Credit score, I just don't get it

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Ominan
 
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Credit score, I just don't get it

Postby Ominan » Tue Sep 23, 2014 3:42 pm

Hi,

So I'm kind of frustrated with the while credit score growing thing. Let me explain a bit of my story.

I come from Europe, landed a job in CA. I heard early on about credit score and how important it is in the US so I started to look asap in getting a credit card (needed one anyways). I see all these different offers online, those sweet miles and advantages, as I'm doing a lot of expenses for work (travel, hotels) I figured I'd be earning a lot and would be easy to land a credit card. Naive as I was, I go to citibank, discuss with one of the representative to get one of their top tier card and of course get rejected once the lady apply online for me: lack of credit history.

And there started the frustrating story, I applied to couple of basic credit cards, even while I make 6 figures, have no debts, have 2 european credit cards, have money on saving accounts: sorry sir you need more credit history to build your credit history. Infuriating.

I needed a credit card ASAP, as travelling with only debit card can cause problems at some hotels or car renting places. Finally, after spending times on forums and figuring out my battle plan, I apply for a secured credit card at BoA and get one with a whopping 1000$ of max spending on it. At least I got my foot in the door and I can add money to the card to increase its max value.

And now I started to look at my credit score evolution (I'm using credit karma). I started at 725 points and one year later I am at 723 points (actually 700, I lost 23 points because BoA issued me a new credit card and for some reason it closed the statement of my credit card at that time, at 50% utilisation, which made my score plummit, yay). So when is my score supposed to go up? I was told there would be "building". My statement are always around 10% of my credit card max or less (read on credit karma it was the best way), I always pay on time or even way in advance. I don't have any debts, bankruptcy or eviction.


I just don't get it.


PS: Sorry for my rant.


MemberSince99
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Postby MemberSince99 » Tue Sep 23, 2014 4:54 pm

It's just how it works here. Your European credit history means nothing here, just like our credit history here in the US means nothing in Europe. Getting a 1000 limit to start is pretty good here honestly.


Utilization can change every month when the bank reports to the credit bureaus here. There can also be mid cycle updates but generally think of it in terms of a monthly thing.


It takes time to build your score. 723, even 700 is pretty good. But it takes time, lots of time, and a thick file to build up to close to 800. There simply is no substitute for time and responsible behavior. So your only option is quite simply: patience.


That's how it is here. Maybe it's not what you are used to but that's how things roll here. Hope this helps you.

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PlyrStar93
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Postby PlyrStar93 » Tue Sep 23, 2014 4:56 pm

Pay bills on time, never late, keep your utilization low and basically that would be it.

When in some time you have a high utilization, just keep it low later on, and your score should raise over time. A "low" utilization should be very low, but greater than zero. You can realize this by paying before statement cuts, which is what you are doing, just need to keep a small amount owed and after statement you can pay that part off. Your 10% is good enough, though.

It does take time to increase your score, and it can be several months to years. It does factor Average Age of Account, so when that goes up it can benefit you. If you apply for new credit, then your AAoA can go down, new inquiries can be added, both lowering your score. However, getting new credit can add up your total available credit and thus potentially lowering utilization, which helps score.

So basically, you are on the right track already.
AAoA-longer is better
inquiries-fewer are better
utilization-lower is better, as long as >0
derogs-no derog marks is best

Keep utilization low and never be late, and wait, and if you don't get mortgage/car loans etc. (mixed types of credit) there is nothing much you can do.
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Ominan
 
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Postby Ominan » Tue Sep 23, 2014 5:51 pm

Thanks guys, I guess this is what I needed: rant a bit and know if I was heading in the right direction.

I'll press on that said direction then. I know it's just the way the system is, but by being not born into into and having the bank-tellers giving you contradictory info depending on where you go , you ask yourself if you are doing the right thing!

Cheers

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Vattené
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Postby Vattené » Tue Sep 23, 2014 10:57 pm

Unfortunately it is a Catch 22 here - you have to have credit in order to get credit. Is the system vastly different in Europe?
-Vattené
FICO-8:
EX - 809 (11/16) | TU - 803 (11/16)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now

takeshi
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Postby takeshi » Wed Sep 24, 2014 11:56 am

Ominan wrote:I know it's just the way the system is, but by being not born into into

It's not any less frustrating for those born in the US. Lack of history is something that everyone has to deal with. None of us starts off with established credit history.

Ominan wrote:and having the bank-tellers giving you contradictory info

You always have to consider the source. Don't rely on bank tellers for info regarding credit. Some of them probably do know what they're talking about but, again, that requires assessing that specific individual's knowledge.

Ominan wrote:So when is my score supposed to go up? I was told there would be "building".

Exactly -- building credit takes time. One has to establish a proven track record. A year isn't all that significant an amount of time in the credit world.

flan
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Postby flan » Wed Sep 24, 2014 11:17 pm

PlyrStar93 wrote:Pay bills on time, never late, keep your utilization low and basically that would be it.

When in some time you have a high utilization, just keep it low later on, and your score should raise over time. A "low" utilization should be very low, but greater than zero. You can realize this by paying before statement cuts, which is what you are doing, just need to keep a small amount owed and after statement you can pay that part off. Your 10% is good enough, though.


Utilization matters only when you're applying for things. If you're not going to apply for things, there's no reason to play silly fico games, and pay before your statement is cut.
If you do it for non-silly-fico-game reasons, that's okay. I sometimeas spend my own money for business expenses, and it makes my accounting easier if I pay the reimbursed amount as soon as I get it, regardless of what the card's cycle is. With a low limit card, and reasonable income, you might spend more than the limit in a month, and want to pay for that.

Once you've had the BoA secured card for six months, and it's been reporting for at least that long, then you can play the utilization game, get it to report a small balance, and apply for something else. Discover has a reputation for liking people that have decent credit, but short history, and no other big limits. (Discover also look at all sorts of non-traditional credit history, which isn't ever talked about on forums, and which you won't have, as a newcomer to the US, so they may not be the best bet.)

Also: did you have an Amex card back home? They have a program where they will consider your history with them abroad when issuing a US card. Amex also likes to see income, and might give you a charge card with your score and income.

Credit Karma's score is pretty meaningless; it's not a score that's heavily used by real lenders, and it's weird about new accounts. CK is very handy to see that things are reporting properly, and to get an idea when the reported data hits your file, so you use that information when applying for something else.



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