Disclaimer: This is mostly for US Era as I have no earthly clue how credit works outside of the US.
Credit score means a great deal for the average consumer. It affects the interest rates one may be offered in any lending situation. It may make the difference between a lender giving you the time of day or simply turning you away. And it is important to insure one has a strong credit score from a young age. So I thought I'd make a thread so people could share their input and experiences and hopefully dissuade that 20-something Era member that might be thinking about financing a $80k Land Rover while earning less than an ideal salary.
Resources:
I learned this the hard way. Back when I was young I had an ex that took a credit card I forgot about and rang up over $5k of debt on it. That went unnoticed for years. Eventually that debt was sold to a cut throat debt collector and I had to settle for $4k out of pocket and my credit score fell to 650. I had no idea what a credit score even was at the time (this was 2012). To finance a car I had to sign special documents and had an absurd interest rate. Even though I earned over $90k and had no other debt.
So, I looked into credit scores and how one could build them. I got a credit card with a cash back reward and used it for everything, paying it off every week. No other debt, ever. Now in 2019:
(Note: 850 is the highest in the USA)
Creditors now literally offer me free things just for the privilege of me being maybe being their customer. I was offered a 1.9% loan from BMW the other day.
So young people, never miss a credit payment, open several accounts you'll never use, and ask for extensions every year even though you'll probably never use them.
Credit score means a great deal for the average consumer. It affects the interest rates one may be offered in any lending situation. It may make the difference between a lender giving you the time of day or simply turning you away. And it is important to insure one has a strong credit score from a young age. So I thought I'd make a thread so people could share their input and experiences and hopefully dissuade that 20-something Era member that might be thinking about financing a $80k Land Rover while earning less than an ideal salary.
Resources:
- Free FICO score from Discover (so long as you let them sell your info): https://www.creditscorecard.com/
- Credit Karma, for seeing a complete view of your credit and challenging items easily and quickly. You can also see the lesser credit score companies that slimy people like car salesman use: www.creditkarma.com
- For US citizens, you can get your actual credit score free of charge once a year here. I know, how nice of the government to let us see the score creditors arbitrarily make once a year. How nice of them: http://www.annualcreditreport.com/
- Total accounts: 10% - There are installment accounts (like car loans or mortgages) and revolving accounts (credit cards). It has never been made truly clear by creditors what an acceptable amount of either is
- Length of credit: 15% - The longer your history the better. It didn't seem to affect my score until about year 8-ish
- Inquiries: 10% - When someone makes an inquiry about your FICO score. This happens often while trying to rent an apartment, check financing on a car, sign up for some retail credit card at a place like Macy's or Target. There is supposedly "soft" and "hard" inquiries but neither seemed to ever affect my credit. My friends in accounting tell me one thing, though: don't do it frequently. Four times MAX a year
- Revolving Utilization: 30% - This is a big one. Keep your monthly credit utilization beneath 9% at all times if possible
- Missed Payments: 35% - The killer. Basically, never miss a payment. If you do the credit companies will make you a pariah for years and your score will tumble
I learned this the hard way. Back when I was young I had an ex that took a credit card I forgot about and rang up over $5k of debt on it. That went unnoticed for years. Eventually that debt was sold to a cut throat debt collector and I had to settle for $4k out of pocket and my credit score fell to 650. I had no idea what a credit score even was at the time (this was 2012). To finance a car I had to sign special documents and had an absurd interest rate. Even though I earned over $90k and had no other debt.
So, I looked into credit scores and how one could build them. I got a credit card with a cash back reward and used it for everything, paying it off every week. No other debt, ever. Now in 2019:
(Note: 850 is the highest in the USA)
Creditors now literally offer me free things just for the privilege of me being maybe being their customer. I was offered a 1.9% loan from BMW the other day.
So young people, never miss a credit payment, open several accounts you'll never use, and ask for extensions every year even though you'll probably never use them.
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