What is your current FICO/credit score?
Mine is 667. I have never used credit cards, and I don't have any debt. My partner, whose FICO score is 780, currently has about twice their annual salary in debt.
Mine is 667. I have never used credit cards, and I don't have any debt. My partner, whose FICO score is 780, currently has about twice their annual salary in debt.
A few follow-up questions:
Lol, nah, nothing like that. Funny, though. But seriously, what's your mom's maiden name, just between us friends?
You know what else has been on my mind? My first pet's name and my best friend from high school's full name. What were yours? 😁
This makes sense. Your credit utilization has a high impact on your score. What they’re looking for is the ratio of Credit used over credit available. Ideally you want to keep it under 30%. In your case you’re dividing by zero so it’s impossible to have a good ratio.
If you’re looking to raise your score, just getting a credit card and not even using it will improve your score by increasing your divisor above zero, but some banks may close the account if it goes unused. If you do use it pay it off ASAP. There is a terrible misconception out there that you need to carry a balance on a card and pay interest to raise your score. THAT’S JUST NOT TRUE. Don’t ever carry a balance. It doesn’t ever help your score and can only hurt it if your ratio gets too high.
Good advice here. Both my credit card apps have me at 850 currently. Between the 2 cards, my limit is about 80k. I put around 500-600 per month on them generally and always pay in full every month. I have not paid 1 cent in interest in probably near 20 years, while taking hundreds in rewards from Discover and BOA. Credit cards are a great financial tool and a huge benefit once you learn the rules to the game....if you maintain discipline.
I request a credit increase every time I get a raise or every 6 months, whichever happens first. Why get credit I dont need? In case I ever do need it, but more important is that debt ratio. That is what gets you good loan rates. Do it before you need it, and you will be set.
There's also a feedback loop here -- once the credit limit increase hits your report, other creditors see it and are more likely to extend increased limits to you. I went through a few years where AmEx and Discover both seemed intent on being my highest limit card and would preemptively offer CLIs after the other one had.
And to expound on your point re: credit utilization ratios - this is another area where having higher limits than you need helps. Your percentage utilized of available credit has a huge impact on your overall score. Having a higher limit means that if you need to carry a balance due to an emergency spend, it'll have less impact on your score.
e.g., you have an emergency expense of $700 with a line of credit of $1000. Your utilization is now at 70%. This will have a negative impact on your score pretty quickly.
Take the same $700 spend and apply it to a $5000 line of credit and you're only at 14% utilization. That'll still have an impact but much less than anything over ~30% utilization.
Even beyond emergencies, if you use a credit card to pay fixed bills each month and then immediately pay them off, you'll occasionally have months where the payment credits after your statement date and hits your credit report -- same deal there. It looks much better on your report if that balance is a fraction of your available credit than if it takes up a large chunk of it.
I've been pleasantly surprised by how much actual good advice has ended up in this whole thread.
Basic personal finance like credit cards and retirement and HSA accounts are so beneficial when you are able to have people explain the basics to you, and the knowledge pays off many times over.
I had a few years of young and dumb followed by struggling through the great recession that pretty well wrecked my credit early on.
I then went through a few years while rebuilding where I really dug into learning how the credit system works and gaming it to my advantage. It was literally a case of getting entertainment out of "number goes up." I got bored with it once my available lines of credit hit a couple multiples of my annual income, but the end result was having a basically perfect credit score.
It ultimately paid off when it came time to buy a car and get a mortgage. Basically had immediate access to the absolute best rates available and approvals have always gone super smooth.
The flip side of that is my SO who never went through the young and dumb stage and hadn't needed to rebuild credit, but had a similar "fuck credit" attitude as the OP so they'd never had credit in the first place. The fortunate thing there is we were able to jump start their credit history by adding them as an authorized user on one of my older accounts with a high line of credit -- this gave a massive boost to both average account age and available credit and pretty much instantly brought their score up from the 5-600s to low 700s. Add in a few more deliberate things like financing a car instead of paying cash and now they've got enough of a credit profile built up that it'll be okay if anything ever happens to me.
Obviously, that requires a lot of trust, but it's good info for relationships where one partner has established credit and the other doesn't.
My SO had untreated bipolar disorder when we met, so her credit was trash from forgetting to pay rent and her car frequently. I got her organized and on a schedule, and once she finally started taking care of herself again and got centered mentally, I spotted her a few hundred for a secured credit card to rebuild her score. She stayed on top of herself for a couple years, and went back to college seriously this time, so she needed a new car as it was over an hour away, so I cosigned for her to get her a decent rate. Now 2 more years later she has somewhere around 8k for a credit limit and a score in the mid 700s last I asked. So 5ish years to rebuild her wrecked credit. Now she's graduating this semester and already got a job offer for like 25% more than I make! Soon it's her turn to pay back my investments in her! 🤣
Yep the credit score algorithm would rather see $20,000 debt with a $100,000 limit than $5,000 debt with a $10,000 limit.
All true points. A pot of our parents grew up terrified of using credit or using it too much for everything and going into debt.
Credit is a tool to use. All the credit score does is show how good you are at using that tool. Can you use it responsibly, without abusing it out going into debt? They can't score you on how well you use credit if you don't use it at all.
Slight caveat, while credit is a valuable tool to use, studies have shown that credit cards absolutely increase spending, regardless of if it's paid off each month.
For this reason I encourage people looking to build credit but afraid of debt to use credit cards only for non-flexible spending. Gas, utilities, subscriptions, etc.
Yep - if it's an expense I have to pay monthly anyway and might as well use one card for my expenses then pay it off every month and reap the rewards points/cash back.
That's a good callout, it does give the feeling of freedom. People have to know what credit means, and know how they will pay it.
I am pretty good at keeping a rough running tally in my head of how much I've spent, and so I can feel that I'm getting close to my limit. Big purchases too impact that a lot. However, I've worked with people who don't have a system, or don't have the ability to do that. Not knocking them, but you do need some ability to keep track of how much you've spent, either yourself or with a routing on checking your amounts.
Starting with only autopaid non-flexible spending is a good bet, and there are credit cars that will de facto get you an ~3% discount on those categories just for using them.
Remember, all cash rewards / points systems exist to make you spend more money, though. Like the cards, they're designed to increase your spending. So it's the same advice -- only think hard about it for fixed costs.
Yep. Banks are not in the business of losing money.
I just have mine paying my phone bill each month
You answered your (obvious) question as to why you don't have a good credit score with this very line. Stop using your debit card. Use a credit card for everyday purchases, and pay the fucker off when you get paid. Mine is over 800 and the only credit lines I have are credit cards (without balances).
This is also good advice for transaction safety. If you have to charge a vendor back on a debit card the bank has to try to retrieve your money. If its on a credit card, it has to retrieve their money, guess which one they will put more effort into.
To add to this, if your debit card is used fraudulently, that money is gone from your bank account forever. If your credit card is used fraudulently, you are on the hook for maximum $50, and in my experience it has always been $0.
I have had fraudulent charges show up on a CC about once every 2-3 years. In each case, the worst hassle is waiting a few days for a new card to arrive. That alone is enough for me to never use a debit card unless absolutely necessary.
Eh, this must be a case by case thing. One of my cards was compromised a couple months ago, my bank was good and got it blocked pretty quickly but one transaction for like $250 went through before they caught it, they refunded me the money in like 3 days.
Yeah you're right. "Could be gone forever" is probably more accurate. I imagine most banks would give you a bit of leeway, just like most CCs aren't going to hold you liable for the first $50 like they technically could.
But at the same time, that money is gone immediately from your account, so if a sizable amount gets debited it could put you in a pickle until/if they refund it.
Totally depends on how much your bank values you as a customer. Which means it's dependent on the bank itself and their policies. About 8 years ago, the company I worked for at the time had their debit card info stolen. About $5600 was charged, bank basically told us to pound sand.
First, you should realize that credit scores aren't based on how much debt you have, It's based on how reliable people are in paying their debts in similar situations.
Someone with 2x their annual salary in debt does sound a little risky to me, but it also means they have a lot of data in terms of credit management history. A lot of people can get into this situation with student loans, mortgages, or other "good" debt.
Someone who has never used credit cards just doesn't have a lot of payment history.
If you feel you need a higher credit score, then opening and using a credit card can be a good way to raise that score. Opening and using debt, like a car payment, mortgage, or other monthly payments will show that you understand how credit works.
Just make sure you fully pay off your credit card every month, because that debt can get expensive.
If you never plan on using any sort of loans, then it doesn't matter what your credit score is, and you shouldn't care what a banking system rates you as.
OP also didn't specify which type of debt. Twice your annual salary in CC debt, ehhh not so great. Twice your annual salary in a mortgage + student loans + car loan actually sounds like a pretty typical situation, if not a bit frugal. That's a person making 100k with a 4yr degree from a public univeristy, living in a 150k house, and driving a usedToyota.
It's all CC debt on their part.
For myself, I simply dislike the usury present in the debt market for consumers and have decided not to engage with it. The over reliance on a number generated by using a usury system seems entirely slanted against the average person.
I'm thinking about buying a house and am probably just going to save up and buy one outright instead of dealing with this bullshit.
You're engaged with it whether you like it or not.
Credit cards are a reality of the modern economy. There are costs associated with every credit card transaction and, due to the ubiquity of credit cards, those costs are priced in to nearly every single purchase you make. Because most merchants charge the same price regardless of payment type, this effectively means that your cash purchases are subsidizing my purchases made with a rewards credit card that has its balance paid off each month by a couple of percent.
You can choose to opt out, but that doesn't mean you're not playing the game either way.
Almost to the max. Your score is likely low because you don't use credit cards and are not building credit. Not that you want to carry debt over month to month, but the idea is that using them (and being responsible while doing so) shows lenders that you can be trusted to pay back your loans.
I'm finally over 800 as of a few months ago. It's worth trying to get your score up and build a credit history - it will come in handy when you're ready to buy a home.
I had a rather inflammatory response which I have deleted. I'm glad you've figured out a way to game the system that you're in.
"Game the system"? I'm literally using it as intended.
Apologies.
There is no way around. If you know how to buy a house without credit let me know.
Step 1: Be independently wealthy Step 2:...
Over 800. In my case there's plenty of credit history since I've been using credit cards for just about all purchases that can be paid that way. All the credit cards get paid off in full every month.
Here in the U.S. credit scores are an unfortunate reality so it's good to maintain some sort of credit history whether it's credit cards, loans/mortgages, etc.
800 no debt I just use my credit card a lot and pay it every month
It’s pretty good.
Your credit rating isn’t really about not carrying debts, it’s about showing you can pay off debt you incur, and you utilize credit in ways that lenders can generally exploit to make money off you.
The second one is a little counter-intuitive, but I’ve been dinged on my credit score over the years for both not utilizing enough of my available credit and not having open loans after paying off my last car (before buying a house).
If you’d like to build your credit, my suggestion is to get a card that offers cash back from one of the major card companies, and put your static expenses on that card. (Utilities, streaming services, car payment, rent(?) - whatever you pay every month.)
Don’t use it for anything else unless you already have cash earmarked for that purchase. Pay it down to 0 every month. That way you don’t get sucked into paying interest, and you’re building credit while accruing rewards for stuff you were going to spend cash on anyway.
I just had to replace my garage roof. It sucked. It cost about $4600. I had the money already saved up, though, because I knew this expense was coming. I had planned to write a check to cover it, but they sent me a digital invoice. Many cards offer cash back, but usually it’s 1%. I noticed their payment site had an Apple Pay logo, and I have an Apple Card, which offers 2% on sites that use Apple Pay. (I am certain other cards have just as good of rewards, but that’s the card I have.)
So I paid with the card, and then paid the card off the day the transaction cleared. I received $92 cash back and no interest charge.
It isn’t much compared to the cost of the roof, but for 30 seconds extra of my time, ‘saving’ almost $100 on the roof isn’t bad. And the credit reporting agencies see I can take a $4600 hit like a champ (they don’t need to know how long I was saving up).
My credit score is at the maximum. If you're young and financially responsible, it's worth getting a credit card and using that to build your score in case you need a loan at some point in your life.
And what is the maximum?
For the one I'm looking at (which is just one credit score company in the UK), 999.
850
@savvywolf@pawb.social didn't say it in their initial post, but they're from the UK, so the score is different.
The OP is from the US (FICO), so it's a different scale.
May I ask, indelicately, how old you are?
Currently 29, but when I first got my card it only took like a year or so to increase my score.
I'm also in the UK, so it could be a completely different system.
It's interesting in that it seems to depend on who I ask.
One of my credit cards says it's 809 as of right now. Based on Transunion.
But another one says 803, also based on Transunion.
¯\_(ツ)_/¯
No idea, I've never checked it.
As someone who spent years trying to repair my credit history because of a lot of things a lot of people did... You need to go check it
Nothing. Because we don't use them in either country I have lived in.
hovers values just below 800, tbh the only thing holding my acore back is my student loans(its not much, just not paid off yet)
Depends who you ask. Less than 600 at experian, over 750 at equifax. Of course the one everyone uses to give out loans is the shit score 🫠
I’ve had medical debt for a long time. Only recently finished school, got a stable career, and felt responsible enough for a credit card. I’m doing great now but have only been at it a few months.
People who want to get on the leader board should consider that your FICO score is a measure of how much lenders can profit off of you.
À bit over 800 because I make good money but have a fair amount of debt on my line of credit that I'm very slowly paying off
fRozeN
Haven't looked since I bought my house. But I own two pieces of property, have a high credit limit and consistent usage, and a positive net worth, so it's probably pretty good these days.
775 Transunion
778 Equifax
I've got about 3x my salary in debt, but that includes a home. I keep my credit cards paid off every month and a large chunk of cash in my savings.
I'm about 808 with my VantageScore. At most I use 14% of my credit utilization. On average I have about 7-10% credit utilization. I also have about 100k of available credit.