Credit Score Issue

[exnavynuke]

My comment about red flags was about the "have ongoing proof of the ability to handle debt" and perhaps I should have said (one example is credit cards).

You are right, credit cards are not the only measure of credit worthiness.

It's not just the ability to pay, but more importantly the willingness and the responsible nature to pay bills on time.
That's why the current system of credit score penalizes quite a bit for missing payments on bills.
Which is why credit cards are a good indicator, as you are free to rack them up, and then every month face the decision to pay the credit card or not.

Exactly.

If you owe $800 in rent, and have $1,000,000 in your checking account but don't pay the rent on time, your landlord is still not getting their rent on time.

If you have nothing documenting that you will actually pay the bill (not just can, but will) and pay it on-time, then you're a higher credit risk than someone with a known track record of paying bills on time.

Opening a credit card (with no annual fees), then using it and paying it off regularly is a simple process that can actually be beneficial (with credit card rewards programs) AND it will quickly raise credit scores for people with no credit history. A single credit card alone can let someone get their credit score into the 800's in time.

 

[Tykimeister]

Thank you everyone for the input. I read what everyone had to say.

I know I have been avoiding the credit card game for some time now. I always have the mindset that the fewer things I have to keep track of the less likely I will mess something up.

While I don't expect myself to have the highest credit score possible, it just blows me away how low it is now and credit card companies won't even give me a card. While the past 7 years I have been debt free and I avoid buying anything on credit, how does everything prior to that just disappear and account for nothing. I now have poor credit, even though my TransUnion credit reports shows that I have never received a penalty for non-payment, no late fees, no delinquencies? Meanwhile it shows old credit cards that were used, student loans that were paid off, and whatever else is reported?

I know I should have been more pro-active on this and I can only be mad at myself. But wow! Wake up and smell the coffee, I need to fix this pronto.

 

[Aerides]

While the past 7 years I have been debt free and I avoid buying anything on credit, how does everything prior to that just disappear and account for nothing.

There's your key. 7 years is all that counts. Stuff older than 7, while still present, is unlikely to factor into your score. Everything has a half life too - more recent activity will have more weight.

Your score is how well you are (currently) playing the game. If you're not playing, you're not scoring. But "I have no negatives" only helps if you have activity to weigh that against. Think of it like saying "I can run 10 miles before I have to stop for a rest" vs. "I don't have to rest because I am standing still"...who do you want to hand a baton to in a relay race? You are an unproven commodity to the lenders, hence a risk, hence 650.

Yes it sucks. For example, my credit score would be about 30 points higher if I had a mortgage. I don't (long behind me "no recent history"). I have almost 30 years of flawless, but I don't have many accounts, and was recently under 800. Can't get to 850 if I tried. (i know, cry me a river...)

Your case is very fixable. But don't rush, expect about 18 months - 2 years to get significant gains. 650 isn't terrible, think of it as a C-

Find one, maybe two credit cards you can get. Do not apply for more than 3 things in a 6 month period otherwise your risk goes up "applying for too much, he's trying to go into debt!!!"

Inquiries count for up to 2 years, but weigh more (negatively) in their first 6 months. So expect to apply for a few things and then go to 620 for a month or so.

Then, double ding - new accounts also count negatively until they are established - same thing "too many new accounts relative to history"

So, apply for a few, get 2. Then use and pay in full those 2 every month - even just $50 in charges each (size of your bills won't matter beyond current balance when a report is pulled).

Doing more will hurt you and swing you even lower.

Capital One has a LOT of products. They also have a free credit score checker that I use that sends me monthly updates, and I can check my score real time whenever. It also shows me things like new inquiries, and helps you learn factors that impact your score. When you self-inquire, you do not count as a lender inquiry so you can check it as often as you like.

 

[jazz4cash]

My comment about red flags was about the "have ongoing proof of the ability to handle debt" and perhaps I should have said (one example is credit cards).

You are right, credit cards are not the only measure of credit worthiness.

It's not just the ability to pay, but more importantly the willingness and the responsible nature to pay bills on time.
That's why the current system of credit score penalizes quite a bit for missing payments on bills.
Which is why credit cards are a good indicator, as you are free to rack them up, and then every month face the decision to pay the credit card or not.

I thought we might have opposing views, but apparently not based on your comment above, esp the bolded part. My views formed many years ago reading my credit report summary which stated that I had too many accounts and my credit history was too short. The second paragraph said I had never missed a payment and my oldest account had been opened thirty years ago.!


Until I retired, I always had mediocre scores but I was never turned down or paid higher rates due to my score and all I ever did was continue to pay my bills on time.

 

[Tykimeister]

Well so far this is what has happened.

Applied for Citi 2% rewards credit card - denied

Applied for Chase Freedom rewards credit card - denied

So I finally just went to my bank, I have been a Wells Fargo customer for 15 years. That's where I had my students loans through. They approved me for their cash wise reward card. Only 1.5%, but beggars can't be choosers.

So I have applied for 3 credit cards in the past couple week. Approved for 1 and denied for 2. Should I avoid applying for another one at this point? Or will applying for 4 within 6 months be to much?

 

[njhowie]

Applying for numerous credit cards over a short time frame will negatively impact your credit score. Stick with the one card, use it, pay it off religiously, and other offers will begin to show up on their own.

1.5% is good cash back amount. Others do go to 2%, but unless you're charging at least $20,000 a year, it's not going to make a big difference.

Now, first thing to do with your new card:

1. Go to your monthly pay bills and for those allowing to be paid by credit card, set them up for auto pay from the card.

2. Set the credit card up to always fully auto pay from your checking account.

3. Do not look to use your entire credit limit - target for no more than 20% to 30% at most.

 

[audreyh1]

Well so far this is what has happened.

Applied for Citi 2% rewards credit card - denied

Applied for Chase Freedom rewards credit card - denied

So I finally just went to my bank, I have been a Wells Fargo customer for 15 years. That's where I had my students loans through. They approved me for their cash wise reward card. Only 1.5%, but beggars can't be choosers.

So I have applied for 3 credit cards in the past couple week. Approved for 1 and denied for 2. Should I avoid applying for another one at this point? Or will applying for 4 within 6 months be to much?

Use your bank card, and pay it off on time. 1.5% rewards with no annual fee is not bad at all for your first card! You are establishing your credit history now. Wait a year or two before applying for another credit card.

 

[Aerides]

So I have applied for 3 credit cards in the past couple week. Approved for 1 and denied for 2. Should I avoid applying for another one at this point? Or will applying for 4 within 6 months be to much?

Find one, maybe two credit cards you can get. Do not apply for more than 3 things in a 6 month period otherwise your risk goes up "applying for too much, he's trying to go into debt!!!"

Inquiries count for up to 2 years, but weigh more (negatively) in their first 6 months. So expect to apply for a few things and then go to 620 for a month or so.

covered above