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Question about credit scores
Old 10-04-2007, 08:30 AM   #1
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Question about credit scores

Not sure if this is the right board to post this, but everyone here seems very knowledgable about financial matters. I have had several credit cards in my life and pay them off the first month, so I carry no balance. I've been fortunate to pay cash for all my cars, so have never had a car payment. And I've never had a mortgage. So my question is... should I be concerned about my credit score? I'd like to eventually buy a house. I do work now and have a good income, but what if I ER then decide to buy a house? Would I even qualify? I've heard you get better rates the better your credit score is. Is/has anyone else been in this same boat? Is paying all my credit card bills on time and never being late enough to have a high credit score?
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Old 10-04-2007, 08:34 AM   #2
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You should have a high credit score if you have credit cards but pay them off every month.Your credit score is based on your credit availability to debt ratio.Why don't you just check your credit score ? Go to FICO .com
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Old 10-04-2007, 09:08 AM   #3
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If you pay off your bills every month, it helps. However, a murky thing called "utilization ratios" comes into play. It is better to have a HIGH credit line and use a little of it every month, and pay it off in full, than a LOW credit line, and use most of it each month, even if you pay it off.

Debt ratio to credit, like Moemg said, also comes into play.

I check my credit score every year, to check for inaccuracies and errors. I have found several over the years........

DW and I went exclusively to debit card about 4 years ago. I still have most of the credit cards I used to, they just sit there. After the first year of debit card only use, our credit score went up over 60 points...........
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Old 10-04-2007, 09:14 AM   #4
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Another option is to check your credit reports for free using www.annualcreditreport.com Keep in mind that your credit scores are not part of the free report, but will cost 6-8 dollars extra from each of the three credit agencies. Also, the credit scores you recieve may or may not be a FICO score. The three credit agencies are touting and selling their own version called Vantagescore, as they are trying to not have to pay Fair, Isaac Inc., which is a separate entity that owns the FICO software, a fee.

The Vantagescore does not directly compare to the FICO score. Fico tops out at 850, Vantagescore tops out at 990. A 750 would be very good on FICO, not nearly as good on Vantagescore.
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Old 10-04-2007, 11:19 AM   #5
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Can you buy the home a few months before ER? That would alleviate the income issues right off the bat.

As for the credit score itself, others hit the nail on the head. Go find out what your score is. Then find a mortgage broker you can talk with who will give you the rundown on which scores typically qualify for the best mortgage rates.

With that information, you can figure out whether or not its in your best interests to "find" a few loans to pay back. I know about a decade ago I took out a personal loan from the bank (back when banks actually offered unsecured personal loans) - put the money in the bank, and used that money to pay back the loan. The interest I paid was about $250 total, but it was *well* worth the improvment of my credit score which was my only purpose for taking the loan out in the first place.

Sometimes things like car loans, due to such low interest rates, can be very advantageous when it comes to building credit for home purchases. Not to say it's the only way, but I wouldn't say "fortunately I could pay cash" since car loans are typically low interest rates which can enable you to both invest the assets elsewhere and allow you to build credit.

So if you need to build credit, you might consider getting a small loan over at Prosper.com (I have a group there in case you're interested - just PM me for an invite) - start it off at 10% max and see if it gets funded. Then pay it back in half the time and watch your credit score improve.

However, if you've been using at least one credit card for a long time, and have a bank account that's been around for a while, and you have no negative things (late payments, etc), then you're probably already in good shape for buying a home.

Lastly, when you do go to buy a home the lender doesn't look at just one score, but typically 2-3 from multiple agencies. I thought my credit would get killed because I took out $30,000 at 0% on a credit card to invest it at 7-10% reliably, and though my Equifax score dropped almost 70 points for that stunt, the other two credit agencies didn't penalize me much at all so just last week I just closed on a $500 down 1st mortgage at the best available rates.
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Old 10-04-2007, 11:37 AM   #6
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Can you buy the home a few months before ER? That would alleviate the income issues right off the bat.

As for the credit score itself, others hit the nail on the head. Go find out what your score is. Then find a mortgage broker you can talk with who will give you the rundown on which scores typically qualify for the best mortgage rates.

With that information, you can figure out whether or not its in your best interests to "find" a few loans to pay back. I know about a decade ago I took out a personal loan from the bank (back when banks actually offered unsecured personal loans) - put the money in the bank, and used that money to pay back the loan. The interest I paid was about $250 total, but it was *well* worth the improvment of my credit score which was my only purpose for taking the loan out in the first place.

Sometimes things like car loans, due to such low interest rates, can be very advantageous when it comes to building credit for home purchases. Not to say it's the only way, but I wouldn't say "fortunately I could pay cash" since car loans are typically low interest rates which can enable you to both invest the assets elsewhere and allow you to build credit.

So if you need to build credit, you might consider getting a small loan over at Prosper.com (I have a group there in case you're interested - just PM me for an invite) - start it off at 10% max and see if it gets funded. Then pay it back in half the time and watch your credit score improve.

However, if you've been using at least one credit card for a long time, and have a bank account that's been around for a while, and you have no negative things (late payments, etc), then you're probably already in good shape for buying a home.

Lastly, when you do go to buy a home the lender doesn't look at just one score, but typically 2-3 from multiple agencies. I thought my credit would get killed because I took out $30,000 at 0% on a credit card to invest it at 7-10% reliably, and though my Equifax score dropped almost 70 points for that stunt, the other two credit agencies didn't penalize me much at all so just last week I just closed on a $500 down 1st mortgage at the best available rates.
I know I shouldn't re-start the old "pay off the mortgage?" debate... I am really trying hard not to say a word!
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Old 10-04-2007, 12:32 PM   #7
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Another option is to check your credit reports for free using www.annualcreditreport.com Keep in mind that your credit scores are not part of the free report, but will cost 6-8 dollars extra from each of the three credit agencies. Also, the credit scores you recieve may or may not be a FICO score. The three credit agencies are touting and selling their own version called Vantagescore, as they are trying to not have to pay Fair, Isaac Inc., which is a separate entity that owns the FICO software, a fee.

The Vantagescore does not directly compare to the FICO score. Fico tops out at 850, Vantagescore tops out at 990. A 750 would be very good on FICO, not nearly as good on Vantagescore.
I just did the free credit report portion out of curiosity. No credit problems but it does show a credit card I know nothing about. Shows no activity but knowing my luck, someone gets the number and charges to it. Better get this card canceled. Can a credit card company open an account on my behalf without my approval? The company in question is CitiBank.
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Old 10-04-2007, 12:37 PM   #8
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<snip>

Can a credit card company open an account on my behalf without my approval? The company in question is CitiBank.

I doubt Citi'd open it, but someone else may have. It's called identity theft. But, you already knew that.



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Old 10-04-2007, 12:45 PM   #9
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I doubt Citi'd open it, but someone else may have. It's called identity theft. But, you already knew that.



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It was opened almost 2 years ago. If done as stated above, I wonder why it has not been used?
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Old 10-04-2007, 01:10 PM   #10
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If you pay off your bills every month, it helps. However, a murky thing called "utilization ratios" comes into play. It is better to have a HIGH credit line and use a little of it every month, and pay it off in full, than a LOW credit line, and use most of it each month, even if you pay it off.

Debt ratio to credit, like Moemg said, also comes into play.

I check my credit score every year, to check for inaccuracies and errors. I have found several over the years........

DW and I went exclusively to debit card about 4 years ago. I still have most of the credit cards I used to, they just sit there. After the first year of debit card only use, our credit score went up over 60 points...........
Wow.. FD... I am surprised you use debit cards.. I don't trust them at all and insist that I do not get one. I even sent a nasty email to the EVP of the retail group that sent me one even after I told them never to send me one.... you are not as protected as you might think.

As for credit scores... I have never gotten mine... don't know what it is and don't care. (heck, it cost money to find out!!!) I have not 'borrowed' money in many years and don't plan to any time soon.
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Old 10-04-2007, 01:17 PM   #11
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I just did the free credit report portion out of curiosity. No credit problems but it does show a credit card I know nothing about. Shows no activity but knowing my luck, someone gets the number and charges to it. Better get this card canceled. Can a credit card company open an account on my behalf without my approval? The company in question is CitiBank.

It probably is not identity theft.. more than likely it is from someone you signed something at a store and 'agreed' to have a card issued. I had one like that I did not know about.
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Old 10-04-2007, 01:21 PM   #12
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Citi can't open a card for you without you applying for it.

TexasProud is probably right. Did you do an "0% financing for 12 months" sort of deal? I believe Citi can be shown as the issuer when from your point of view its the local furniture store.

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Old 10-04-2007, 02:07 PM   #13
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Citi can't open a card for you without you applying for it.

TexasProud is probably right. Did you do an "0% financing for 12 months" sort of deal? I believe Citi can be shown as the issuer when from your point of view its the local furniture store.

2Cor521
I see what happened now. I did agree to a Home Depot card out of weakness once. Damn salesman pushed me into it. I cut the card up when I received it. Just wrote a letter to cancel it.

Well at least my credit report is ok. I didn't pay for the FICO score either. No plans to ever borrow money again.
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Old 10-04-2007, 02:38 PM   #14
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Cancelling cards can sometimes drive your FICO score down, because it increases utilization (i.e - same amount of debt outstanding, but now decreased availability). Of course, in your position, you don't really care about that.
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Old 10-04-2007, 02:41 PM   #15
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Wow.. FD... I am surprised you use debit cards.. I don't trust them at all and insist that I do not get one. I even sent a nasty email to the EVP of the retail group that sent me one even after I told them never to send me one.... you are not as protected as you might think.

As for credit scores... I have never gotten mine... don't know what it is and don't care. (heck, it cost money to find out!!!) I have not 'borrowed' money in many years and don't plan to any time soon.
Well, my bank has some protocols on my card (small bank). They will not allow an amount to be charged over a certain amount. The account it is connected to does not have a lot of money in it at any one time.
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Old 10-04-2007, 02:49 PM   #16
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Can a credit card company open an account on my behalf without my approval?
Of course they can... if they think you were the one who opened it. All it takes is some basic personal information on a piece of paper.

I've never once been asked for photo ID when applying for a credit card, regardless of whether it was for $300 or $30,000 limit with Citi. Though to Discover's credit, they recently asked me to send them paystubs for the $25,000 credit limit I requested for a new card.
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Old 10-04-2007, 03:01 PM   #17
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Though to Discover's credit, they recently asked me to send them paystubs for the $25,000 credit limit I requested for a new card.
That's to protect them against failure to repay, not to protect you against identity theft.

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Old 10-04-2007, 03:26 PM   #18
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That's to protect them against failure to repay, not to protect you against identity theft.

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Good point. I (by "I" I mean "all us people") always like to think I'm the center of the universe.... but apparently so does everybody else!
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Old 10-04-2007, 07:24 PM   #19
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Of course they can... if they think you were the one who opened it. All it takes is some basic personal information on a piece of paper.
Thats not what I meant. I guess what I should have asked....Can they open a pre-approved account without my consent? We all have received pre-approved applications before. At one time, I believe they even mailed you a card even though you didn't apply.

I fully realize that any account can be opened on your behalf if they think it is you that is submitting the information.
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Old 10-04-2007, 11:29 PM   #20
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Thats not what I meant. I guess what I should have asked....Can they open a pre-approved account without my consent? We all have received pre-approved applications before. At one time, I believe they even mailed you a card even though you didn't apply.

I fully realize that any account can be opened on your behalf if they think it is you that is submitting the information.
The answer is NO.. they can not open an account without your consent..

Any card you got was fake... not a real card.

BUT, your bank can send you a VISA or MC DEBIT card without your consent that looks just like a credit card... mine has done it twice and I got pissed and made them close it and issue me a plain old ATM card..

Now, there are some ways you can open one up without knowing you consented... I have read where there were some games where you would sign up to win a car or something else and the fine print said that you wanted to open a CC account... sneaky, but you did 'consent'..




I know FinanceDude used them and I am sure others do, but your legal rights are not that much with them... no matter what the banks 'says', you are still a lot more exposed with a debit card than a credit card.. and if there is a problem, they do not have to give you your money back while they investigate,... for most of us it does not matter, but I for one am against them...

And I want the bonus cash from my CCs anyhow...
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