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Old 10-18-2017, 10:12 AM   #1 (permalink)
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The importance of a good credit score

A good credit score is more important than most people realize. We all know, or at least show know that a good credit score allows you access to lower interest rates, better credit cards, etc.

But a good credit score is freedom to change your life. You could be someone with a felony record and because of that not be accepted at certain jobs. Yet with a good credit score that same person could walk into a bank, get a business loan and start a thriving business.

Having a good credit score is easy, but takes time if you went off the tracks in your younger days or in some harder times when life took over. Despite that, you can get back to a high score.

How is your score calculated?
  • 35% of your score is based on your payment history
  • 30% is based on current debts
  • 15% is determined by credit history
  • 10% is allotted to new credit applications
  • 10% is about types of current credit

Payment History: Paying on time. Delays are nicks to your score. They recently recalculated the formula so the nick isn't as big, but is still a hit none-the-less. A delayed payment can take 4 years to fall off your score.

Avoid by online bill payments!

Current Debts: Your debt to credit ratio. Anything under 30% is good, while under 10% is ideal. Example: You have a credit card limit of $10,000 - so keep it under $3000

Of course it helps to just not run up the debt first right? Save first!

Credit History: How long you've had your oldest credit card. Sure you might have an old card you don't use, but don't cancel it. Having credit history that goes back over a decade is good news to your credit score.

New Credit Applications: Applying for new cards, having credit checks when buying a car, applying for a new oil company to deliver oil/propane, etc. Keep it under 3 over two years to stay in the excellent zone.

Types of current credit: Having a mix of credit products, such as a mortgage, a car loan, a home equity loan, and one or two credit cards is considered healthier than having multiple credit cards.



How do I check my score?

Thankfully a lot of credit cards now give you a peek at your score when you want. While it's just a good guess on most of them, it's a darn close.

CapitalOne credit cards have this option - I have one of those cards and like their service.

I believe Credit Karma does this also - though I have never used it myself so can't speak for it.

You can get a free credit report once a year on: https://www.annualcreditreport.com

as seen and linked by https://www.consumer.ftc.gov/article...credit-reports if you want to not take my word for it.
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Old 10-18-2017, 12:01 PM   #2 (permalink)
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In NJ, and I am sure other states, you can get 1 free credit report a year, from each agency. Transunion, Equifax and Experian. So spread them out. They should be the same. Always good to know what is on your record.
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Old 10-18-2017, 12:06 PM   #3 (permalink)
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Important note.. anual credit report is just a report ... no score.

Also i can vouch for credit karma. They give you equifax and transunion score for free. Every month. Though they do like to pump theyre affiliated offers. But they are not in your face about it.

Comfortably sittin at a score of 750 now. With 9k of cc debt, 210 house mortg, 35k car loan. Bout to buy a second house after payin off the CC'S.

Credit is imporntant to the american way of life. Tho completly useless if you live within your means. If you listen to dave ramesy youll never need credit. But thats a hole other topic.
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Old 10-18-2017, 12:11 PM   #4 (permalink)
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New Credit Applications: Applying for new cards, having credit checks when buying a car, applying for a new oil company to deliver oil/propane, etc. Keep it under 3 over two years to stay in the excellent zone.
This is probably the hardest to understand. I was told that not all checks actually go against your credit report, they check the consumer report, and don't ding the credit report... cause that makes sense, right?

Basically it means if you are applying for a car lease, the car company wants to check your history of repayment, not to open new credit.

A new job wants to check to see if you are terrible with money, how many times you have defaulted or went bankrupt.

A Consumer report is frequently checked, which is tailored to the specific ask, and your "credit" report isn't checked or dinged unless opening a credit line.

So, don't be afraid to lease a new car, start a new job, apply for a mortgage, and apply for a business loan, all at once. When shopping for a new house mortgage you will have multiple checks, especially if you are a good shopper.
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Old 10-18-2017, 12:48 PM   #5 (permalink)
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Sitting at about 807 as of last month when I checked.

Some credit cards and money management services (I think Mint and Capital One both it) will keep you up to date on the score periodically.
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Old 10-19-2017, 12:04 AM   #6 (permalink)
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Re-Fi'd the dump a few years ago. Got an 816. Mortgage writer doo-dooed himself and said he'd never seen one that high. Asked me how I did it.

Bought the wife an anniversary band last year. The jewelry store offered me their credit card, I accepted. He went out back and ran my numbers, came back with a 5hit-eating smile and was pleased or offer me up to a $20K credit limit.

My advice is exactly the same as Carter's. Don't live beyond your means should be added to the list.
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Old 10-19-2017, 06:41 AM   #7 (permalink)
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Originally Posted by seajay View Post
This is probably the hardest to understand. I was told that not all checks actually go against your credit report, they check the consumer report, and don't ding the credit report... cause that makes sense, right?

Basically it means if you are applying for a car lease, the car company wants to check your history of repayment, not to open new credit.

A new job wants to check to see if you are terrible with money, how many times you have defaulted or went bankrupt.

A Consumer report is frequently checked, which is tailored to the specific ask, and your "credit" report isn't checked or dinged unless opening a credit line.

So, don't be afraid to lease a new car, start a new job, apply for a mortgage, and apply for a business loan, all at once. When shopping for a new house mortgage you will have multiple checks, especially if you are a good shopper.

The easiest way to figure out if it will hurt your credit or not is to ask if it is a "hard" or "soft" credit inquiry. Soft inquiries will not count against your score. Hard inquires will always count against the "new credit application."

Also, both Discover and American express offer a free credit score. I haven't been able to figure out which bureau (or formula) they come from. Last time I checked, there were over 12 credit score formulas used by the 3 bureaus. While they are all slightly different, the score shouldn't change much more than 10-20 points between them.
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Old 10-19-2017, 08:42 AM   #8 (permalink)
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I offer as an alternate plan to "credit".....

There are likely two things in your life that you will (rarely) be able to afford to pay for. A car, and your house. In the start of your financial life, get a secured card. Yup, secured. Pay all your bills and grocery through it for six months. The second you get home, go online and pay/refresh the balance. That will build enough credit to get a used car. Do so. (cancel and destroy that card) Make all your payments on time, even early. Do that for about a year and you will be able to get a house loan, particularly with money down, and (of course) a job with the right income to rent ratio.

After that. Pay cash for every single thing you own and do. If you can't afford it, don't do it. Never, ever own a credit card. Pay all your utility bills, etc on time, every time. You will not only have excellent credit, but your debt ratio stays low and most important.
YOU LIVE WITHIN YOUR MEANS.

That last part is what so many Americans (and our Govn't) like to forget. Credit is a fools game.
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Old 10-19-2017, 09:19 AM   #9 (permalink)
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Originally Posted by punkncat View Post
If you can't afford it, don't do it.
https://www.amazon.com/dp/0930374061...preview%3Dtrue

I think you and pretty much everyone here would enjoy reading this.

It's about a bunch of guys living on an island and catching fish.
One guy spends a day making a net instead of eating for the day.
Now he can catch more than one fish a day and he opens up a fish bank.
Moral of the comic is to invest in capital because one fishing net is still worth one fishing net no matter how the economy goes.

A what if part of the story has some of the dudes "borrow" some fish so that they can go on "vacation", but a storm strikes so they never pay back the bank and no one can go out fishing. There's no fish in the bank and everyone dies.
Moral of that story is save up for nice things because bad stuff happens and people who live solely on credit are ruining themselves and the economy.
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Old 10-19-2017, 10:50 AM   #10 (permalink)
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Originally Posted by punkncat View Post

After that. Pay cash for every single thing you own and do. If you can't afford it, don't do it. Never, ever own a credit card. Pay all your utility bills, etc on time, every time. You will not only have excellent credit, but your debt ratio stays low and most important.
YOU LIVE WITHIN YOUR MEANS.
Credit when handled responsibly is great. I have multiple credit cards and use them for every transaction (with the exception of small local businesses), but treat them as debit, never buying more than what I have in my checking/savings. The bonus rewards I get from them, pays for Christmas gifts for my entire family (15 people). They key as everyone has pointed out is living within your means.

I actually would not be able to do my job without credit cards. I do a fair bit of traveling and you can not stay at a hotel or rent a car without a credit card. I know most debit cards can be treated as credit cards when they are ran, but the consumer protections offered through credit cards is far beyond what is offered through debit cards. Did someone steal your credit card number? No problem, its a small inconvenience, but your not out any money and a new one will be mailed within days. If someone steals your debit card they take your money, your actual hard earned dollars. Now the bank will refund you, but it is a process that takes 1-3 weeks and will require a good bit of effort providing information throughout the process. Throughout that time you do not have your money. Also, the buyer protections are much better on a credit card. Most people don't know this, but a lot of credit cards offer extended warranties, extensions on the return dates and other various perks when shopping.
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