Anybody here understand credit ratings??

[Pixelated]

I've started paying off my debts and my credit score has DROPPED. It's gone from moderately good to poor! WTF?!

[Dave1982]

Very little about credit scores make any objective sense. Just having your report run causes the score to drop, which is utter bullshit.

[Pixelated]

What, so if I go online to check my own credit score, it can cause it to drop??

[notalwaysright]

I'm not an expert, but I've been watching the report that Capital One shows me each month and it's strange. It seems like it takes a while for something to impact the score. Like, mine went from Good to Average due to an inquiry, but like 2-3 months after it happened even though the report showed the inquiry the month it happened. Have you closed any accounts, or opened a bunch of accounts all at once?

You checking your own credit shouldn't affect the score, I hope!

[EricKei]

As someone who has been keeping an eye on his own in the past few years, here's what I can tell you (all IIRC):

- Self-inquiries do NOT affect your score in any way (this includes the yearly FREE report from each company -- do NOT sign up for their "monitoring services" or anything else that requires payment)

- "Soft" inquiries should have no effect, or a miniscule one. Not entirely sure what these include.

- "Hard" inquiries (e.g. applying for a loan or credit card) DO drop your score a bit for a few months, moreso if you have more than 3(?) on the books at a time

Certain other things that affect the score:

- Length of credit history (the longer the better, generally)

- Payment history (the more on-time payments in the last 3 years, the better)

- Available amount of credit (in $) and # of lines of credit/loans/cards -- Too low is bad, but so is too high. AFAIK 2, maybe 3 cards total is preferred as a max ..?

- Paying off something completely is good as long as it stays on the books, tho it may hurt a bit if removing it drops you to "nothing on the books at all," as that is treated the same as having no credit history

- The simplest way to bolster credit, from what I've heard most often (beyond simply paying all of your bills on time) is to go to your bank or a credit union, take out a secured credit card for their minimum allowable amount (e.g. you deposit $200 in a special account, and they issue you a card with a $200 limit), and literally only charge one thing to it (e.g. one fillup of gas for your car each month -- I'm talking about 50 bucks or less). Make sure it is paid off 100% every month, on time; ideally, pay it off as soon as it shows up in your online account, before the bill even comes. After a year or so of this, you should see some improvement -- Just ask in advance to make sure that they report these cards/payments to the credit bureaus.

[BookstoreEscapee]

Have you closed any credit cards? That'll change your credit ratio, so even if your actual debt amount is less, the percentage of debt compared to your available credit will go up, which will affect your score. I have one card that I don't use much but it has a really high limit (like, I could actually charge a car on it if I wanted to). When I got my mortgage, one guy I talked to told me I should use it once in a while just to make sure they wouldn't decide to cancel it, because that would make my credit ratio look (much) worse and tank my score. Mostly I use a different card that has a limit under $4000, and I charge around $600 a month on it (that includes my phone/electric/cable bills which get charged automatically, plus most of my everyday expenses; once I collect enough cash back bonus I trade it in for a Starbucks gift card ), and pay it off in full each month. So if you pay off a credit card, it's best to keep the account open, at least until you get your debt down.

[BookstoreEscapee]

These might be helpful:
https://www.tdbank.com/personal/customer_advocacy.html
http://money.howstuffworks.com/perso...edit-score.htm

Also, there might be someone at your bank you can talk to who can help answer your questions.

[Pixelated]

Thanks for all the advice and suggestions, folks. I'm pretty sure I know what happened in my case and will make an effort to rectify it toot sweet. I am on an apartment hunt as Mom's house will go on the market in the next few months, and this is a complication I definitely don't need.

BookstoreEscapee: I closed out two credit cards but that was at least a decade ago. I have never gotten any replacements. I don't think my current financial situation would make me eligible for any credit card, so ATM I have one of those "loadable" ones. (Yep, I do understand that it doesn't do a damn thing for my credit rating.)

[EricKei]

Try the secured card route -- By definition, they're not actually extending you cried *per se*, as they have that 100% backup in the account. However, it *looks like* credit as far as yourcredit reports and rating are concerned.

[Pixelated]

Try the secured card route -- By definition, they're not actually extending you cried *per se*, as they have that 100% backup in the account. However, it *looks like* credit as far as yourcredit reports and rating are concerned.

I'll look into that. That's where you put (say) $200 down on the card, right, and then you just "charge" with it like a regular card ... except they've already got your money, so there's no actual bill involved ... right?

[Heksubah]

I'll look into that. That's where you put (say) $200 down on the card, right, and then you just "charge" with it like a regular card ... except they've already got your money, so there's no actual bill involved ... right?

Not quite. So say you put $200 down, they'll give you a $200 limit and hold that $200 as security in case you default. But if you use the card, you still have a monthly bill. That $200 is security against the limit, not a payment.

A really good way to utilize a card like that is open one and set one small monthly bill to auto bill to it, something for less than 33% of the total. Then when you get the bill pay more than the minimum due, but do not pay the full balance each month. Carry a small interest over. That shows good utilization (you have a small balance, but are using the card and paying it off regularly) and it shows you to be profitable to the card company (if you pay in full every month it looks bad, oddly enough, since they earn no money off of you due to not getting any interest so they'll be less likely to refund late fees or ever increase your limit).

I did this and it has very much helped my previously abysmal credit.

[EricKei]

What Heksubah said ^__^

They don't actually deduct anything from the $200 deposit when you use the card (that would be a pre-paid debit card such as what Voldemart offers); that $200 simply sits there so they they don't have to come after you in case of default or the like. In case of emergency, it should also be possible to get the deposit back on short notice if you pay off AND cancel the card.

The credit agencies don't know that it's a "secured card" (that is the term you want to ask about), but it is treated in every other way as if it were. It's an excellent way to build up your credit. Also, depending on the bank or credit union, some may offer to refund the deposit or give you a credit increase after a year or three of making consistent monthly payments, as you've proven yourself to be reliable to them, no matter what your credit history may say.

[Pixelated]

Oh, okay, thank you! I will definitely look into that!

[Pixelated]

I picked Capitol One ... it only requires a $75 security deposit. I don't have $200 to lock up at this point.

I remember a couple of years ago when some exec from one of the credit card companies sneered at people who paid their full balances each month as "deadbeats." That didn't go over well ...

[EricKei]

That's still 100% true of all CC companies. If you don't make them ANY profit, they don't see you as an actual customer x.x