Logic behind credit scores

[$ hoarder]

Credit Karma says my credit score is 759. But it seems as if the tips for improving it are to take out more credit which seems odd. It also suggested I keep accounts open longer (that makes sense, I'm 30).

Can someone explain the logic behind needing a larger amount of credit open to improve your credit score? My husband and I have a 20k credit limit and on our shared card and pay it off every month. We have a good foundation: we have a solid EF (long time Suze follower), a good nest egg for our age, started saving for college (one baby), etc. Naturally I want the best and highest credit score but it seems silly to just open another account that I'm not going to use.

[eric448503]

Anything over a 750 will be good enough to get you the lowest rate anywhere. My wife is 33 and has an 817, but she also has more revolving credit open than you, we use a little bit of each and pay off every month. It just shows your ability to manage it is all.

[disneysteve]

Do not take on more debt or open new lines of credit just to boost your score. First off, that's stupid. Second, your score is already excellent.

One thing I would make sure of is that you are never charging more than 30% of the credit line on your credit cards. In your case, that means a max of 6K/month that you pay in full on time every month.

The one thing that is probably making your score lower than pristine is your youth and relatively short credit history but only time can fix that.

[Kundan Lal Rana]

Can someone explain the logic behind needing a larger amount of credit open to improve your credit score?

It's quite good score you have! It's a fact that having a larger amount of credit open improves your credit score. The credit score is calculated from the positives and negative information about your credit report which includes payment history(accounts around 35%), late payments, amount of credit(accounts around 30%). etc.

[Eagle]

@ $ hoarder

Pretty much anything over 700 is considered a good credit score. Note that the "credit score" that is available for free at Credit Karma is a Vantage score, not a FICO score, so don't rely on it.

Most companies (say 80-90%) in the U.S.A. go by your FICO credit score. FICO credit scores range between 300 and 850. Per the FICO website, the five main factors of your credit score are: 35% payment history, 30% amounts owed, 15% length of credit history, 10% new credit, 10% types of credit.

You can get your actual FICO credit score here: www.myfico.com

This is not free. You have to pay for this. It's normally $20, but they often have 20% and 25% sales, so if you need to pull your actual FICO score, just wait for a sale. I think it’s probably a good investment to get your actual FICO score once a year.

You can also check out ways to get your free credit report here.

[Randomsaver]

I think good credit score is only used for approving debts and not obtaining a low rate.

Mine was 720 but Wells Fargo still stamped me with a 6.9% interest on a car loan last month. I really don't know the basis of that especially since I also used to have my mortage with them and they knew I paid on time always. I was expecting somewhere below 5%.

I wish there's a standard Score-Rate Band table in industry. For example, a score of 701-750 maps to a rate of 3.51%-4.00%.

That way, consumers are incentivized to really improve on credit scores.

[GrimJack]

CreditKarma makes its money by pointing you to goods or services that par for the referral. My CK score was like yours until I got my CC debt down to next to nothing*. If they are suggesting that you increase your available credit, it might mean that you need to get your overall debt below 50%.


*(it would have been nothing but Golden Goddess the cat cost me about $4k (she was a rescue kitty that REALLY needed work) - I have since upped her entertainment value to $10.00 per day to help her get out of debt)