Credit Score Strategies

[Tommy_Dolitte]

What role does your credit score play in your wealth strategy?

Tricks of the trade?

TD

8)

 

[Cut-Throat]

I have no clue what my credit score was or is. I don't do credit any more, so I guess I don't need to know.

 

[John Galt]

Mine plays little or no role. When I was a "Captain of
Industry", people showered me with cash, even though
I was loaded with debt. already. Now that I am mostly
debt free and my credit history is golden, no one wants
to talk to me. I understand though, because my income
is below poverty level. They don't care about my net worth it seems. Anyway, I've reviewed my credit reports. Nothing negative, but lots of activity, which I suppose is negative enough to give one pause.

John Galt

 

[Bob_Smith]

If I ever really need credit, my attempt at ER will have failed and I'll be in trouble. So in a sense I don't care about my credit rating.

OTOH, I'm seeing reports that more and more insurance companies are charging higher premiums if the credit rating isn't stellar, and they aren't disclosing it. That could make it a costly issue for early retirees.

For the original poster, one thing I read awhile back - use less than one half of the credit line you have - preferably one third. That helps keep the rating high.

 

[Hyperborea]

Another important item for keeping your credit rating high is to keep your oldest credit card. Even if you get a good deal or better rates or toasters or whatever and get a new credit card keep the old one. The length of time that you've had a credit account improves the score.

 

[Jane]

I am not ER'd yet so I have to care about credit rating I guess. I check it once a year just making sure that everything is ok. Since I am not yet FI, I have to make sure that my credit rating is high enough so that whenever I need a loan I don't get hit with higher interest.

So to repeat what others have said, what people have told me about maintaining/increasing your credit rating is:
1. No late payment.
2. No maxed out credit.
3. The longer you are using the credit, the higher the score.
4. Bankruptcy is a no-no if you want good score.
5. Do not apply for too many credits (ie. try to limit the number of cards, loans etc that you hold at a time).

Jane

 

[farmerEd]

Its ironic that now that I have stellar credit (fico score of 800+), I never use credit...I'll always keep my credit good by paying bills on time, and as others have said, it affects other things like insurance rates, but besides that it plays very little in my life....

...but perhaps thats why I receive about a dozen solitications a week from companies that want me to use their cards...

 

[John Galt]

Hello farmered. The irony was not lost on me, i.e.
that my credit has really never been better (this is my
view not my score) and yet I am now persona non grata
with a lot of companies. On the other hand, I still
receive lots of soliciations for credit cards. When they see my income and the heavy past activity I either
get turned down flat or get such a small line that I
don't want to bother with it. And by the way, you regulars
know that I take all the free money offered (-0-%).
I just paid off a card as the -0- % was coming to an end.
Within 2 weeks I had a new -0- offer from the same company which I promptly maxed out. Coincidence?

John Galt

 

[cute fuzzy bunny]

I looked for a post someone left but couldnt find it. It was a link to a presentation on credit scores. Cant remember the threads author, but the text said something like "the government thinks we're idiots" followed by the link. I dont think anyone responded to it. But the presentation was interesting, it showed how many points are applied to each thing.

A lot went to living in the same place for a long time, no bad credit marks, lots of positives, reduced unused credit lines, etc.

So I guess you live in the same place a long time, pay all your bills and close any open accounts you dont use.

ER doesnt appear to cause a problem. Every time I do something like get a cell phone or open a charge account the person checking the credit score usually whistles and says "wow thats the highest score I've ever seen!".

 

[Bob_Smith]

Here is a link to some info from TransUnion. Summary:

-- Pay all your bills on time. Late payments, collections, and bankruptcies have the greatest negative effect on your credit score.

-- Check your credit report and remove inaccuracies.

-- Keep your account balances below 50% of your available credit.

-- Establish a long history of paying your bills on time and using credit responsibly. You may also want to keep the oldest account on your credit report open in order to lengthen your period of active credit use.

-- Avoid excessive inquiries

https://www.truecredit.com/help/learnCenter/creditScores/raisingYourScore.jsp?cb=WalMart

 

[Tommy_Dolitte]

TH, I'd posted that info. It was a presentation the FTC put on.

I'm glad you enjoyed it.

 

[trumpeting_angel]

Helpful hint for making sure the bills get paid on time:

I put all my monthly bills onto auto-pay from my online checking account. For credit cards, I use an amount that I believe will be just above the minimum payment. (Relax, everybody, I'm only making minimum payments on my 0% credit cards!)

If I charge anything, I can go online and change the payment -- usually I pay the balance in full on cards that I'm actually using. But going on vacation and missing the due date is no longer a problem.

And I second the comment about keeping your oldest credit card. My oldest is 30 years old now, and the credit-watchers certainly seemed impressed with that.

Anne

 

[otako]

I think it's better just to eliminate credit from your life. If you need to buy something credit it probably means that you can't afford it.

 

[John Galt]

I agree no credit (debt) is best. But...........I can think of
exceptions to this rule.

John Galt

 

[KB]

I use credit to earn the cash-back my Visa and Discover card pay. Each time I charge or at least weekly, I pay the balance off.

My oldest card is 12 years old. A few years ago I opened about 4 zero interest accounts to buy things for the old house, and paid them all off before the end date. But keeping them open along with the Visa and Discover caused me to have too much open credit and my Fico dropped about 40 points. After cancelling the newest accts, the Fico score went back up.

I'll stick with the 2 cards and earn a little cash back. No new credit needed here. Though I do want a new car.

 

[BigMoneyJim]

Between the 5 years I just spent getting out of debt and the rise of identity theft I keep wondering if I should intentionally trash my credit score with a few staged late pays.

However as much as I want to never use credit I will probably use it for a house, car or emergency at some point. But I'm not going to devise and follow any financial stragegy based on fico scores.

I make good money, have no debt and intend to get rid of all but 2 cards (have a couple of gas cards, a couple of store cards and a tertiary big card that need cutting up), and my past late pays are vanishing over the horizon, so I expect my credit score will look pretty good soon anyway.

 

[Beachbumz]

I can't imagine not having credit cards! I also can't imagine carrying a balance on one!!! We are headed to Aruba and flying FIRST CLASS for free just by charging everything we can. But you have to be VERY careful to use it more like a checking account or it can get away from you (ie never charge more than you have budgeted).

Just today, we have applied for a new citibank card with no annual fee that will give us 5% cash back at grocery stores, drugstores and gas stations. We will use this card for those items only. A savings of 8 to 10 cent a gallon on gas sounds pretty good right now!

 

[trumpeting_angel]

I like my revolving 0% credit cards, too, but I couldn't keep track of them when I was working (more than) full-time, and if you can't keep track of them, they're a losing strategy.

Now, however, I have graduated to part-time work, and I have a nice chart with all my 0% cards, and their expiration dates (when they start charging interest). It helps to have the capital to back this up: if you can't pay them before they charge you interest, they'll be a very bad deal.

Anne

 

[JOhn Galt]

Hello Anne. Although hopelessly disorganized in most
areas of my life, the "teaser" CC rates I watch like a
hawk. I make payments way in advance to eliminate
possible "slow mail" and I call ahead of time to verify the
exact date the 0% expires. As far as I can recall I
haven't gotten nicked yet.

John Galt