High credit scores for young adults?

[S_Happens]

Luckily zomgwtf has straightened most of this thread out.

There is a significant difference between the computation of a FICO score and how creditors view the accompanying credit report(s).

Payment history and credit:debt ratio make up the majority of a FICO score calculation.

As for whether you should pay your card off every month or pay the minimum consistantly.
Paying off your credit cards in full every month will net you the highest FICO score by showing up as "pays on time as agreed" and lowering your credit to debt ratio. On the other hand, paying the minimum shows that you are willing to eat interest and credit lenders like to see this (not a substitute for good FICO score). It is something a lender considers when evaluating a credit report.

Someone asked about letting an account sit inactive. This will affect your FICO score negatively, albeit by a small amount compared to payment history and credit:debt ratio. My suggestion is to use it for something(s) you always pay for (a utility or commodity) and to pay the account off in full every month.

As stated, bank accounts have no impact on FICO scores.

Yes, doing "hard checks" on your credit affect your score negatively. This is a check that you have to authorize, not the same as a "soft check" done routinely by large CC companies that send you offers in the mail.

I may read back through and address anything I missed.

 

[zomgwtf]

Hard checks always negatively effect your credit score, that's why you don't want to authorize many over an extended period of time. For instance one every 3 months is too often, you want to try and keep them all within a small amount of time. The report only keeps the last 3 checks for 5 years.

 

[Pythagorean]

I had a 700+ credit score until I canceled my Alaska Airlines credit card (cause I didn't like paying the annual fee). Bastards.

 

[samoth1]

How do brokerages work here? If I have, e.g., $50k available margin, and am using $50k, does this count as "credit"? Is it reported to the bureaus?

 

[TheStatutoryApe]

This friend was lying, he does not have excellent credit because his father regularly deposited money into a bank account.

Lying is perhaps a bit extreme. At most he did not know what he was talking about. I've heard any number of things that are supposedly good or bad for your credit and at one time or another have heard that those things were a load if crap. As far as I know he did in fact have near "perfect" credit and what he told me was the best explanation he could come up with in the absence of any other reason why it should be so good.

Another interesting thing was something my ex told me. She said that her parents had really good credit and when they decided to take out a small loan to renovate their home they were denied. They had no idea why since their credit was supposed to be impeccable. They were apparently told that the reason they were denied is that they had "too much" credit. The rationale was supposedly that with the number of credit cards they had, and the high limits on them, they could easily slip into massive debt at any time apparently making them a liability. They were told that they should close some of their credit accounts. This seems to go in the face of what you are saying about making sure to increase your credit as much as possible, perhaps there is a nuanced difference though. Thinking about it now it may have had something to do with their credit to income ratio. Her father was the sole income provider and while he made decent money he was only a sheriff (yes I dated the sheriff's daughter) and wasn't exactly making the big bucks.At any rate, I am never sure what to believe on this subject any more. I only throw out things I have heard to see what people say about them so I might get a better idea of what is and isn't true.

 

[Evo]

A timely article. http://finance.yahoo.com/banking-budgeting/article/110744/8-slipups-that-wont-hurt-your-credit-score?mod=series-m-article-c

 

[S_Happens]

They were apparently told that the reason they were denied is that they had "too much" credit. The rationale was supposedly that with the number of credit cards they had, and the high limits on them, they could easily slip into massive debt at any time apparently making them a liability. They were told that they should close some of their credit accounts. This seems to go in the face of what you are saying about making sure to increase your credit as much as possible, perhaps there is a nuanced difference though. Thinking about it now it may have had something to do with their credit to income ratio. Her father was the sole income provider and while he made decent money he was only a sheriff (yes I dated the sheriff's daughter) and wasn't exactly making the big bucks.

Assuming the reasons for denial to be correct, this highlights THE main difference in the two discussions going on in this thread. There is a difference between a FICO score and what a credit lender decides to do with that score/report. FICO scores are based on a set of rules that should be easily enough accessible to anyone who wants to know.

Income is certainly used by credit LENDERS in determining whether or not they decide to offer credit, but there is no credit to income ratio used by the agencies that determine FICO scores (or to my knowledge by credit lenders either, although I cannot speak for every single one).

 

[Greg Bernhardt]

A timely article. http://finance.yahoo.com/banking-budgeting/article/110744/8-slipups-that-wont-hurt-your-credit-score?mod=series-m-article-c

Good to know overdrafts don't lower the score. I seem to overdraft a few times a month

 

[Astronuc]

Good to know overdrafts don't lower the score. I seem to overdraft a few times a month

Just as long as you pay the bill for PF.

 

[Greg Bernhardt]

Credit scores must be a sham! My credit score was constant for four months then last month it bumps up 30 points and then this month it bumps down 36 points. I have never missed a payment and all that I changed was I added a new credit card.

 

[Pythagorean]

Credit inquiries can affect your score, canceling credit cards can, looking the wrong way at a lender, etc.

 

[lisab]

Credit inquiries can affect your score, canceling credit cards can, looking the wrong way at a lender, etc.

...the flavor of gum you're chewing...

 

[gravenewworld]

I'm 28 and last time I checked my credit score it was around 720-730. I paid off a brand new car, have 2 credit cards that have been open since my junior year in college that I have always paid on time, and have made on time payments on my student loans. That's about it. Credit scores are a huge scam.

 

[Astronuc]

Timely article - Healing a Wounded Credit Score

http://www.nytimes.com/2011/02/19/your-money/19money.html

 

[dlgoff]

Credit scores must be a sham! My credit score was constant for four months then last month it bumps up 30 points and then this month it bumps down 36 points. I have never missed a payment and all that I changed was I added a new credit card.

Well I'm way over 30 but I've only got one credit card and my score, in '02, was 815. All I did was pay it off in one or two months.

 

[Greg Bernhardt]

ha! I haven't done anything different besides getting another credit card and now my credit score is 732. I don't get it!

 

[S_Happens]

Opening a new line of credit changes your FICO score.

1) You change your credit to debt ratio, hopefully for the better.

2) You now have a line of credit that is brand new, which affects it negatively.

I'll go back and read my previous posts, but I should have posted information on exactly how FICO scores are calculated if it wasn't done before me. If it's not then I'll come back and edit a link in.

Time is a big factor, especially for those of us that are young and/or recovering from poor credit.

Edit- Here is a quick and simple link. http://www.myfico.com/crediteducation/whatsinyourscore.aspx