7 Credit Score Myths Debunked: What's The Real Truth?

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mistatall
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7 Credit Score Myths Debunked: What's The Real Truth?

Postby mistatall » Fri Jan 27, 2012 12:32 pm

Hey all,

I'm new to credit cards. I've tried to do research on the do's and don'ts but often get conflicting information. I don't really need the credit card at all, I'm only using it as a credit builder so I'm looking for ways to maximize benefits to my credit score and report.

Here's some things/myths I'm unsure about

1. Utilization: The goal is to keep the credit card limit low in order to maximize the best credit rating for myself. My credit limit is $500 with Capital One so I'm just gonna keep the balance around $100 every month. Sound good?

2. I got a card at Capital One with a yearly fee of $25. I don't want to pay this fee the rest of my life when I could probably get another card for free out there. I also don't want to close a credit line. But I've only had this card for 2 months anyways so closing the credit line may not be that bad. Thoughts on this? My best option would be to get Capital One to wave the fee somehow or maybe upgrade cards?

3. I always hear its bad to let people "check your credit" like it costs me 2 points for someone to look up my credit history (say I'm applying for a loan or something). Should I stray away from letting people look up my credit unless it is an absolute necessity?

4. $500 as a limit kinda sucks. When will I be able to increase this and does it hurt me to ask for an increase?

5. Is it necessary to open up other credit lines? If I make payments in full ahead of time there's no reason to open another credit card I would think?

6. Are there any other credit cards out there that actually offer me something useful. I don't fly that much or use some of the weird bonuses they offer. My credit report is still pretty blank, but getting X% back on food and groceries would be great.

7. Finally, is there a place to check my credit report? Is it free? Are there any other side effects to checking my report?

Thanks for the help


namvet
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Postby namvet » Fri Jan 27, 2012 3:29 pm

mistatall wrote:Hey all,

I'm new to credit cards. I've tried to do research on the do's and don'ts but often get conflicting information. I don't really need the credit card at all, I'm only using it as a credit builder so I'm looking for ways to maximize benefits to my credit score and report.

Here's some things/myths I'm unsure about

1. Utilization: The goal is to keep the credit card limit low in order to maximize the best credit rating for myself. My credit limit is $500 with Capital One so I'm just gonna keep the balance around $100 every month. Sound good?

2. I got a card at Capital One with a yearly fee of $25. I don't want to pay this fee the rest of my life when I could probably get another card for free out there. I also don't want to close a credit line. But I've only had this card for 2 months anyways so closing the credit line may not be that bad. Thoughts on this? My best option would be to get Capital One to wave the fee somehow or maybe upgrade cards?

3. I always hear its bad to let people "check your credit" like it costs me 2 points for someone to look up my credit history (say I'm applying for a loan or something). Should I stray away from letting people look up my credit unless it is an absolute necessity?

4. $500 as a limit kinda sucks. When will I be able to increase this and does it hurt me to ask for an increase?

5. Is it necessary to open up other credit lines? If I make payments in full ahead of time there's no reason to open another credit card I would think?

6. Are there any other credit cards out there that actually offer me something useful. I don't fly that much or use some of the weird bonuses they offer. My credit report is still pretty blank, but getting X% back on food and groceries would be great.

7. Finally, is there a place to check my credit report? Is it free? Are there any other side effects to checking my report?

Thanks for the help


1. Yes 2. Wait at least 1 year to get some history 3. Always check your own credit via many credit monitoring sites available to you. 4. Don't ask Cap One for a CLI, they will do that for you when you are eligible (you may be in the credit steps program). 5. Yes you will need about 3 trade line (take your time in getting them). 6. Not yet (too new). 7. A free credit report is avalible to you one each year at this site: http://www.annualcreditreport.com

DoingHomework
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Postby DoingHomework » Sun Jan 29, 2012 9:22 am

namvet has it right.

I'll just emphasize that what everyone is looking for is a long track record of being a responsible person and paying your debts on time. You only build that by being patient. Wait at least a year before applying for anything new.

Letting someone check your credit hurts a lot more than two points. More than 2 hard inquiries in 2 years will hit you by up to around 30 points. That's a lot.

mistatall
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Postby mistatall » Mon Jan 30, 2012 1:50 pm

namvet wrote:
1. Yes 2. Wait at least 1 year to get some history 3. Always check your own credit via many credit monitoring sites available to you. 4. Don't ask Cap One for a CLI, they will do that for you when you are eligible (you may be in the credit steps program). 5. Yes you will need about 3 trade line (take your time in getting them). 6. Not yet (too new). 7. A free credit report is avalible to you one each year at this site: http://www.annualcreditreport.com


Thanks for the help.

Can you go into more detail with #2

-You want me to close the credit card after 1 year and get one without a fee? I'll lose the last year of on-time payment history.

Also regarding #5

-Why is it good having multiple credit cards. I'm not seeing the value. Say I have a Capital One card with $1500 limit vs three cards with $500 each. It seems like semantics to me...

namvet
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Postby namvet » Wed Feb 01, 2012 2:27 pm

What your goal here is to establish a good credit record and high credit score. This can not be done over night. It takes time and effort to become a "fico high achiever". No i don't want you to close your credit card after 1 year. Don't close any new credit until later on when you have a great score and other cards that don't carry a fee. In a few years, once you are established and you choose to close a credit card it will continue to report for 10 years on your 3 credit reporting agencies (Ex,EQ,TU). You need several accounts reporting on your records to you get a high fico score. Such as credit cards, store cards, installment loans, mortgage etc. t



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