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Thread: Credit card -vs- debit card
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08-26-2013, 10:37 AM #76
Yep- the statement cuts on the "close date". This date is the same time for a given card every month, pending bank holidays and weekends (for some card issuers) that can throw it off by a couple days. Each card has a separate statement close date. You can look it up on a recent statement.
You can make a payment before this date and keep using the card. The 1-3% is more accurately any amount >$1<3% of available credit.
If you have $0.99 or less, some card issuers will actually cancel your bill, giving you a free $0.99, but reporting your balance as zero, which hurts your FICO score a little bit- just one of many complications in the world of FICO maximization.
I will pay off the current balance of my card between on week and 3 days before the statement close date and keep using the card so that when the statement closes it posts a >$1 balance. If I know I'm not going to be using the card for a while (backpacking trip or something), I'll pay off all but $1 on the current balance.
You can always make another payment a few days before the statement closes if your last week before the statement date is a really heavy usage week. Obviously, the higher your credit limit the wider the >$1<3% target range is, so the easier it is to hit it month after month. A card with a $25k limit is much easier to do this with than a card with a $300 limit.
To make sure this works for you, it is best to "pull" money into the card rather than "push" money out to the card. What I mean is, use the website of the card issuer to make a payment, don't use your regular checking account bill payment system or send a check in.
When you pull money in, the card issuer has to credit your account for the payment within a business day or so- can't remember the exact law, but that is the spirit of the law. When you push money, it can take days for the money to clear and be posted to the account, which can cause you statement balance to be much higher.
If you mess up and your statement balance posts as more than 3% or $0, you've always got next month to try again.
If you use multiple cards for whatever reason (1 for gas because it has some gas cash back program, 1 for travel because of a rental car insurance benefit, 1 for restaurants because of some other cash back program, etc) this system gets more complicated because you need all accounts to post exactly $0.00 and only one to post >$1<3% of available credit in order to maximize your score. They've all got different statement dates, so for the ones you want to report $0.00, you need to pay off the balance and make sure there are no pending transactions that post last minute before their statement dates to throw off your $0.00 number. For this reason, if you are trying to maximize your score in preparation for a big purchase (car, mortgage, whatever), you might want to keep it simple and only use one card in the month(s) preceding while you can easily maximize your utilization. No point in getting an extra $10 in cash back if it risks throwing you out of the top mortgage bracket and costing you thousands over the life of the loan.
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08-26-2013, 11:09 AM #77
This may be beyond your expertise, but where is the top mortgage bracket re FICO scores?
And as a separate question, and perhaps also beyond your level of expertize, but when two people apply for a mortgage together, do they just average the FICO scores?"fuck off you asshat gaper shit for brains fucktard wanker." - Jesus Christ
"She was tossing her bean salad with the vigor of a Drunken Pop princess so I walked out of the corner and said.... "need a hand?"" - Odin
"everybody's got their hooks into you, fuck em....forge on motherfuckers, drag all those bitches across the goal line with you." - (not so) ill-advised strategy
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08-26-2013, 11:09 AM #78
Glad you are finding it useful, and again, happy to help! I was where your daughter is not too long ago.
FWIW, it is much better to start by getting a secured card from a credit union (or bank- just be careful of fees) than to get a crappy unsecured card or a store card. Some of the more selective issuers have internal models that say "people who have accounts with x, y and z are more likely to default and/or be bad customers, so deny them or give them really low credit limits and/or higher interest rates."
Common "bad" creditors to have on your report are shitty issuers like First Premier, Capital One (while they now have some "prime" offerings like the Venture Card, they started off by issuing credit to people who couldn't get credit anywhere else, so they got placed in models and are still there in some) etc, any in store financing (furniture places, electronics stores, etc with "no payments for 60 days and 0% until 2015! The people who take those offers are much more likely to default/ charge off/ go through bankruptcy), and low limit store credit cards and store cards from wherever- Target, Best Buy, Sears, etc. Store cards that are only good at one store and can't be used elsewhere are particularly bad.
These things don't outright hurt your FICO score, but they set off alarms in many good issuers internal models, which seriously hurt your chances of getting good rates, higher credit limits, lower rates and more selective cards in the future.
A common mistake is that people get denied credit from a couple issuers, and then go down the line and start applying anywhere they can think of and end up with a scarlet letter account with a crappy issuer that hurts them in the future. Make sure you recommend to your daughter that she doesn't do that.
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08-26-2013, 11:46 AM #79
Others here in the industry will know more than I do, but my understanding is that a 780 is the cutoff for the top bracket.
My understanding is also that the 780 cutoff is for your middle score out of the 3 CRAs, so if your EX is 795, EQ is 785 and TU is 775 your 785 middle score will get you into the top bracket. I'd bet that even if your middle score was 780, if you have any seriously delinquencies on one credit report that seriously throws things off (795, 785, 625) the lender would take that into consideration and likely hold it against you.
I could guess on the applying jointly thing, but I don't know for sure.
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08-27-2013, 01:11 PM #80Registered User
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How does credit variation affect your score. They say,that mixing it up with cc ,auto loan, mortgage or other forms make up you score.
Example I am looking to buy used car soon. Plan to pay cash but if I finance some of it it will add another account/ inquiry but adds a different type of credit. Looking to buy a house in next year and want to be able to maximize my score.
Would the financed car help? Does amount matter?
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08-27-2013, 01:58 PM #81
Do you have any current accounts (credit cards, etc) in good standing? If so, the small boost you'd get from having a more diversified credit mix would likely be offset by the average age/ inquiry hit that you'd take.
IMO/IME, there is no good reason to go into debt to build credit. You can easily hit 800+ FICO range by just managing your credit cards in the way I've described in this thread. Not only will taking out a car loan likely lower your score, you will lower the amount you can approved for in your mortgage app process because it will throw off your debt to income ratio.
No need to go into debt.
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08-27-2013, 02:30 PM #82Registered User
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Exactly the answer I thought. But wanted the clarity. I read about how it could help but assumed it would very little. The concept was to finance less than 2 k with money already set aside with cost of financing being less than mony saved at cost of better mortgage
You are very good at stating clearly how it works when it never seems to be very clear.
Thanks
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08-27-2013, 08:13 PM #83
kevo, you're the man!
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08-28-2013, 09:07 AM #84Registered User
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Most banks I've seen underwrite mortgages on a case-by-case basis that consider a lot more than just FICO scores, so there's no real pre-defined brackets. This practice can vary by lender obviously, but there's no clear nation-wide "standard". Auto loans can be different...very FICO score driven with clearly defined pricing by FICO bracket.
At the bank I currently work at, we use the lower of the two middle FICO scores to underwrite joint applications.
Just an aside...bank regulators generally consider any loan where the FICO score is lower than 660, when made, to be "sub-prime", but I'm assuming you're not in that category.
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08-28-2013, 07:06 PM #85Registered User
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For your kids' future, designating them as Authorized Users of your cards will help them. It apparently counts in the AAoA portion of the score, so do it as soon as the issuer will let you. Obviously, the designation does NOT require that you actually let them possess the extra card.
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08-29-2013, 03:15 PM #86Registered User
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Kevo,
What do you know about VantageScore credit reports? I just paid $8 for mine as part of my free annual Experian report.
It goes to 990, I though the FICO score only goes to 850? Did I end up paying for something that is not a FICO score?
Was trying to preemptively put together a package for viewing properties, as the Realtor won't show without a report proving I am capable of paying.
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09-02-2013, 09:59 AM #87
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09-02-2013, 02:53 PM #88Registered User
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09-09-2013, 01:52 PM #89Registered User
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Woah, Kevo crushed it in this here thread! Great info d00d.
Brought to you by Carl's Jr.
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09-17-2013, 11:08 AM #90
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09-11-2014, 03:33 PM #91
someone was just trying to convince me that creditkarma's score was now accurate, his exact statement was
have you used it lately? they have the vantagescore which is what all 3 majors use now apparently."fuck off you asshat gaper shit for brains fucktard wanker." - Jesus Christ
"She was tossing her bean salad with the vigor of a Drunken Pop princess so I walked out of the corner and said.... "need a hand?"" - Odin
"everybody's got their hooks into you, fuck em....forge on motherfuckers, drag all those bitches across the goal line with you." - (not so) ill-advised strategy
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09-11-2014, 05:08 PM #92
Negative. The idea that the three major credit reporting agencies "use" a score is in itself historically inaccurate.
The three major CRAs collect and store data. This data is sold by the CRAs to credit issuers (financial institutions and insurance companies) who run the data through internal and third party scoring algorithms.
FICO is a company that is a third party to any of the CRAs. They develop scoring algorithms that predict things like the likelihood of a consumer defaulting on their loan, or even more sinister things like the projected profitability of a consumer- the most profitable consumers aren't necessarily the ones who pay on time all the time. A lender can make a ton of money off a consumer who is struggling and will have late payments and carries a large balance, but not ever declare bankruptcy. This is generally referred to as sub-prime, and there are a ton of shady lenders who want people just like that.
When a financial institution does a credit check, they don't say "He Experian, what is Danno's credit score?" Instead, it is more along the lines of "Hey Experian, please pass Danno's credit report onto FICO so it can run through the scoring algorithm we use there."
So, the Vantage score was developed by the CRAs together as a way of cutting out the third party FICO- they realized that they were leaving a ton of money on the table by having the financial institutions get the score from a third party, so they developed Vantage to try to undercut FICO. Why buy a FICO score when you can get a score directly from a CRA for cheaper?
The issue is that most financial institutions didn't want to move things around and start using Vantage, either because of having to rework internal models that were already based of FICO or because Vantage didn't do as good a job as FICO algorithms at predicting the things that the institutions wanted (risk of default, profitability, etc). Vantage was not adopted on a large scale by financial institutions, so the score is useless to consumers.
The confusion comes from the consumer facing sites run by Experian, Transunion and Equifax. Over the past couple years people have gotten more interested in personal finance (probably as a result of the recession) and the CRAs realized that they could make money selling consumers their "credit score". The issue is that the CRAs started passing off the Vantage scores to consumers as their "credit score" as a way to make some money off the Vantage algorithm that never took off on the lending side. Again, Vantage is pretty useless because what matters is what lenders use, not what CRAs sell.
FICO realized that they too could make money with a consumer facing site of their own and developed MyFICO. For a while they had a bit of a falling out with Experian- Experian wouldn't give FICO consumer data to run through a FICO algorithm to sell FICO score direct to the consumer, so MyFICO could only sell EQ and TU scores- for several years it was impossible to buy an EX score from MyFico. There was, and still is, a ton of consumer confusion over the idea that there is more than one credit score, so MyFico had to compete with dozens of other sites (many of which were run by the CRAs) who want to sell or just give out Vantage scores.
It is possible to buy a Vantage score from each of the CRAs, but again, what matters is what the financial institutions use.
Now, a bit more info- the Vantage algorithm isn't a static thing and it has been changing to be more like FICO. There is a long thread over at CreditBoards that breaks down the difference between the FICO algorithms (remember, there are several FICO algorithms) and Vantage.
In the past year or so, the delta between a lot of people's FICO scores and Vantage scores have narrowed (some by as little as a couple points), but there are still some key differences between the scores, especially when it comes to how Vantage handles utilization (revolving balance/available revolving credit). Vantage score you higher for carrying a balance to a certain point, while FICO scores you highest if you just have one revolving account reporting a couple dollars a month and all other account reporting a zero balance.
This has revamped one of the stupidest and most harmful inaccuracies that people keep spreading- that having a little bit of debt and paying interest actually helps your score. It does if you look at Vantage scores, but carrying a balance actually hurts your FICO score and again, that is what matters because it is what most lenders use. You do not need to pay a cent of interest, ever, to have an 800+ FICO score.
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