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FICO credit score question

Y

yg17

macrumors Pentium
Original poster
Aug 1, 2004
15,030
3,009
St. Louis, MO
I just did the free online report thing where you get 1 report a year, and Equifax offered to give me my score for free if I offered to sign up for a free trial of something, so I figured what the hell, and signed up (and will have the joy of calling in and cancelling it soon :rolleyes:). My score was 702. Couple questions:

1. Is 702 good or bad? Equifax said it was still good, but slightly below average. So is 702 terrible? Within a year or so, I'm hoping to purchase a new car and hope that the 702 isn't going to stop me from getting a halfway decent interest rate.

2. Less than a week ago, I paid off a credit card, about all $1100 of the balance. Balance is zero now (not yet reflected on my credit report). The limit was $2000, so I assume more than 50% usage was hurting my score. Can I expect my score to go up a bit when they report that?

3. I have another card that's got about $250 on it out of a $2900 limit and I'm going to have that paid off soon too. Considering it's only about 10% usage, is that also bringing my score down much? Or is that negligible?

4. The only other credit history I have are student loans which I haven't yet started paying on. I'm under the assumption those damn loans are also bringing me down. They're reported as being in good standing, but since I don't make payments until another year, I don't know how they could be anything but good standing.

Thanks
 
702 is not a great score and you won't get the best available %APRs but it's not terrible either. One thing to keep in mind, that the actual number of open accounts and loans will hurt your score, doesn't matter that you paid off all of your credit cards, as long as you have like 3-4 or more credit cards, it will keep your score down even if the balances are zero. Of course paying everything on time helps the score but just the fact that you have a couple of active credit card accounts will decrease your score.
 
If you close any open accounts that aren't in use you'll likely bump your score a few points. Also, I think you might benefit from consolidating student loans into one loan, but that might be more of a hassle than it's worth.

I was told that 720 was the bar to clear, so you're nearly there...
 
Also consider that each of the big three will give you a different FICO number.

When I got my mortgage, they used the middle FICO number. However, when I got my car, the dealer only pulled my BEACON (which is what Equifax calls their FICO number).

For me, Equifax was the lowest of the three FICOs. It was about 45 points lower than what Experian rated me (my highest score), even though they both showed the exact same credit history.
 
I have a couple of Suze Orman's books and I think they do a good job of explaining finances in laymen's terms. I'd recommend Young, Fabulous, and Broke to anyone new to the "real world" (just out of college, mid-20's first career job etc.,) as explains how to build your credit score and pitfalls to avoid. For example, closing CC accounts could negatively impact your FICO score by erasing your "good" credit history and how it effects your credit-to-dept ratio.


Lethal
 
So I just want to clarify something that I haven't been sure about.

I understand that if I'm currently using most of my credit limit, it's bad for my credit score. I have a $1000 limit (just got my first credit card in June) and I put most everything on it (for the rewards, I guess; I could use my debit card instead, if I wanted to), so by the end of the month I'm at around a $700 balance (it's only been a couple months, and a few one-time expenses, so this is a rough guess). I pay it off in full each month, as soon as I get my statement.

Does my credit score suffer because of my history of running up 70% of my credit limit, or do I "cleanse" it by paying it off each month? Say I've just payed off everything, is my credit score hurt by the fact that, at one point, I was using most of my credit limit?
 
FredAkbar said:
So I just want to clarify something that I haven't been sure about.

I understand that if I'm currently using most of my credit limit, it's bad for my credit score. I have a $1000 limit (just got my first credit card in June) and I put most everything on it (for the rewards, I guess; I could use my debit card instead, if I wanted to), so by the end of the month I'm at around a $700 balance (it's only been a couple months, and a few one-time expenses, so this is a rough guess). I pay it off in full each month, as soon as I get my statement.
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Hmm, that's a good question. AFAIK, the credit card companies only report your balance once a month or two, so I guess it all depends on when they report it. I'd imagine there would be a pretty significant difference in your credit score if they report your $700 balance right before you pay it or your zero balance right after you pay it. Figuring out when they report it (if there's a certain date or if it's just random) is the tricky part, but if you can find out an exact date (say, the 15th of each month) then you could maybe adjust your billing date so the card is paid in full a few days before that
 
Okay, thanks. That's what I thought. I can pay online up to 4 times per month (even in the middle of the payment cycle, it doesn't have to be after I get my statement) so I can clear my balance whenever needed, basically. I'm with Citi, in case anyone is wondering.
 
Fred,

Citibank reports your end-of-month balance. If you have 70% of your available credit taken at the end of the month they will report that. It will ding your FICO score.
 
Ah, good to know. When you say "end of the month" do you mean the end of the statement period (for me it's around the 23rd)? (I know I called it end of the month too :p). So I can always just pay it off right before my statement date and it'll be good.
 
I'm a mortgage consultant, so I see credit reports every day.

yg17 said:
My score was 702. Couple questions:

1. Is 702 good or bad?
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702 isn't a bad score, but it could be better. Like zwida said, 720 is generally the bar you need to get to in order to get some of the best rates possible.

yg17 said:
2. Less than a week ago, I paid off a credit card, about all $1100 of the balance. Balance is zero now (not yet reflected on my credit report). The limit was $2000, so I assume more than 50% usage was hurting my score. Can I expect my score to go up a bit when they report that?
Click to expand...

It might go up a little, but there's good debt and bad debt. Whenever you have a revolving credit account (credit card, retail charge account, etc...) and you hit the 30% mark on used balance it will begin to adversely affect your credit score. But it's also good to have open lines of credit because it shows your responsibility for retaining low balances. So it's best to have a couple revolving accounts with small balances, don't completely pay off an account unless you have a specific reason to (high interest rates, too many cards, etc...)

yg17 said:
3. I have another card that's got about $250 on it out of a $2900 limit and I'm going to have that paid off soon too. Considering it's only about 10% usage, is that also bringing my score down much? Or is that negligible?
Click to expand...

This is good debt. Keep it if you have the discipline to keep the balance low.

yg17 said:
4. The only other credit history I have are student loans which I haven't yet started paying on.
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This will not negatively impact your credit score right now. As long as your loans are still in deferment and you're not required to pay anything against them, your credit will not be affected.

The current way credit is scored in this country is ridiculous. There are some serious flaws in it. I have seen someone only 10 months out of bankruptcy have a higher score than someone who has never been late on a single payment. Although this person had never been late, he did have a lot of open lines of credit, and even though his income MORE than supported his debt his score was still low. There is something VERY wrong with that.

And are you aware that your credit score is dinged even when you PULL your credit? The rationale behind this is that if you're looking at your score then you're thinking of accruing more debt. Stupid! Sometimes the worst thing you can do to your credit score is buy a car because some sales staff will pull your credit numerous times to try to fit you in to the right financing program.

Credit should be solely based upon your ability to pay your debt on time, and that's IT!

Anyway, distinguishing the difference between good debt and bad debt is the key to manipulating your score. Have a few open lines of credit, keep a close eye on the balances and make your payments on time. Do this and your credit score will soar.

Keeping your score high is more important than ever now, especially if you plan on buying a home. I get an email or two every day from various mortgage lenders telling me they've tightened their restrictions, because no one wants to lend money to someone with a score lower than 680 anymore.

I'm done rambling. I hope this helped some!
 
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