is ever paid late...we dont have loans etc...but a couple months ago his redit went from the high 700s to low 400s and no-one can tell us why...there is nothing on his report...its just gone down...we are still trying to get information as to why this happened...still no answers...so we will see...so no they arent really accurate and can change at anytime for no reason

    Leave a comment:


  • disneysteve
    replied
    Originally posted by cypher1 View Post
    My favorite debate with friends is when they tell me its better to keep a small balance each month. I always reply with "I must be doing something wrong paying it in full each month then, as I only have a score of 800."
    Yep. People can't seem to understand that the credit bureaus don't care at all if you carry a balance or not. They don't even track that information. They strictly look at your payment history and your utilization ratio. So your CC company reports on the billing date what your balance is and if you are current on payments. It doesn't matter if you pay the bill in full the next day or not.

    Leave a comment:


  • cypher1
    replied
    Originally posted by bjl584 View Post
    My credit is excellent in spite of the fact that I've never made it my primary goal to have good credit.
    I think that having a good credit score as your primary financial goal is misguided.
    If you have good financial habits, don't pay your bills late, and don't have too much leverage, then your credit score is naturally going to rise and be healthy.
    Same boat. My rule of thumb was to always pay CC in full at the end of each month. It kills me to pay interest. I have four cards (two main ones for use) and my oldest has got to be about 19 years old.

    My favorite debate with friends is when they tell me its better to keep a small balance each month. I always reply with "I must be doing something wrong paying it in full each month then, as I only have a score of 800."

    Leave a comment:


  • jiM_Mi
    replied
    Originally posted by disneysteve View Post

    This is a great point and worth highlighting. Many credit reports contain errors so sometimes your score can be bad because of a mistake. Check your report and if you find something that isn't right or doesn't belong to you, follow the steps to contest it and get it removed.
    There are errors which can be corrected, and errors which "appear" impossible to correct
    there are errors which NEED to be corrected, and errors which don't add much value

    Here is a story, I have told it before
    Married first time in 2002, ex wife #1 (ew1) was added to my longest credit card/highest limit card. We used the card for gas groceries and small things. The money was always in budget to pay it off.
    she was paying minimum balance on the card (she did the checkbook). She told me whenever I asked the card was paid off each month. I never saw the bill.
    EW1 had changed the address on the account to her mother's apartment (a new address...)

    I found the Bill at the exact wrong time in front of a few too many people in 2008.
    I paid the balance the next day (it was about $25,000)
    I then took steps to control more- likely ineffective steps, but the address was now on my credit report
    This happened one more time, where she did not pay off the balance each month, and I took more ineffective steps to control.

    Divorced EW1 in 2012.
    Many bills were forwarded to her address which were joint accounts, so banks now have a second address for me I never lived at

    In 2015 There was an error in my taxes. IRS withheld the return, and I did not receive the return until April 2019. I had most i's dotted and t's crossed at end of 2018. I had to answer some security questions with IRS, and I had to admit I lived at both addresses above to pass the "security test" of the IRS.
    First, how does the IRS get to pull the info from the credit report? I NEVER filed taxes from either address
    Second, if you go to credit bureaus to fix this, they say they get the info from the banks, it is not their info
    Third, the banks will not change their info
    fourth- because many banks had this address for me (her car, joint loan; first mortgage, second mortgage, one credit card since closed) the information according to credit bureau algorithms say I lived there (4 bills at one address means I must have lived there).

    How important is this? Probably important, but not critical. Not worth my time to correct at this point. It won't change my score, but the info at the credit bureaus is not accurate to the life I have lived.
    Last edited by jiM_Mi; 07-30-2019, 06:02 PM.

    Leave a comment:


  • jiM_Mi
    replied
    Originally posted by scfr View Post
    Are you asking about people who are young or new to the US and have no established credit record? Or people who have a poor credit rating and are trying to improve it?
    I think the guidelines to build credit would be similar (see previous post of mine).

    Leave a comment:


  • jiM_Mi
    replied
    Originally posted by james.hendrickson View Post
    Okay, I know this is a more basic question...but the forums gets a lot of lurkers, so I'm asking partly for their benefit and partly because I just did a review of ways to improve ones credit score for an article I'm working on.

    What do you guys find has been the best way to build good credit?
    I am in the process of rebuilding credit after a divorce in 2012 with several delinquent payments and a house short sale, In 2017 my credit score was about 450 before I started the rebuild. I am between 550 and 650 now as not every credit bureau is showing same information.

    1) If you have delinquent debt, remove this from credit report. Likely paying it off or declaring bankruptcy are the two best choices.
    2) Open new credit accounts (for example with a 450 score, no account was open, once I opened new accounts, the score went up)- more on this below.
    3) Pay off balances on the credit accounts each month
    4) monitor the credit reports. Examples- I have a new gas card (see item #2) but it is not showing up on credit karma, but it did show up on my transunion report when I checked their website.
    5) Have a 7 year plan- most closed accounts drop off credit report after 7 years- I need to verify this is true (Nov 2012 and Dec 2013 are dates of some closed accounts on my report), so I will know more about this at end of year. Some bureaus are showing these as open accounts, some show as closed (credit karma shows as closed).

    Here is the 7 year plan I started in 2018
    1) remove delinquent accounts by paying them off- this includes collection accounts and anything reported as delinquent.
    2) Open new credit accounts wherever possible (I have some logic to this, in general more are better). The score drops as I open accounts and my avg length of credit is between 11-15 months. In 4 years this will help, short term it drops.
    3) The goal is 4 open credit cards with 4 years of history with me with no annual fee.
    3a) it is OK to pay an annual fee for a few years when rebuilding as its better to have an open account than no account at all
    3b) once offers come in for no annual fee cards, take that offer, but remember don't close the annual fee accounts until you've had the other card open for more than 18 months.
    4) To be able to qualify for a mortgage, the credit tiers are 650-680, 680-720 and 720+. Basically any score above 720 is wasted (the bank said they had no better rate for an 850 credit score than a 720 credit score).
    5) There are amazon like services which sell goods and give you credit, and report to credit bureaus, these are your friend- no annual fee, $0 balance on report, easy to open for 4 years while building score (fingerhut is one I have used)


    Leave a comment:


  • disneysteve
    replied
    Originally posted by Smallsteps View Post
    I would always check your record with the yearly free report to make sure items are correct on it.
    This is a great point and worth highlighting. Many credit reports contain errors so sometimes your score can be bad because of a mistake. Check your report and if you find something that isn't right or doesn't belong to you, follow the steps to contest it and get it removed.

    Leave a comment:


  • Petunia 100
    replied
    Originally posted by bjl584 View Post
    My credit is excellent in spite of the fact that I've never made it my primary goal to have good credit.
    I think that having a good credit score as your primary financial goal is misguided.
    If you have good financial habits, don't pay your bills late, and don't have too much leverage, then your credit score is naturally going to rise and be healthy.
    I think that is exactly right. Practice good financial management and a high credit score follows automatically.

    Leave a comment:

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