Maximizing Credit Score before applying.

[44Dan44]

Just wanted to share something that applies to any type of car loan, home loan, new credit application.
Many of you prefer to remain debt free and/or payoff your credit cards monthly like I do but in the event you plan to make a large purchase or as applies to this forum, buy a new truck, you can bump your FICO score up a bit with a little planning ahead.

This mainly applies to you if you carry zero balance due across ALL of your credit cards. FICO views zero debt or "utilization" as a negative and a small amount of debt or utilization as a positive and then a big negative again when your utilization or debt is too high.
If you carry zero debt regularly, make a purchase with your credit card but DO NOT pay it off right away, wait until the next statement date for that credit card so that the small purchase you made is reported to the 3 major Credit Reporting Agencies, ie Transunion, Equifax, Experian. If you always pay off your credit card before the statement date, no utilization is ever shown to the CRA's. Once the balance due on your statement is reported to the CRA's you then have 25-30 days before the next statement to pay it off as your normally would with zero interest charges incurred.

1% utilization is the best possible for maximizing FICO scores.

As seen below in my example, (truck delivers May 7th-ish but I'll secure my loan probably just before May 1st) I made a purchase of $24.37 on a credit card with a 44,500 credit limit resulting in 0.52% debt utilization (FICO rounds up to 1 full percentage point) resulting in a nice bump. Lenders don't care if your score is 800 or 850, its the same either way, good is good, no extra credit given (pun intended) but if you are borderline next lower tier credit this little trick could put you over the top.

 

[Cseybert]

Both my bank and my credit union have said 740 and up to 850 all the same.

 

[44Dan44]

Both my bank and my credit union have said 740 and up to 850 all the same.

Agree. 850 is just a game I play, although I have used it to force a credit card company to give me their best advertised rate, they really can't argue the point. The post is intended for borderline lower tier.

 

[Alligator John]

I don't believe that is true. Utilizing credit of course increases your credit score, but carrying the debt instead of paying it off right away does not. I use cards to get cash back and points. Especially for large purchases. I but carry none of the debt. I pay them immediately. It still reflects positive changes on my credit score.

 

[44Dan44]

I

I don't believe that is true. Utilizing credit of course increases your credit score, but carrying the debt instead of paying it off right away does not. I use cards to get cash back and points. Especially for large purchases. I but carry none of the debt. I pay them immediately. It still reflects positive changes on my credit score.

It's settled science. Guinea pigged to death at Credit Boards forum and My Fico forum. Credit Karma scores don't matter and have very little correlation to reality.

 

[Alligator John]

Does Carrying A Balance On A Credit Card Hurt Your Credit Score?

But is carrying a balance on your credit card always a bad idea? And is it bad for your credit score? Check out our expert advice to find out.

www.forbes.com

Carrying a balance on a credit card to improve your credit score has been proven as a myth. The Consumer Financial Protection Bureau (CFPB) says that paying off your credit cards in full each month is actually the best way to improve your credit score and maintain excellent credit for the long haul.

 

[CaptainMike]

I don't know, we are truly debt free (well, except for what the government says we owe them) and carry zero credit card balance and my FICO has been in the 820 range for years. My understanding is the credit agencies look at potential debt, i.e. available credit vs income. That might be splitting hairs with the point you are making, but your advice is solid. I got into a little credit trouble in my early 20's and vowed to never, ever let that happen again. It takes diligence and determination, but it's worth the effort and is never a question when one considers assuming debt.

 

[44Dan44]

Does Carrying A Balance On A Credit Card Hurt Your Credit Score?

But is carrying a balance on your credit card always a bad idea? And is it bad for your credit score? Check out our expert advice to find out.

www.forbes.com

Carrying a balance on a credit card to improve your credit score has been proven as a myth. The Consumer Financial Protection Bureau (CFPB) says that paying off your credit cards in full each month is actually the best way to improve your credit score and maintain excellent credit for the long haul.

What I've described is not what you are calling "carrying a balance"

 

[Alligator John]

Should You Carry A Balance On A 0% APR Credit Card? | Bankrate

There are some clear pros to carrying a balance without paying interest, but there are some potential downsides to keep in mind when it comes to intro APR periods.

www.bankrate.com

You may have heard carrying a balance is a good way to build credit. This is just a myth. Credit card companies report the balance that appears on your statement to the credit bureaus. Whether you go on to pay the entire amount or carry some over to the following month, it doesn’t change the number reported for that month. Plus, a FICO score doesn’t consider whether you’re carrying a balance.

 

[44Dan44]

Plus, a FICO score doesn’t consider whether you’re carrying a balance.

100% false. It's the 2nd biggest factor in your score.

 

[Alligator John]

When you make a credit card purchase it is still included no matter if you pay it off the same day or the next month. There is no benefit to waiting.

 

[44Dan44]

When you make a credit card purchase it is still included no matter if you pay it off the same day or the next month. There is no benefit to waiting.

Again 100% false. You can make purchases every single day of the week, The credit reporting agencies DO NOT see that, they only see what amount due is reported on the statement, that determines your utilization of available credit. If you've paid them all before the statement cuts, the CRA's will see 0% utilization. The benefit to waiting is clearly demonstrated in post 1, see the photo, see the score jump.

 

[Alligator John]

Why that 30% rule of thumb about credit card use could be costing you

Experts say there is a misconception among consumers that your credit score won't be negatively affected unless your total balance climbs above 30% of your available credit.

www.google.com

 

[44Dan44]

Why that 30% rule of thumb about credit card use could be costing you

Experts say there is a misconception among consumers that your credit score won't be negatively affected unless your total balance climbs above 30% of your available credit.

www.google.com

Cool story, now link me to 1% utilization. As I stated in post 1: Zero percent utilization lower score, 1% best possible score, higher is bad.

 

[Alligator John]

As a southern gentleman I will have to just agree to disagree. I advise others to do their own research and not to take the word of individuals on social media.

 

[44Dan44]

As a southern gentleman I will have to just agree to disagree. I advise others to do their own research and not to take the word of individuals on social media.

lol, 100% agree
https://moneytips.com/best-credit-utilization-ratio/

 

[CFE]

Came for the knowledge, stopped for the popcorn

 

[Brutal_HO]

Just wanted to share something that applies to any type of car loan, home loan, new credit application.
Many of you prefer to remain debt free and/or payoff your credit cards monthly like I do but in the event you plan to make a large purchase or as applies to this forum, buy a new truck, you can bump your FICO score up a bit with a little planning ahead.

This mainly applies to you if you carry zero balance due across ALL of your credit cards. FICO views zero debt or "utilization" as a negative and a small amount of debt or utilization as a positive and then a big negative again when your utilization or debt is too high.
If you carry zero debt regularly, make a purchase with your credit card but DO NOT pay it off right away, wait until the next statement date for that credit card so that the small purchase you made is reported to the 3 major Credit Reporting Agencies, ie Transunion, Equifax, Experian. If you always pay off your credit card before the statement date, no utilization is ever shown to the CRA's. Once the balance due on your statement is reported to the CRA's you then have 25-30 days before the next statement to pay it off as your normally would with zero interest charges incurred.

1% utilization is the best possible for maximizing FICO scores.

As seen below in my example, (truck delivers May 7th-ish but I'll secure my loan probably just before May 1st) I made a purchase of $24.37 on a credit card with a 44,500 credit limit resulting in 0.52% debt utilization (FICO rounds up to 1 full percentage point) resulting in a nice bump. Lenders don't care if your score is 800 or 850, its the same either way, good is good, no extra credit given (pun intended) but if you are borderline next lower tier credit this little trick could put you over the top.

"zero balance due "

A distinction should be made regarding the difference between a zero balance due and a statement balance.

I pay all my CC to "zero balance due" before due date to avoid any interest but don't always pay it down completely, and they will still show a balance on the bureaus as of the report date. That said, if I was looking to apply for credit, I would pay the only card I don't pay to $0 every month down to about $600 (1% of my avail credit on that card) for a few months prior. That said part duex, anything over 720 (760 mortgage) - (mine hovers around 830+) is just icing on the cake, no better or worse credit deal.

 

[Wanderlust073]

I bought a vehicle right after another major purchase. My score when they ran it had dropped to 798. It cost me the best loan rate they reserved for 800+. Presumably every lender can draw their own lines in the sand.

No major purchases, paying cards to 0 every month, and only debt being mortgage and truck keeps the score parked at 850.

Pass the popcorn.

 

[44Dan44]

Interesting discussion although none of it applies to me. My intent is not to offend anyone but in my opinion, a good credit score translates into being a good slave.

I intentionally keep my credit score low so I have no worries about my identity being stolen and used for nefarious purposes. Not having credit available has a very positive unintended consequence, I can only purchase what I can afford and that means if I am going to buy something, I really need it. Over the past few years I wanted a new AEV Prospector with a Four Wheel Camper - paid cash without blinking an eye. There is a long list of other items purchased that most men would dream of owning - paid cash for it. I travel full time and every penny spent comes out of my savings. As long as I am reasonable regarding my expenses, I will continue this adventure for as long as I desire.

Here's the secret - if you play the credit game you are making other people rich and keeping yourself poor.

Totally taking your post as intended: BE DEBT FREE! A Top 5 piece of life advice for anyone.

However, you make some fairly foolish statements from there for anyone coming behind you to read and quite frankly for yourself as well;
I'll also make the disclaimer no offense intended and I'm sincere on that, you are a very intelligent person with incredible life and work experience but you are really missing the mark on this subject. I understand your perspective however, as should anyone reading it: correct me if I characterize this poorly, 1. You are at a time in life where you are enjoying what all your years of hard work have bought you. 2. You don't have any plans to buy a house or land and raise a family, all that is done. 3. You are the type of guy with a close friend in practically every city you've ever visited, the type of guy who can say "I know a guy" for any situation that would ever come up. All of those are great things, but you are not the norm, you are a Renaissance Man, a high complement.

" A good credit score equals being a good slave"
False, debt makes you a slave, a good credit score is freedom to flex when you need it, to take advantage of opportunities.

"I intentionally keep my score low so I have no worries about my identity being stolen"
Pardon, but that's the dumbest thing I've ever heard. You can freeze your credit file to prevent that. All you've done is guarantee yourself higher home/car insurance rates, barriers to certain types of employment (understanding that's not a factor for you, speaking to the crowd) and a lot of missed opportunities.

"every penny spent comes out of my savings"
If you are earning 5% in a savings account, take a chunk out to buy ____________ a tractor, as an example, that interest earning potential is gone forever. Instead you could have taken a 0% interest loan and paid it timely keeping the bulk of your savings growing, but wait, your credit score is low, sorry, you don't qualify for 0% Missed opportunity, lost money.

"if you play the CREDIT game you are making other people rich and keeping yourself poor"
I earn multiple thousands of dollars a year on credit card bonuses and cash back bonus, I pay ZERO interest because I pay in full each month, I don't keep cards with an annual fee, I churn through them to collect the free money and then close them before the annual fee is due, rinse/repeat. I've finished my Christmas shopping this year, literally $3,900 of it was free*** money, the rest I planned to spend anyway and is already paid off before the new monthly statement even hit. If you play the DEBT game, you are correct.
***All those credit card bonuses they generously pass out are paid for by people who run up their debt and pay interest, Chet is right, don't be that guy.

"here's the secret"
Discipline

"I only purchase what I can afford"
100% sound advice whether its in cash or transacted through a credit card.


'People have learned to fear credit, when they should have been taught to fear debt'