Credit
I have fairly good credit, but I want to increase it since I'm thinking of buying a house and new car. I'm 25 and have a few credit cards with fairly low balances and lots of student loans. Is there anything I can do right now to increase my credit within the next couple of months?
Comments
Overall, probably the most important thing to do now is get at least a 10% downpayment saved up. If you can't do that, it may not matter much what your credit score is.
Oh wait, I forgot that I'm not a spammer.
(and my apologies to Maria Anderson for the insinuation that she is a spammer)
And I would save up a 20% downpayment for a house and buy maybe in a year or three, after prices apear to have started coming up from a sustained bottom. The next price runnup will almost CERTAINLY not be as fast as it was for this bubble, giving you plenty of time to get in for a "close to bottom" price.
I would also buy when you think interest rates are as high as possible. Remember, people buy a payment, not a price. The more that is factored into the payment for interest, the lower the relative price. And, more importantly, a high interest rate always implies the opportunity to refi as rates go down. The same cannot be said for low rates. Low rates are only good for sellers.
1. to establish higher ratio (rcc has mentioned this already)
2. to establish as a responsible borrower. As a responsible borrower, by having 20k LOC and having 2k credit card makes a huge difference.
3. do not close your accounts. It establishes both history and also add your ratio.
Paying off your student loan is also not a huge concern, it is one of the lowest factor on the scoring system.
So bottom line is this, I would just get a crap load of credit card, LOC and what not. Using it sparingly and wisely, but do make sure you use them. Lenders are known to cut credit line and close account without notice. I have experienced it several times already.
Do not miss any payments, no collection, keep the ratio low and you should maintain a stellar credit. I have a pretty damn solid credit score and I know the game very well.
I disagree.
Times and economic landscapes change. People need to change with them.
Student loans cannot be "bankrupted away". Banks know this. The poster already has credit cards and "some" credit. In the current environment the student loans are a load on the credit that can be extended. By eliminating them, he will effectively increase the amount of credit for which he can qualify. And by focusing on paying one down fast (and then the next), while continuing to make payments on the others, he can effectively speed up the process while simultaneously simplifying his finances, which is seriously underrated.
What I didn's say, which goes without saying, is that he has to be careful about how much "available credit" he already has. If you have a $10,000 credit limit card, but cary zero balance, that $10k is factored into how much another lender will give you.
Of course making the payments on all bills will improve the credit score, which is the heart of the posters question. I expanded only because I think credit score should be the least of a 24 year old's concerns in the current economy, considering the other information about themself the poster volunteered.
I will agree that my advise was relatively vague...
One thing I need to expand: The reason I created an account was to counter some of the things you specifically were saying. When I saw that you had responded so quickly to my posts, I was not entirely surprised.
I have been actively following this credit bubble since before everyone was calling it a credit bubble. I think it is important for many people to understand that they may be doing business in a "pre-depression" atmosphere and at least take into account the possibility when making financial decisions.
It is amazing how people's perception of the value of an item can change. I used to sell blank videotapes for $20 a piece and people bought them by the case. Seems silly now. We may look at $500k McMansions the same way in a few years. It needs to be considered.
Not-so-sophisticated techniques:
Ask a question that is vaguely related to the forum topic. A few days later a new poster gives an answer with a link.
More-sophisticated-technique:
Create an account and post useful information that agrees with the most vocal members of the board. When you have gained trust, start posting links to desired sites in response to questions.
If you are for real then welcome. Be warned that it may take a lot of time and effort to gain our trust and even then we will be wary if your behavior turns spammish.
I have been a member (with the same name) in Freerepublic.com for about ten years now. I know how it works. I'm also 54 years old and have seen it in real life. I can say something ridiculous at age 54 and people listen intently. But I could (on rare occasion) say something smacking of wisdom in my early 20's and "got no respect".
I sold commercial real estate between '79 and '82 in downtown Seattle. Sometimes when a new client first laid eyes on me they'd look at me as if they were saying, "uh, can I talk to your DAD?".
I came in here forgetting the rules. Sorry about that...
By the way, I am speaking from seeing hundreds of credit report and having a very strong credit report of my own. I can also provide methods to boost credit score by 40-50+ points in 1 month or less (provided there's room for such boost), and these methods that were proven.
Generally, if you're choosing between paying down CC balances vs. student loans, your credit score will improve more quickly by paying down the cards. This happens because paying them down decreases your credit utilization rate (current balances / limits).
What about your husband's credit? Remember, you've both got scores (3 each actually), and in dual-earning families the lender will generally use the middle score from the lower scoring spouse. To get the best loan you'll want to be 720+.
I am terribly guilty of scope creep, another thing I am paid to avoid.
As others have said:
-Keep a low balance on your credit cards at credit reporting time. This doesn't mean "don't use them" but try paying off large chunks of it before they issue your statement. AFAIK, the statement date (and balance) is what they report to the credit agencies.
-Don't get new credit if you're looking to get a mortgage in the next few months - it'll probably make your score worse.
-Don't rely on being an authorized user on your spouses credit card, and having that help your score. That *used* to work, but the agencies are in the process of changing that. Instead, contact the credit card company and get put on a Joint Owner of that card. Some companies won't do this, BTW.
-Don't pay back your student loans. You'll probably need the cash for down payment more than you're hurting because of the monthly payment. Besides student loan interest is tax deductible and *usually* as quite a low rate.
You don't need 20%, or even 10% down payment right now, regardless of what others may tell you. There are FHA programs out there for 5% down with pretty decent rates.
Still, I'm not sure that buying now is a good choice. Keep saving, pay off your revolving balances, don't buy a new car, and you'll be fine...