765 People Helped
Member Since: September 2011
I read a gazillion articles about credit, utilization, improving credit etc. I will give you my take on my personal experience. I believe yes, there is an algorithm but I believe that it differs from person to person and your credit habits, problems, financial situation, etc. So each credit report is unique to a person and what you do in terms to increasing your score is up to those "components" from what I researched and found out that there are over 200 different things are being looked at job, residence, payment history, accounts, etc. They all will differ from person to person.
6 years ago I fell into the credit slump the entire country was in, 2 cars repo'd, collections, etc. My credit was shot to a like 510 or something. So the last 4 years I started picking up the pieces to rebuild my credit.
To start I took out a loan at a buy here / pay here lot that reported to Equifax at 22.9% APR. Orchard Bank was kind enough to get me an unsecured card for $300. I then was approved for a BofA secured, then went to Wells Fargo secured and Fidelity. So now I had a car loan 3 secured and 1 unsecured card with hardly any limits.
I did the whole 10% utilization game by paying multiple times a month and always PIF before statement date. Did this for about 12 - 15 months. I got BofA to unsecure my card, change to a rewards card. I got a Cap 1 blank check pre approved auto loan for $30,000 but when I went to the dealer they beat that rate with GM Financial for 2% lower APR and less money down. So I took it, then bought a second car with the Cap 1 blank check.
Now I paid about 8 months. I then went on a app spree applying to as much cc as I could to see what I could get, yes I was a little methodical about it but I got approved to about 10 CC's
Barclay, Cap 1 Quicksilver one, Cap 1 Spark, Nordstrom, Macy's, Amazon Store, Fingerhut, and now Walmart and Target Red credit card. My Fidelity unsecured after 10 months (their policy is to review after 15 months) and they added $250 plus removed annual fee.
When I got approved for my Target, Walmart card I had 23 inquires on my report on Equifax, about 10 on TU and about 16 Experian. My current score are about 646, 648 and 656 between the 3.
What I found out for myself that banks look a lot at your credit management, payment history is one part of it but how you used the cards. Does your spending pattern indicated that you are desparate for money or if you have a lot but the limits are just too low. What I mean by that. I let my utilization go up on several cards to about 70% and let it report to the CRA. Then paid most of them to 0 and the other down considerably. I did this with all my cards and in different patterns.
This is where I found my biggest jump in credit score at one time +10 at once.
My fingerhut account I have a CL of 1200 carry a balance of 700 (min payment $46 but I pay $100)
Most of my CC have a $1000 CL so on a few I reported a $700 balance, $500 balance, on my $500 CL card I reported a $280 balance, Amazon $400 reported $248 and so on.
yes my credit score tanked by like 3 - 6 points but the next month it shot up when I made the big payments on all of them.
So my moral to the story is that everyones credit and financial situation is unique dependent on countless factors but what I gathered is that if you use your credit in a pattern that demonstrates that you use it only to avoid to pay cash but you actually have it. They will extend you credit. You can show it by making multiple payments per month but charging frequently. It will show a pattern that you know exactly what you are doing.
Utilization, Inquiries, all of it matter in a the grand scheme of things but I think what really matters is the big picture because ulitmately that is what the credit report is suppose to give a lender - the big picture - are you a responsible borrower and do you know how to manage your money. If you only pay a little bit and charge a lot shows the bank you over extent yourself, if spend frequently and make lots of payments display the banks that you simply just using your credit as a tool but really only spend the money you have cash and then just pay it of.
I work in technology so I can say with confidence that banks use technology for risk managment. If you ever look at some of your credit reports, they also report what payments you made, how many time per month, what you high credit was, when you made the payments (in my case they will several per month), how much money you make, what type of credit you have. So if Bank of America gives you $1000, it may signal to another bank, if they give you credit then they may should give it to you too. Nordstrom asked me to give them a valid CC# to verify my identity but I think they use it assess your credit as well.
So the big picture is to prove to banks, that you do not NEED credit but you use it instead of your cash even though you have but you prefer to may lump sum payment. Ultimately these banks make money off each and every swipe you do at the stores which means money to them. You not using that them and not that often is no benefit to the bank. you using them all the time, allows them to make lots of money. The interest they charge you by carrying balance is just a secondary stream of income!
dbatl2012's response was:
I received this offer but I quickly ran away from it. The annual fee of $99 is ridiculous in addtion to all of these other fees such as making a payment! I understand that there are some people that deserve this card because they simply are reckless but then there are people that try but fell on hard times who should get another chance without being completely exploited.
If you want a credit card because you need the money. You should NOT get a credit card period. A credit card is a tool not a way of living. There are several other products that other banks offer that are much more palatable such as Wells Fargo Secured, Capital One Secured (If you credit is not that bad you may qualify for a unsecured with a low limit).
Wells Fargo secured only charges a $25 annual with an APR of 18.99 unlike Credit One of 29.99 which is usually the penalty APR.
What's the point of getting this card with an unsecured low limit when most of it is spent on their fees? You are better off saving several hundred and go the secured route.
Ok a lot of these statements are confusing. From my understanding if I have a card that has a $300 credit limit, you should not use more than 30% fo your limit which is $100. You can make muliple payments BEFORE the closing date. So if I buy something for $250 but then make a $200 payment before the closing date. It will only show $50 as balance.
So if you utilize your card more than the 30%, I suggest to make multiple payments before the closing date so that your utlization will stay below 30%
Car Insurance is a complete rip off. What does my Credit have ANYTHING to do with my driving record. It is totally absurd and they just use it as a ploy so that they can charge you more for a bogus reason. First off all, Car Insurance is required by law, so if I want to drive I MUST have car insurance. They don't give you any leeway or grace period in paying. You pay up front and if you don't pay within a few days, they report you to the DMV which will result in suspension of your registration and eventually your driver license. So the need to pay your insurance is more important than your cell phone bill otherwise you have to pay lapse fees with your DMV and get reinstated.
In addition they state that people with bad credit are more likely to file a claim, which sound very bougs to me and I don't know who conducted that research. We all know that everytime you file a claim your insurance goes up plus you have a deductible so why would anybody just file a claim unless they had a real reason to. Isn't that what insurance is for? Unfortunately, this business turned into "We will insure you but you better not file a claim". Insurance is suppose to "insure" you for any mishapp that may occur.
but just like the article says, there is nothing you can do about it, it is government mandated and you have to have insurance if you want to drive, these insurance companies continue to rip us off because we do not get anything back from our years of payments, insurance companies get to keep all of it and when you need it they will try anything to NOT do what they suppose to. It's legal extortion. point blank
I have this card and did $800 deposit. The application was a little bit difficult and I had to call the bank to verify information then was approved. However, this card went through Fidelity Bank but they manage the card. I graduated after 10 months, automatically. They raised my CL by $250 and also canceled the annual fee. All of this happened automatically.
So this whole credit utilization debacle is an ongoing thing because for one, no one really knows it but a lot have an idea similar to the Google algorithm.
I spent a whole of time researching credit because I needed to fix mine. I started at a close to 500 score because of a bad 2 years in 2008 - 2009 but I managed to increase my score about 150 points in 2 years. I started with a bunch of secured ones, got an Orchard bank one. I did the BofA, Wells Fargo and Fidelty. I never kept a balance and always made multiple payments throughout the month so that it would hardly report a balance. I tinkered around with keeping a balance and then having all paid off. Depending how much you have does make a difference but I believe it is more so if you keep 0 - 30% you get a certain ding, 31% - 60% it's another ding then you have the max out range.
Also, what I notice is that what is being calculated is how you pay your bills across the board. Let's say you always keep a 0 balance and then you may make a major purchase that run your CL all the way up, but you pay it down fairly quickly will be calculated differently then when you just keep a 90% utilization and only pay the minimun for a long time. Two different scenarios.
If you are one of those people that pay it off quickly the bank may raise your CL, if you are struggling to make minimums and keep high balances your CL may gets cut because the bank may feel as you are struggling and therefore become a risk.
Ultimately, Banks make money of each and every swipe that you make, so they do want you to swipe a whole lot but they don't want you to become a risk because if you swipe a lot and can't pay it back that means they will lose money. So that is why the frown on carrying high balances. There is a difference if you blow out your utilization every once in a while but then pay it back quickly vs. someone that just floats barely touching the max out.
That is how banks assess how much credit to give you, if they see that you have a $1000 credit limit and you charge $800 but pay it off let's say before the due date, the bank may give more credit. It is even better to make mulitple payments throughout the month. If you have a $1000 credit limit, charge $500 then pay it down to 0 and be certain to pay it 0 before the statement close date because that is the balance that is reported to the CRA. Using this method does several things, it shows the bank that you do not have enough credit hence that is why you keep paying on it to keep the balance low especially when you pay it to 0 before closing dates. 2) it helps you control your spending, if you say I always make a payment once I reach $300 - $500, so you never max out.
Also lastly, a Credit Score is mainly important when you are trying to buy something, get a loan, or credit card. Outside of that if you have a credit card that give you a 0% APR for 15 months, then why not take advantage of it, it is called making your money work for yourself. If you have a $5000 CL and you want to buy something for $3000 - $4000 because your 0% APR but you know you can pay it all of in about 6 months then it should be a problem because ultimately your score will go back up once you pay it down
Banks want to deal with responsible credit users that's why they give you the credit, if you use as to where you don't really need it but it is more so convenience for example you pay your bills, you don't have to use cash and you can float it out for an additiona 30 days then do so. The key components are to never look desperate for credit!
Desperate = 1. Max'd out CC / making min. payment for a long period of time 2. Max'd out CC / make min payment but then use that payment to charge again. 3 You keep adding to your debt every month like first your balance is 500 next month 1000, then 1200....
As long as you have a long strong history of keeping your balances low and paid off, carrying a big balance for a short period of time won't be that deterimental unless you are looking for more credit.
These credit algo's factor in your ENTIRE History and going forth, so even if we do similar things we still differ and it will reflect in the FICO, So me keeping a high balance may not affect me as bad as it may affect you. Just as someone else's credit behavior affects their scoring very different than from someone elses
I don't agree with any of these answers.
I am going specifically of my own experiences. I went form a 510 credit score to 680 in 4 years and I received about 15 different types of credit cards which include 3 cards from Cap 1, Barclay, Macy's, Nordstrom, Amazon, Walmart, Target, Fidelity, etc. ALL of them are being excellent cards and I do not have any of those credit rebuilder cards like credit one, etc that charge you stupid APR and fees.
I also have a BofA BankAmericard Cash Rewards, I started as secured at $500 after a year or so I got it unsecured with $1000 CL then 6 month later which is today I did an online request for an additional $2500 and got it instantly making it $3500.
In order to build your own credit strategy there are several things you have to understand 1. Every credit profile is unique and it is unique to you because there are a gazillion of factors what determines what 2. Banks make money of every single swipe, so they want you to use your cards A LOT but at the same time you should spend only what you can afford with ease.
now with that being said. If you have low limits, you have to demonstrate to the bank that your current limits are not sufficient. So you should use your cards a lot and go up to about 60 - 70% but pay multiple time during the month.
So if you have $1500 credit line, use your card up to $1000 - $1200 then in 2 weeks pay it back down to 0 then use it again. This will create a pattern that shows the bank that you have the money to pay but you don't have enough credit to do what you need to do during the month. You can call them and request a CLI and your arguement will be that you need access to more credit but want to keep your utilization low. So you can tell them that you use at least $1500 per month and would need about a $4500 - $5000 CL to keep your utilization at 30% while doing what you need to do. If you demonstrated to them that you can pay these amounts with ease they either approve you or counter it.
So the key is to demonstrate that you can handle a higher limit. So when you use $1000 per month and make 2 payments per month that equal to your spend it should signal to them that you have the money and need more access.
You won't be able to justify a higher limit when you only use $300 on a $1500 limit and just make that payment, that shows the bank, that you are okay with that limit. You have to show them that you can pay larger sums. So if you can easily pay $1000 in a month that would give them a security that you can make bigger payments.
They will only give as much as they think you need or can handle without putting them at risk. Also each bank is different with their guidelines.
For the other person to say that you shouldn't use your card, I would say it really depends.
I have cc where I get cash back rewards I get 3% for gas, 2% for groceries and utility payments and 1.5% on every other purchase which means I earn money by simply using the card. I get about $50 back on each of my cards for just doing what I normally and would do with a debit card. So why wouldn't you use the Credit card daily. Plus your protection on a CC is much better then cash or debit as you have no protection.
If you have one of those predatory cards like Credit One where they charge $100 annual fee and 30% APR, etc. then it should only be used for minimal stuff and to show that you have credit to get to another card. But before going that route I would get secured by a good bank that will eventually graduate you.
Larryaw, that is the whole design of our country - DEBT. They want you to owe because that is how they make money. Right now they don't make money off your wealth, so you are actually a bad prospect because the banks feel that you won't give them an opportunity to take advantage off them.
Have you ever noticed whenever you go to a department store (Target, Macy's, etc) everytime you check out, they want to push their credit cards on you by telling you that you could save 20% right now if you get their credit card. This is the problem they want us to be indebted for ever..
The funny thing is that in Asia, "owing" is perceived as shameful and during the recession Asians are able to buy everything because they don't carry any debt. So I would tell you be thankful that you don't have the need for credit and stay that way. Who cares about when the banks deem you if you don't need it. You own your house, you have money put away that's better than any loan or credit a bank could ever give you!
dbatl2012's reply was:
I don't see how they are the biggest bank in the world! They are simply a predator, all of their business practices are synonamous to loan sharking. I can't tell you how many times I had to call customer service to have fees reversed. Bank of America plays games with your accounts. I have one that I use for everyday use and I don't keep much money in in case my number gets stolen they can't take any money out. I noticed that BofA has the ability to "see" what charges are coming in. Let's say you pay someone with a check as soon as they scan it, BofA knows that it will come so if you don't have the money in right then, they will run that debit and rearrange charges that maybe 5 days old to go last but that check that was just scanned will go in first. So that they maximize the fees.
They have the latest technology and make banking really easy but their shady business antics makes it very hard to deal with them. I would totally use them more if they would have the ING Direct mentality but it's opposite.
Unfortunately, people do think that way and that is just due to their small minded and ignorance. I owned a business and the business faltered during the downturn of the economy. What people forget is that just because you no longer make the money, you still have obligations that do not go way. When you have an overhead for lets say $15,000 per month and you earn $25,000. You don't see a problem, however once the income goes from $25,000 to let's $8,000 that means you are now coming out of the pocket $7000. Many felt they maybe able to recover by adjusting somethings and some never had to deal with something like this.
In my case I was trying to hold on, I kept pulling out of my savings every month and trying to change things which again cost money. My business was established I didn't have to spend a whole lot on advertising but when it got bad, I needed to do something and I figured paying for advertising would do it, which it didn't it just put me more in the whole. So after this, you still have credit card payments, equipment payments, etc. Eventually you have to let go. A lot of my creditors didn't budge when I asked for some type of relief, ironically it was only after I was completely tapped out and basically threw in the towel that they were willing to work with me and I told them it's too late now, when I kept calling I was able to make some things work but since you tapped me all the way out I have nothing left. So here I am with bad credit.
I don't need the credit as I pay everything cash now and I have recovered severaly in my income, so I got into the habit to just pay cash. I just know I have to rebuild my credit in case of an emergency but I won't use credit like a have in the past. It is evil to me know like poison.