Sometimes it is difficult to know how different actions are going to affect your credit score. Recently free credit reports have become available to people once a year (or more often, in some states). Because of this, you may want to estimate what your score is in between free credit checks (although it is recommended that you check your credit report more often than once per year).
The following scale is based on a good credit score (750 or higher FICO). Due to this, some of these actions may cause a more severe change in credit scores lower than this. This also explains why having a large amount of inquiries has no change associated with it (since a person with good credit will be likely to use it to shop around for the best deal).
Keep in mind that this scale is only a simulation of how your FICO may be affected by credit-related actions. Don’t take anything you see here as certainty!
Revolving Credit Line Usage (such as Credit Cards):
0-15%: Baseline
16-29%: -3
30-50%: -5
51-64%: -7
65+%: -15
Bankruptcy Filing:
No: Baseline
Yes: -170
Number of Inquiries:
0: Baseline
1-2: -5
3-4: no change
5-6: -5
7+: no change
Delinquent or Past Due Accounts:
No: Baseline
Yes: -50
Open Lines of Credit/Loan Balances:
0: Baseline
1-2: no change
3-4: -3
5+: -5
Open Mortgage:
Yes: Baseline
No: -5
It is not unheard of for credit scores to drop 30 points based on a 50% usage of revolving credit, so these are more guidelines than hard and fast rules.
May 16th, 2006
Related Topics: simulation fico scores (2)- credit report simulation (1)- "credit score 750" (1)- credit card simulation (1)- credit score simulation (1)- "FICO " credit score simulation (1)-
I received my first credit card as a result of a program which allowed parents to cosign with their children to obtain credit. It had a $200 limit. Every month I charged movies, lunches, and computer games to it. And every month I diligently paid it off with the money I made working at a ski area. By the time I was 21 I had an excellent credit rating with a 4-year history.
I’m not advocating that all 17-year olds should have access to a credit card. But too often I see parents who baby their children, or tell them stories about how horrible credit can be. Credit is a tool, just like a gun or a car. When respected, understood and used appropriately, it has great benefits. When used by someone uneducated and disrespectful of its power, it becomes dangerous.
Getting your credit started is not a terrible situation to begin with. When starting out, you begin with a clean slate; in the eyes of credit companies you are neither risky nor beneficial, and you have the opportunity to prove yourself.
In this case, the first thing you should at are any special programs you are involved in. College students have the best shot at this. Credit companies love students because they often spend large and spend often. They also usually have mom & pop’s salaries to bail them out when they get in trouble.
The best idea is to ignore the recruiters on campus and do your own research online. Go to specific company sites and look for their college cards, or credit-builder cards. It will be slow going for awhile when you start out with a low-limit, but it is also very easy to get limit-raises with these cards. After a couple months of paying your card on time, in full, ask for an increase.
For building your credit, a great option is looking to companies with whom you already hold a card. Ask for a limit increase or a rate decrease. Then look for which agency they pull reports from and find out which other companies pull from that agency. Then contact those companies for a card as well. Credit companies are fierce competitors, and if one of their peers enjoys having you as a card holder, they most likely will as well. Also look to diversify with different types of cards (Visa, MC, AmEx, etc.).
Another good place to check with is a local credit union. They usually can offer competitive rates on credit cards to members who are looking to build credit. The only downside is that they are not able to offer the comprehensive rewards programs of large banks, but the objective is to build credit and work up to those big cards, right?
Also remember, that credit is affected by other factors besides cards. Try to make sure your report is as diverse as possible. Utility companies, student loans, (small) car loans, and mortgages, if kept current and in good standing, are huge boosts to credit.
April 20th, 2006
Related Topics:
