Comments on: Credit Score Question From a Reader http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/ A premiere personal finance blog, established 2003. Within, Flexo discusses his own experiences with money, and he and other authors comment on a wide range of personal finance topics. Sun, 08 Nov 2009 07:50:42 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: Brian http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64888 Brian Mon, 02 Oct 2006 22:49:06 +0000 http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64888 Thanks for all the help! I was wondering for Chase cards (cause I have one), if the credit limit will is the # used for the utilization. There were previous posts for Capital One where the denominator for the utilization was not the actual credit limit, but the credit SPENT. I was wondering if this was the same for Chase and which banks or credit card companies we have to watch for that do that. Thanks for all the help!

I was wondering for Chase cards (cause I have one), if the credit limit will is the # used for the utilization. There were previous posts for Capital One where the denominator for the utilization was not the actual credit limit, but the credit SPENT. I was wondering if this was the same for Chase and which banks or credit card companies we have to watch for that do that.

]]> By: Single Ma http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64871 Single Ma Mon, 02 Oct 2006 20:03:33 +0000 http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64871 Here's the link I referred to in the previous comment. http://singlemomandmoney.blogspot.com/2006/01/that-infamous-3-digit-number.html Here’s the link I referred to in the previous comment.

http://singlemomandmoney.blogspot.com/2006/01/that-infamous-3-digit-number.html

]]> By: Single Ma http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64870 Single Ma Mon, 02 Oct 2006 20:01:31 +0000 http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64870 Utilization (balance/available credit) is considered on individual cards AND as an aggregate total on all revolving accounts. It does have a large impact on your score (30% as ricemutt mentioned). When carrying large balances, you may notice an impact on your score in increments. Of course maxing out a card is bad, but carrying a balance above 50% on any one card can also hurt. As the balance declines, the score will improve (assuming a clean report and all other things equal). A few years ago, I used to monitor my reports daily (preparing for mortgage) and lived on creditboards. I noticed my scores would improve as I reached util in 75%, 50%, 30%, and 10% increments. Based on my credit profile, I also noticed util between 5-10% is optimal for me. For others, it may be zero. When credit history is young and your file is thin, there isn't much working in your favor (other than having a clean report) so util should stay in the safe range...below 30%. I also agree with kira. It's a lot easier to ruin good credit than to build it. Even if you're doing all the right things, only time can improve your score. History accounts for 35%. Think of it as your financial "reputation." Takes a lifetime to establish but a small lapse in judgment can ruin it. For more details, I wrote about the infamous FICO score earlier tihs year. Utilization (balance/available credit) is considered on individual cards AND as an aggregate total on all revolving accounts. It does have a large impact on your score (30% as ricemutt mentioned). When carrying large balances, you may notice an impact on your score in increments. Of course maxing out a card is bad, but carrying a balance above 50% on any one card can also hurt. As the balance declines, the score will improve (assuming a clean report and all other things equal).

A few years ago, I used to monitor my reports daily (preparing for mortgage) and lived on creditboards. I noticed my scores would improve as I reached util in 75%, 50%, 30%, and 10% increments. Based on my credit profile, I also noticed util between 5-10% is optimal for me. For others, it may be zero.

When credit history is young and your file is thin, there isn’t much working in your favor (other than having a clean report) so util should stay in the safe range…below 30%.

I also agree with kira. It’s a lot easier to ruin good credit than to build it. Even if you’re doing all the right things, only time can improve your score. History accounts for 35%. Think of it as your financial “reputation.” Takes a lifetime to establish but a small lapse in judgment can ruin it.

For more details, I wrote about the infamous FICO score earlier tihs year.

]]> By: ricemutt http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64865 ricemutt Mon, 02 Oct 2006 18:21:56 +0000 http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64865 I'm no expert, but I held a question-of-the-day in August about credit cards and limits. I did some research before writing the post and found a WSJ article that discussed credit utilization, and how that affects about 30% of your score. According to that article, it's best to maintain a utilization of less than 50% (what you're calling outstanding balance:credit limit), and to spread it among a bunch of different cards, which (I think) would imply that "utilization" is calculated by averaging the utilization on each card and not by taking the overall outstanding balance/total credit. Hope that helps somewhat! I’m no expert, but I held a question-of-the-day in August about credit cards and limits. I did some research before writing the post and found a WSJ article that discussed credit utilization, and how that affects about 30% of your score.

According to that article, it’s best to maintain a utilization of less than 50% (what you’re calling outstanding balance:credit limit), and to spread it among a bunch of different cards, which (I think) would imply that “utilization” is calculated by averaging the utilization on each card and not by taking the overall outstanding balance/total credit.

Hope that helps somewhat!

]]> By: Kira http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64861 Kira Mon, 02 Oct 2006 17:16:01 +0000 http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64861 It's in fact QUITE easy to wreck a good credit score, than to improve a bad one. One late payment, or heaven forbid a 60 or 90 day late, can drop a good credit score by hundreds of points, whereas it will take months of on time payments to raise a bad score - particularly if you had multiple offenses in the past. Your credit utilization ratio should usually be under 30%, I've seen many places, but get it as low as possible. I don't know that it's a huge impact on the score for somebody young. I just graduated school and have great credit despite having had very high utilization ratios, I usually get dinged for the accounts-are-too-young thing. Making payments on time and keeping your report free of errors is basically all youneed to do to get a 700+ score. Everything else just comes with time and there is not much you can do to speed that up! It’s in fact QUITE easy to wreck a good credit score, than to improve a bad one. One late payment, or heaven forbid a 60 or 90 day late, can drop a good credit score by hundreds of points, whereas it will take months of on time payments to raise a bad score – particularly if you had multiple offenses in the past.

Your credit utilization ratio should usually be under 30%, I’ve seen many places, but get it as low as possible. I don’t know that it’s a huge impact on the score for somebody young. I just graduated school and have great credit despite having had very high utilization ratios, I usually get dinged for the accounts-are-too-young thing.

Making payments on time and keeping your report free of errors is basically all youneed to do to get a 700+ score. Everything else just comes with time and there is not much you can do to speed that up!

]]> By: Brian http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64851 Brian Mon, 02 Oct 2006 16:17:27 +0000 http://www.consumerismcommentary.com/2006/10/02/credit-score-question-from-a-reader/#comment-64851 Thanks for the help! If you were to give a ratio range that is good to have (that is outstanding balance: credit limit), what would it be? 0.25? 0.20? Also, isn't it generally easier to start with a great credit score and harder to lower it (excluding missed payments and blatant errors) by say not paying off the entire balance or whatnot, than it is to have a bad score from the geto and trying to build your way up? Or is it the same either way, from great --> bad or bad --> great score? Thanks for the help!

If you were to give a ratio range that is good to have (that is outstanding balance: credit limit), what would it be? 0.25? 0.20?

Also, isn’t it generally easier to start with a great credit score and harder to lower it (excluding missed payments and blatant errors) by say not paying off the entire balance or whatnot, than it is to have a bad score from the geto and trying to build your way up? Or is it the same either way, from great –> bad or bad –> great score?

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