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Credit Score Issue
Old 06-19-2018, 12:47 AM   #1
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Credit Score Issue

Hello, I recently checked my credit score when I filed my taxes back in April and I was kind of surprised it was rather low. I'm talking in the 650 range. My credit card expired several years ago and I never bothered renewing it because I never used it. So now I applied for a Citi Bank cash rewards card and they won't even give me one!

I have paid cash for my past 2 cars. So no auto loan in the past 15 years.

I had ~$20,000 in student loans and I paid them all off in 18 months, back in 2010.

I have never had a mortgage and rent month to month.

Steady job, same employer for past 9 years.

I get it, I don't buy anything on credit and my financial responsibilities are very limited. But I don't get why my credit score is so low, when some people I know have a mountain of debt and much better credit scores.

How can I raise my credit score in an aggressive manner? I don't have any interest in taking out loans. I could open a new credit card through wells fargo and start using it for every day purchases. This whole system seems flawed and its a little ridiculous.

I checked my credit score on Transunion. It just shows past home addresses, student loans, 2 old credit cards I once had, etc. Nothing major. Nothing else in the report is negative in any way.
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Old 06-19-2018, 01:14 AM   #2
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Try to request a report of your credit data from the credit reference agency who gave the score. Check for any discrepancies and notify the CRA if you find any. Try not to get frustrated and you will resolve over time. Some credit cards target top end earners, others target everyone, so being refused is a demographic issue not personal. Also never miss a payment as lenders don't like it.
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Old 06-19-2018, 04:03 AM   #3
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You should check credit reports from all three reporting agencies to look for any hint of identity theft. I don’t have any debt. I do use credit cards, but pay them off as soon as the charge hits the account and my score is high. I do check my credit reports monthly to watch for any fraud and report any suspicious charges to the credit card bank immediately. Good luck!
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Old 06-19-2018, 05:15 AM   #4
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The reason why you have a low credit score is because you have no debts and do not utilize any credit.

If you don't have any credit cards and no debt, then it's going to be very difficult to raise the credit score.

Here is what to do. I did it for teenage daughter a couple years ago starting with no credit, and today she has a very good score.

1. Assuming you have a checking account, brokerage account, or some place else where you keep your money, get a credit card (not a debit card) from the bank, credit union, or brokerage firm that has the checking/investment account. Let them give you a minimal $500 limit on the card if necessary.

2. As difficult as it may be for you based on spending habits, you are going to have to use the credit card. The way we did it - I did not even let daughter have the credit card, I simply set up her cell phone bill to autopay from that credit card, and then the credit card to autopay from her checking account. We're talking $30/month. There is never any balance carried on the card, it's always paid off each month.

3. Apply for a Discover card. At some point an offer letter showed up from them. Daughter had no verifiable income. I simply indicated the amount she had in savings and they approved. She uses this card for every day expenses. Discover is also good as you can use it at many grocery stores to get cashback with no interest, no fees (it is not counted as a cash advance) - it's like getting a free month usage of the cash. Very convenient getting the cash with weekly groceries as it saves a trip to the ATM. Her Discover account is also set to autopay from her checking account - no balance ever carried month to month.

4. After a bit of time, the bank offered to increase the credit limit (we didn't ask). Other pre-approved credit card offers began showing up in the mail, and her FICO score is over 750. Today, 21 year old kid still has no verifiable income, yet she has an excellent FICO score.
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Old 06-19-2018, 05:26 AM   #5
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^^njhowie has the right answer. Credit scores are not based only on your ability to pay. They want to see that you use credit and have a track record for paying it off. Dave Ramesy calls it the "I like debt score". You could amend his comment to read "I like debt and I pay it off on time". These are the folks with the highest scores.


Edit to add: If you are reluctant to use credit to build your score, you may want to check out DR's recommendations. He advocates you can function well without a credit score. While the DW and I don't have a mortgage or auto loans, we do use cards. If you can use credit appropriately, DR's plan seems cumbersome in the modern world.
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Old 06-19-2018, 05:40 AM   #6
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As I post every chance I get, credit scores are a scam IMHO. That said we are all pretty much "stuck" with this system. All the advice given above is valid, esp. wrt getting reports from the 3 major bureaus and look for any discrepancies. They usually provide guidance as to why your score isn't higher (e.g. too many inquiries). When my report showed errors, I was never able to get them fixed, but at least I knew of the problem and got my dispute noted. Many financial institutions offer free reports. These may not use the same formula as many lenders use, but it is still valuable to track monthly changes in your "score". Bank of America, Chase, and a couple credit unions I use offer free monthly reports from Experian or Transunion. A score of 650 shouldn't prevent you from getting a card to start improving your score. A credit union might be a good place to start.
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Old 06-19-2018, 06:00 AM   #7
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Njhowie's list of steps mirrors some of my progression to obtain credit back in the 1980s and early 1990s. My first CC came from my local bank, the one I had my checking and savings account with, when I was 22 and 6 months out of college. Many CCs had annual fees back them, so being able to get my foot in the door soon led to getting no-fee card offers in the mail so I could drop the with-fee cards. The credit limit wasn't very high, which was okay, in part because I had already opened a second card. The CC issuer did gradually raise the limit over the years.


Back then, Sears didn't accept national credit cards, so I got a Discover card. (Sears then began taking national CCs, so I never ended up using Discover and they canceled my card nearly 20 years later.)


Having built up enough credit from occasionally using my CC and from paying down my student loan, I was able to get a mortgage before I turned 26.
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Old 06-19-2018, 07:05 AM   #8
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Another plus for njhowie.
We use credit cards to get some cash back, plus we need to maintain a good score due to current renting status.
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Old 06-19-2018, 07:22 AM   #9
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Originally Posted by flintnational View Post
While the DW and I don't have a mortgage or auto loans, we do use cards. If you can use credit appropriately, DR's plan seems cumbersome in the modern world.
My score hovers in the 815-830 range and don't carry debt. However, I have several CCs that have a total limit of $150K and a HELOC (no balance) I opened in 2013. No car loans in many, many years. Since I tend to pay off the CCs a couple of days before the statement closes, I rarely have more than $100 as reported balances. So, my score should really be much less since I am not utilizing the credit.

My Dad had an issue a few years ago with higher insurance rates since he had no credit cards and hadn't had any consumer debt in 40+ years (so no credit). He eventually got a couple of CCs and after about 18 months, his score got up to the high 700s. Last time I looked at it, he had a 826 with only two credit cards with limits around 5K each.

What am I trying to say, you ask? It's a game that's not easy to figure out.
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Old 06-19-2018, 08:55 AM   #10
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If one has not credit cards or loans for a long period of time and then requests a CC the banks get a bit suspicious. You might check out a local Credit Union where you can talk to somebody face-to-face. Offer to put some money in a CD that the credit union can keep as collateral in the event you do not pay. Usually, after a year of paying on time they will release the hold on the CD and treat you as a person of credit worthiness.
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Old 06-19-2018, 09:21 AM   #11
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Originally Posted by ExFlyBoy5 View Post
My score hovers in the 815-830 range and don't carry debt. However, I have several CCs that have a total limit of $150K and a HELOC (no balance) I opened in 2013. No car loans in many, many years. Since I tend to pay off the CCs a couple of days before the statement closes, I rarely have more than $100 as reported balances. So, my score should really be much less since I am not utilizing the credit.

My Dad had an issue a few years ago with higher insurance rates since he had no credit cards and hadn't had any consumer debt in 40+ years (so no credit). He eventually got a couple of CCs and after about 18 months, his score got up to the high 700s. Last time I looked at it, he had a 826 with only two credit cards with limits around 5K each.

What am I trying to say, you ask? It's a game that's not easy to figure out.
I pay off my balances every month end and have the closing date for the credit cards on the 4th of each month. Thus my balances which are only reported monthly are usually low.
I believe the calculations of the credit score wrt use of credit are maximized when the balances as a % of available are very low, but NOT at zero.
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Old 06-19-2018, 06:30 PM   #12
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The reason why you have a low credit score is because you have no debts and do not utilize any credit.
What he said.

Back in the late '70's I worked with a guy that had a very hard time buying a house because like the OP he didn't have any established credit. He'd never had a loan for anything, paid cash for cars, no credit cards all that.

After my divorce in 1983/84 my credit rating was not all that good either (and was the reason for the divorce). I even had to get a secured credit card, in which case the credit union "locked" the money in a savings account. I could still get access to it if needed, but they would then cancel the credit card if I did. Once I reestablished my creditworthiness, I had no problems getting credit cards.

So a secured credit card may be the fastest and easiest way to establish a credit rating. Like most here on the forum we use credit cards a lot but we pay them off in full every month.
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Old 06-20-2018, 01:11 AM   #13
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My son lived in New Zealand for several years. Upon return to the US, he couldn't qualify for a home loan because he had no credit in the US. I added him to my longest held credit card and he now had over 30 years of established credit over night. He got the loan.

The bank advised him to do this; see if someone who has long established credit would be wiling to add them to their account.

Maybe you know someone who could do that for you as well.
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Old 06-20-2018, 09:53 AM   #14
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OP - Just be sure the credit card you do get actually reports to the credit agencies, some store cards may not, so stay away from them.

Also, since you sound responsible with your money, understand you are leaving free money on the table by not having a credit card. I use my credit card for groceries, gas, restaurants, shopping and then pay it off fully every month.
The credit card company gives me back a percentage (example 2%), so for every $10K I normally spend (which I would spend without any credit card), I get back $200.
Besides that, credit cards give you other free things like extended warranty protection, ability to dispute charges, etc.
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Old 06-20-2018, 10:48 AM   #15
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Originally Posted by ExFlyBoy5 View Post
My score hovers in the 815-830 range and don't carry debt. However, I have several CCs that have a total limit of $150K and a HELOC (no balance) I opened in 2013. No car loans in many, many years. Since I tend to pay off the CCs a couple of days before the statement closes, I rarely have more than $100 as reported balances. So, my score should really be much less since I am not utilizing the credit.

What am I trying to say, you ask? It's a game that's not easy to figure out.
It's not easy to figure out and since the formulas are proprietary, there is no concrete roadmap to achieving a great score. With that said, after years in the banking industry, the behavior that seems most impactful on credit score (aside from derogatory marks such as slow pays, collection items, etc.) is credit utilization, exactly as outlined above. The quickest way to move a score is to have several outstanding lines of credit (like credit cards) and USE them. ALWAYS pay on time and when you reach a point when you have several credit lines, NEVER let the outstanding balances total more than 10% of the aggregate available credit. Doesn't matter if you pay them off every month or not, as long as you don't use more than 10% of the aggregate available at any one time. If you don't qualify for a credit card, then visit with your bank or CU about a secured card. Once you have a few months of history under your belt, the offers will start arriving in the mail and you can go from there. One more thing -- try to avoid store cards if you're not planning to use them. Closing accounts reduces your aggregate available balance (thus, increasing your utilization) and stores will often automatically close an account if it hasn't been used in some period of time. To add some depth to your credit file, consider financing your next car purchase. You can always make the payments for a couple of months, then pay it off. Finally, download an app called Credit Karma -- its a fantastic tool for monitoring progress.
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Old 06-20-2018, 11:18 AM   #16
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It's not easy to figure out and since the formulas are proprietary, there is no concrete roadmap to achieving a great score. With that said, after years in the banking industry, the behavior that seems most impactful on credit score (aside from derogatory marks such as slow pays, collection items, etc.) is credit utilization, exactly as outlined above. The quickest way to move a score is to have several outstanding lines of credit (like credit cards) and USE them. ALWAYS pay on time and when you reach a point when you have several credit lines, NEVER let the outstanding balances total more than 10% of the aggregate available credit. Doesn't matter if you pay them off every month or not, as long as you don't use more than 10% of the aggregate available at any one time. If you don't qualify for a credit card, then visit with your bank or CU about a secured card. Once you have a few months of history under your belt, the offers will start arriving in the mail and you can go from there. One more thing -- try to avoid store cards if you're not planning to use them. Closing accounts reduces your aggregate available balance (thus, increasing your utilization) and stores will often automatically close an account if it hasn't been used in some period of time. To add some depth to your credit file, consider financing your next car purchase. You can always make the payments for a couple of months, then pay it off. Finally, download an app called Credit Karma -- its a fantastic tool for monitoring progress.
The under 10% usage is correct, but it is also better to have between 0 and 10%. Additionally, the credit card usage is only reported ONE time a month, so technically it can be over 10%, as long as it is not over 10% at the closing/reporting date.
There has been talk to penalize having too much credit, even if not used, but it has not been implemented so far.
After credit utilization and timely payments, the age of the credit card is the next factor considered.
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Old 06-20-2018, 11:51 AM   #17
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Also, since you sound responsible with your money, understand you are leaving free money on the table by not having a credit card. I use my credit card for groceries, gas, restaurants, shopping and then pay it off fully every month.
The credit card company gives me back a percentage (example 2%), so for every $10K I normally spend (which I would spend without any credit card), I get back $200.
Besides that, credit cards give you other free things like extended warranty protection, ability to dispute charges, etc.
It also provides for a nice ledger of how you spent your money.

We have our cards on autopay through a joint account. I can figure out our annual spending in a matter of minutes.
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Old 06-20-2018, 11:53 AM   #18
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The under 10% usage is correct, but it is also better to have between 0 and 10%. Additionally, the credit card usage is only reported ONE time a month, so technically it can be over 10%, as long as it is not over 10% at the closing/reporting date.
This is true. We charge everything we possibly can on credit cards (gotta get those reward points ), then pay the balance. Typically we're at 1% to 2% of the aggregate limit. A few months ago, we went on a furnishing spree and racked our balances up to 10%. It dropped my score 10 points. Not huge, but still....
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Old 06-20-2018, 12:01 PM   #19
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Also, since you sound responsible with your money, understand you are leaving free money on the table by not having a credit card. I use my credit card for groceries, gas, restaurants, shopping and then pay it off fully every month.
The credit card company gives me back a percentage (example 2%), so for every $10K I normally spend (which I would spend without any credit card), I get back $200.
Besides that, credit cards give you other free things like extended warranty protection, ability to dispute charges, etc.
This too. I have one that rebates 1.5%, another that rebates 2%, and the Sears M/C that I've had since 1972 periodically has rebates on specific purchases. This month it is 10% statement credit on purchases made at gas station, grocery stores and restaurants. So I use that at the grocery store & gas stations, then when the offer expires I go back to the 2% card. The 1.5% card doubles the warranty on anything I buy with it so when I bought a new snow blower I used that card.

The Sears card I applied for at the urging of an older (and wiser) sister for the explicit purpose of establishing a credit rating when I worked for Sears so I thought it would be easier to get. It had a low credit limit of I think $400 at the time, and I'd go buy a shirt or pair of jeans every once in a while and then pay it off when the bill came. I have no doubt that helped me when I applied to get an apartment a few years later.
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Old 06-20-2018, 12:05 PM   #20
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I have had some small, downward spikes in my FICO score in the last few years (after I raised the CC limit) when I charged a little more than usual in a given month. Most months I charge between $150 and $300 but once in a while it would spike to $700 or even $1,000. In those months, my FICO Score would drop 20 points, still over 800, before rebounding a month or two later.
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