[ms_courtney]

I want to get some real been-there-done-that advice on building a good credit report. I pulled copies of mine recently because I was about to shop for auto loans. I got the loan and a fair interest rate of 4% but I know that with a really good credit report I could have gotten that even lower. I know part of the problem is my student loan debt, but it's paid every month like clock work so it can't be ALL bad. I think.
Basically I'm not really sure how to go about getting my FICO score or whatever looking good for the future. A condo or townhouse is definitely in my 5 year plan. Anybody have experience in what to do, how to time purchases, number of cards to maintain, when to contact credit bureaus?

[Goddessoflubbock]

The first thing is to know what your FICO score is. All 3 CRAs use slightly different scales.

The key is keeping your debt ratios low and not be overextended. If you have AVAILABLE credit exceeding half a years pay, you have too much. If you are using more than half your available credit, you're overextended.

Your credit takes a hit anytime you request credit and they check your reports. Opening and closing lines of credit will also be a negative hit.

Late payments are almost as bad as missed ones.

After I lost my job 5 years ago I paid off and closed all my credit cards. My credit took a 300 point hit.

[joshmamabear]

Do NOt make the mistake of closing your credit card, even if you have paid it off. The longer you have it, the better for you in terms of history and the credit limit it has will also help increase your total available credit. By example, here's why:

CC A - 0.00 balance; credit limit 3500; opened in 2007
CC B - 2000 balance; credit limit 3000; opened in 2008
CC C - 300 balance; credit limit 3000; opened in 2010

total credit balance is 2.3K with total available credit @ 9.5K which means your total credit utilization is 24% which is good. IF CC A is closed, the total credit available will be reduced to 6K with balance remaining the same but the ratio now becomes 38% which is several percentage points higher than 24%. Also CC A is the 'oldest' CC in this case so it is unwise to close this CC. Not wise to close an account UNLESS you're paying an outrageous annual fee on it. If no annual fee, just use it every now and then with small purchases that you pay each month so you don't carry a balance and still keep the account active.

The higher the credit limit one has that is NOT being utilized, the better it looks as far as our credit worthiness is concerned. The more debts we accumulate (we max out) out of total available credit we have, is a red flag to creditors on how we manage our finances.

PP is correct, the top 2 you have to keep in mind is pay your bills on time and keep your balance vs total available credit at its lowest. If you can do it @ 25% or less, that'll be good on your report.

[floridagirl83]

This is all good advice but we found out recently from a mortgage broker that every credit card that has no balance adds $10 to the debt part of the monthly calculations. So if there are cards with a small limit that you know you will never use again, it may be better to close them. Store cards come to mind here. Of course, double check me on this before doing anything.

[Easy2save]

Originally Posted by floridagirl83

This is all good advice but we found out recently from a mortgage broker that every credit card that has no balance adds $10 to the debt part of the monthly calculations. So if there are cards with a small limit that you know you will never use again, it may be better to close them. Store cards come to mind here. Of course, double check me on this before doing anything.

================================
Really? I am always looking for REAL advice about credit and credit reports. Not just the blogs that repeat the same generic "things" ad nauseum. (don't misread this; I am acknowledging its validity).

If this is true, this gives me some insight on how my paid off accounts are seen monthly. I am really thinking about this as I type. Seems the $10 added doesn't make that big of a difference but it does school me in how to let a small balance I can't quite address right now to pay off, let "skate" to the next billing cycle for the next payoff.

Thanks for sharing.

[Easy2save]

Originally Posted by ms_courtney

I want to get some real been-there-done-that advice on building a good credit report. I pulled copies of mine recently because I was about to shop for auto loans. I got the loan and a fair interest rate of 4% but I know that with a really good credit report I could have gotten that even lower. I know part of the problem is my student loan debt, but it's paid every month like clock work so it can't be ALL bad. I think.
Basically I'm not really sure how to go about getting my FICO score or whatever looking good for the future. A condo or townhouse is definitely in my 5 year plan. Anybody have experience in what to do, how to time purchases, number of cards to maintain, when to contact credit bureaus?

=========================
I know you asked for how to clean up a credit report (in your title). I don't have any been there, done that help for you on that, so sorry! . But....

Courtney, wow, 4 percent! Actually, that's pretty good for car loans these days. Advertisements that tout low interest car loans (like 0 percent) are very hard to get and most likely go to those who have 800+ credit scores. Not that you don't have that, in fact, I hope you do!

Wish I had 4%. We went through our credit union where we have a reasonably good relationship (steady direct deposits, savings) and still got only 6.xx %. The credit unions are depending on credit score automation just like the banks now. It used to be they used "eyes" to actually look at your banking relationship with them. Our score is lower now because our credit lines are many due to 18+ months in unemployment that resulted in some borrowing to get by. And, to make it more painful, the credit union does not apply extra payments to principal, reducing my interest paid. If I had known that, I would have gone with a bank! They apply extra payments when asked to the principal; the credit union when asked, said no.

IF you don't find a way to clean up your report as you wish, consider a REFI on the car loan if you strongly believe you can qualify for the lower rates. Just google "low auto loan rate promo" or something similar to start your search for a better rate. You should get at least one bank that is pushing promo rates as a google response. And, consider whether the institution (whether it be the one you have now or the new one with a refi) allows you to make extra payments to principal.

Before you consider my advice as not relevant, I am also basing the advice on your long term plan to buy a property. If you pay more toward your car loan or your other account, you reduce your balances and your lines of credit being utilized. That will look better on your credit report both now and in the future for the property purchase. Best wishes!

[joshmamabear]

Originally Posted by floridagirl83

This is all good advice but we found out recently from a mortgage broker that every credit card that has no balance adds $10 to the debt part of the monthly calculations. So if there are cards with a small limit that you know you will never use again, it may be better to close them. Store cards come to mind here. Of course, double check me on this before doing anything.

I have a different experience with Sears store card which we used to buy appliances years ago when they offered 20% off sale price plus free delivery. We never used it for buying anything else @ KMart/Sears. Soon as my statement came, I paid it off and its been years now that I still get balance statement of 0.00 so it means they aren't adding anything. The store card has been converted to Citi card with 0.00 balance all these years. It helps with my credit utilization to keep it w/in 5% range that's why I keep it open as long as they don't start charging annual fees.

as to CC report, this is what I do ~ since we are allowed one free report from each of the 3 credit agencies annually, I get one from Equifax in Jan then another in May from Experien and the last one in September from Transunion. I have closely monitored our reports for years now w/o paying anything.

I also signed up for WM Discover free FICO score that I get to check monthly.

[floridagirl83]

I was just saying if they are open, you sort of get dinged still. I had never heard this before, so who knows. If you have a zero balance, it should report as zero no matter what, but your credit score may still be impacted.

Sent from my Samsung Galaxy S4 using AFullCup

[ms_courtney]

Yeah I think its really important to get advice from people who have dealt with situations first hand. Not many of my friends have bought houses yet, or if they did they flipped them so it wasn't the same approach I'm trying to take.
The car loan was aggressively negotiated, believe me, and I paid 2/3rds of the loan with down payment and my first payment. I will have a year of payments then its over. Didn't even WANT another car but had an accident. So I guess I want to make this loan count on the ole credit report.
Thanks for the credit card advice. I have one for work that I can only use for work expenses (but it is reported to the bureaus), and one with a low limit that is my own but never sees the light of day. I'm going to keep it i think, and maybe see if they'll increase the limit when I finally have a good down payment saved and am about to start shopping. That'll lower my utilization ratio and maybe my interest rate.

[Macchiatomom]

Thanks ladies for sharing!

[Easy2save]

7 steps to clean up your credit report | Bankrate.com

I got an email this morning and am offering the above link regarding an article from Bankrate.

Disclaimer: I have not examined the details of the article yet and cannot "vouch" for its validity although it comes from a reputable site. But, maybe something will help someone.

Best wishes~!