Author Topic: Good/Bad credit in US  (Read 5028 times)

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kkl123

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Re: Good/Bad credit in US
« Reply #15 on: September 12, 2011, 01:53:10 PM »
Yes, but the point is that if you don't use credit, you don't need to worry about credit. Good credit for renting an apartment can be obtained by having a solid work history and by having a substantial amount of money in the bank--money that would have been thrown away on interest fees, rather than gaining interest as it should. It is a little harder to get that initial credit established, but it's far better than running up a bunch of debt. Using credit is like flushing money down the toilet.

In the US, do you pay interest if a credit card is paid off in full at the end of the month? I have heard this so often from Americans.

I only start paying interest if I do not pay my full bill at the due date, which I always do.

I think it depends on the credit card. And just to add "fun" to the whole situation, some of them have fees to penalize you for paying the whole balance off every month--you're not generating enough interest for them, so they ding you with a fee.

But that's not true of all credit cards.  In fact, I don't pay a yearly fee for any of our credit cards (some of which we've had for 30+ years), and since I always pay the balance in full each billing cycle, I never pay interest or late fees.  Our credit scores are very high because we pay on time, in full. We're not very lucrative for the credit card companies, but we get offered very good interest rates on mortgages and insurance because we have good credit scores.

I use our credit cards for most purchases at "big stores" but pay cash at family businesses, like our veterinarian or doctor or the local feed stores.  That keeps them from having to pay for fees to get their money from the credit card company.

I prefer credit cards to debit cards because there are more protections against fraudulent use of a credit card than a debit card written into law.  Even though our credit union (like a bank, except it's a group of people who pool their funds) extends the same protection to the debit cards they issue as the law does to credit cards, I still prefer to keep the credit cards open and our credit history improving.

I also recommend that people who are considering opening a credit card check with their local credit unions -- that's where you tend to find the no-fee credit cards and low interest rates.

megswsu

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Re: Good/Bad credit in US
« Reply #16 on: September 12, 2011, 02:16:37 PM »
^POD.

I've never paid any fee for paying on time. That's the sort of thing I'd read about before signing up for a card. I have one card that does not have an annual fee, and another that does. The only reason I'm keeping my AmEx open for now is b/c I've had an account w/them since I was 18 (31 now) and had a blip on my credit 3 years ago concerning my condo. So it helps my credit score to have a long-standing account open and no late payments. I still hate that $90/year fee though. But they do have good stuff for all the points, so whatever for now! :)

And I do think credit history is important. Before I met my husband and got him straightened out, his credit was horrible. He didn't understand how to budget and how to pay off the full amount each month. So he was a poor choice for lenders and deservedly got bad interest rates as a result. How else are lenders to know if you're good about paying your debts off if there's nothing to go by? To me it makes sense. They're taking a risk loaning money or renting an apartment to you, they need to know what they're getting themselves into.

However the nice thing about credit is that if you're diligent w/your money and pay things off and don't over extend yourself, you can better your report and your score. It might take some time to repair it based on how bad off your history is, but it can be done. DH filed for a BK before we were married, but ever since then we've made sure to build him back up and in another 4 years he'll have nothing bad on history. And never again for that matter! Unfortunately my MIL fails to understand how credit works and so has creditors calling her. Wish I could offer her advice, but I'm not stepping on that land line! 

And I'll *very* rarely use my debit card. I know there are more protections now, but that's a direct link to my bank account and I don't want anyone having "access" to it. At least w/a credit card it's a barrier to my money.  :)





Judah

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Re: Good/Bad credit in US
« Reply #17 on: September 12, 2011, 02:23:01 PM »
In fact, I don't pay a yearly fee for any of our credit cards (some of which we've had for 30+ years), and since I always pay the balance in full each billing cycle, I never pay interest or late fees. 

This is true, but I would add one caution: several years ago I had a credit card company cancel my card because I had never paid any interest on it.  Since I wasn't profitable to them, they just canceled me. 
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kkl123

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Re: Good/Bad credit in US
« Reply #18 on: September 12, 2011, 02:38:01 PM »
In fact, I don't pay a yearly fee for any of our credit cards (some of which we've had for 30+ years), and since I always pay the balance in full each billing cycle, I never pay interest or late fees. 

This is true, but I would add one caution: several years ago I had a credit card company cancel my card because I had never paid any interest on it.  Since I wasn't profitable to them, they just canceled me.

The biggest issue I've ever had with a credit card company was trying to keep the amount you can use (credit limit) low on a card I wanted to use strictly for internet purchases.  That took several rounds of discussions with supervisors and threats of closing the card before they decided that yes, I could have a card with a $500 limit instead of the ridiculously high amount they wanted. 

In my experience, admittedly limited to three cases, I've never had a card canceled for not paying interest, but I have had threats of cancellation of a card I'd forgotten about and hadn't used for a year or so.   I do recall hearing about a rash of card cancellations for various and sundry non-reasons about the time the NY investment houses were imploding in 2007/08, but you're the first I've "met" who has had this happen.

If you read the contracts of most credit cards, they can cut you off at any time for any reason, including "we feel like it today".

I swear the marketers of credit cards must spend time in Victorian opium dens or something... the last time I got a new card in the mail to replace an expired card, when I called in to activate it, I was offered 0% interest for a year and a free magazine subscription to anything I wanted on a list of about 200 titles if I'd charge something on that card within a week. 

sasha

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Re: Good/Bad credit in US
« Reply #19 on: September 12, 2011, 02:38:29 PM »
I'm trying to counteract that by using my debit card as a credit card

Unfortunately, that won't affect your credit report (and thus credit score) in any way. Although you can run the card as credit, it really isn't credit because it is still automatically withdrawn from your checking account. It's not an extension of credit. If you get your credit report, that account probably won't be listed at all (mine never have been).

If you really want to improve your credit score, get a real credit card, charge a few bucks on it once every six months or so to keep it active, and pay it off in full at the end of the month. Being an authorized user or a cosigner on your husband's card is a good plan, too.

Sasha

DavidH

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Re: Good/Bad credit in US
« Reply #20 on: September 12, 2011, 02:54:58 PM »
If one uses credit cards sensibly, and that's a very big if, they can be a great tool.  For example, many cards offer some incentive, airline miles, reward points, cash back, based on purchases, usually one point or mile per dollar spent with some kind of bonus for certain things.  If you buy most things you would ordinarily buy using the card and pay off the total amount due at on time, you get the perks and incur no interest costs and the perks might be worth more than the annual fee.

On the other had, credit cards are often a very expensive way to borrow money, so if having one encourages you to spend beyond what you can pay off, the cost becomes very high.  In some cases, that still might make sense to finance something using the card, for example, if you have an emergency expense (say your hot water heater breaks), it might be better to pay the credit card interest rate than a short term loan depending on the circumstances. 

Another advantage is when it comes to renting a car or a hotel room.  Many companies block (that's the wrong term, but hopefully someone else can explain it) a relatively large amount of money if you use a debit card, whereas they only charge the amount you owe on a credit card.

I think the advice of live without credit cars entirely is not very good, rather the key is using them responsibly.  If you know the temptation to overspend will be too great, then don't get one, but they do serve a purpose.  A credit card can make it easy to be irresponsible and live beyond your means, but that doesn't mean you have to take advantage of that.

Outdoor Girl

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Re: Good/Bad credit in US
« Reply #21 on: September 12, 2011, 03:15:26 PM »
A friend of mine, married for many years, was always the one paying the bills.  Except that all the bills were in her husband's name.  When she was living elsewhere for a little while due to work, she tried to get a credit card.  She couldn't get one because she had no credit history.  She finally managed to get a store based credit card that she could use to get gas and charge things at that particular store, with a princely spending limit of $500.  Cripes, I got an $800 limit on my first card that I got before I graduated university!

I use credit cards almost exclusively.  It is counter-intuitive but it helps me stay on budget.  I always get a receipt when I use my credit card but if I pay cash, I sometimes forget to get the receipt and forget to record the amount spent in the daytimer I use for the purpose.  When the bills come in, I set up the payments on line, post dated to 5 days before it is due to ensure I don't pay any interest.  I only pay the amount listed on the statement.

And the odd time I've had an issue, like a postal strike delaying receipt of the bill or paying the wrong card, when I've called in to inquire, I usually end up getting the interest charges waived.  In Canada, and I know at least California is the same, the vendor gets charged a certain percentage for every transaction that goes through on a credit card so the CC companies still make money off of me, even if I don't pay any interest.

Although it is illegal, I've seen signs in small shops that indicate they won't process a CC for a purchase of less than $10.  So I do try to use cash at small stores for small purchases.  If it is a big chain, I don't worry about it so much.  It is the cost of doing business for them.
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sasha

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Re: Good/Bad credit in US
« Reply #22 on: September 12, 2011, 03:22:35 PM »
There seems to be a lot of misconceptions on what is actually reported to the credit bureaus that makes up a person's credit history. (This will all be US-centric information.)

There are two components to someone's credit history: the credit report and the credit score.

When talking about a credit history in an absract way, people are almost always talking about the reports compiled by the three credit bureaus: Equifax, TransUnion, and Experian. They compile information on any credit that is extended to you. This can include car loans, student loans, personal loans, credit cards, mortgage loans, HELOCs, and other lines of credit. They also include information from any collection agencies that may be pursuing debts.

For the most part (there are a few exceptions), utilities, phone companies, and landlords do not report to credit bureaus. If you are delinquent to any of these folks, though, you will generally be turned over to a collections agency, and that agency will report you to the credit bureaus.  So paying on time to any of these places won't help your credit history, but not paying will hurt you.

Most utilities, phone companies, and banks have their own systems that report your payment history within the narrow scope of their services. For instance, if you overdraw your bank account too frequently, your history will be recorded in ChexSystems and you could be denied opening a checking account at other banks. But if you check your credit report, these items most likely will not be on it.

Now to the credit score. The credit score is generated from the information from your credit report. Things that improve your score will be a low debt-to-credit ratio, number of accounts (but not too many!), age of accounts, mix of accounts, and payment history. Things that can hurt you are a high debt-to-credit ratio, too few accounts, not a very long history, a history of delinquent payments, and too many credit inquiries (so-called "hard pulls," which do not include viewing your own credit report, and multiple queries within a very short time frame are often viewed as just one pull). Your score won't take too hard of a hit from hard pulls, and will often rebound in just a few months.
Edited to add: having store credit cards can hurt your score as well

As someone said before, scores range from 300 to 850. Scores are mostly used to determine what kind of an interest rate you qualify for. (The better the score, the lower the interest rate.). Credit scores are not provided to employers who are making hiring decisions. They can obtain a credit report (and only with your permission), but not a score. Additionally, the report is somewhat different than the report provided to lenders.

I think landlords can get your score, although I'm not really sure about that. Many landlords will only want the credit report anyway.

For the most part, negative information stays on your credit report for 7 years. There are exceptions, such as bankruptcy, which stays on for 10 years. However, even if negative information hasn't aged off your report, your score can improve as time passes and you make on-time payments.

Sasha
« Last Edit: September 12, 2011, 03:24:52 PM by sasha »

Seraphia

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Re: Good/Bad credit in US
« Reply #23 on: September 12, 2011, 03:27:48 PM »
I'm trying to counteract that by using my debit card as a credit card

Unfortunately, that won't affect your credit report (and thus credit score) in any way. Although you can run the card as credit, it really isn't credit because it is still automatically withdrawn from your checking account. It's not an extension of credit. If you get your credit report, that account probably won't be listed at all (mine never have been).

If you really want to improve your credit score, get a real credit card, charge a few bucks on it once every six months or so to keep it active, and pay it off in full at the end of the month. Being an authorized user or a cosigner on your husband's card is a good plan, too.

Sasha

Yeah, I'm an authorized user for his account, and that's exactly what we do. We get my credit report checked anyway, since I had my wallet stolen a while back. (Fortunately, the credit card wasn't in there then)
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sasha

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Re: Good/Bad credit in US
« Reply #24 on: September 12, 2011, 03:32:16 PM »
Although it is illegal, I've seen signs in small shops that indicate they won't process a CC for a purchase of less than $10.  So I do try to use cash at small stores for small purchases.  If it is a big chain, I don't worry about it so much.  It is the cost of doing business for them.

It's not illegal; it used to violate the terms of use with the individual credit card companies. However, the Dodd-Frank Act changed this so it is now fine.

Sasha

Outdoor Girl

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Re: Good/Bad credit in US
« Reply #25 on: September 12, 2011, 03:36:46 PM »
Sasha, I hadn't heard that!  I'll have to check to see if that is also true in Canada.  Thanks.
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sasha

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Re: Good/Bad credit in US
« Reply #26 on: September 12, 2011, 03:39:50 PM »
Sasha, I hadn't heard that!  I'll have to check to see if that is also true in Canada.  Thanks.

Good question! I have no idea about Canada.

Sasha

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Re: Good/Bad credit in US
« Reply #27 on: September 12, 2011, 03:59:11 PM »
   A non credit history will prohibit you from getting a mortgage and car loan or renting an apartment.   Although mortgage companies can look at other things......car insurance , cell phone , utilities. You will pay more for that loan then a person EXACTLY like you(same job, same savings , same age/education, same liabilities excluding the credit cards) with 3 credit cards that have been paid off over 2 years. The point is would you lend someone $200,000 when they have never bowwowed a cent from anyone before, do you really want to be the first person to lend someone money? lenders feel the same way.   The untiles do count but not for much , if you don't pay your light bill your light will be turned off, so those type of credit references are weighed differently hen unsecured debit.   

  Now if at 19 your parents help you get a car loan(or you get one by yourself with a much higher intrest rate) , that loan will be on your credit for 7 years after it has been paid off, so the car loan can be your credit for renting an apartment and future car loans, the apartment and car loan can be your credit for getting a mortgage(you would also need to use the utilities as additional credit references) So you can get mortgages without every having a credit card. 

It depend on were in life you are once you have a motgage/landlord and student loans/car loans a 24 months same as cash plan to buy carpet/furniture/electronics you have good credit whiteout credit cards.    Credit scores are newish , they were put in place to stop raceism/sexism. It's just much easier early in life to have 2 credit card with a $100-200 balance that you take a year  or two to pay off.   If you live with your parents or roommates who are the only people on the lease then whether or not you pay rent you are not building credit, if the utilities are not in your name you are not building credit. 



A PP was wrong work history and available cash do not effect your credit at all , they effect you debit worthiness but not credit rating. Credit rating are only effected by how much money you have borrowed/tried to borrow and how you have paid it back.  A lender/landlord will look at all 3 (credit rating, work history/income and affable assets)and some may decide to waive credit requirements because of work history and assets. 

To my knowledge lack of a credit history will not effect employment or insurance ( insurance companies use a different scoring system then lenders)  Bad credit will effect these but not no credit.  * note there is a difference between having no credit and having a credit history no one has even looked at before , insurance , utilities companies, video rental stores all look at your credit. being 21+ and never having anyone even look is suspicious (unless you have recently immigrated come out of a comma/jail and some housewives/husbands with everything in their spouses name)

shhh its me

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Re: Good/Bad credit in US
« Reply #28 on: September 12, 2011, 04:06:56 PM »
  Sasha re utilities and credit history.

  Utilities do not report , but the companies can be asked for a reference which can be added to a credit report and the report will be rescored for the purposes of a particular loan. 

sasha

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Re: Good/Bad credit in US
« Reply #29 on: September 12, 2011, 04:23:23 PM »
  Sasha re utilities and credit history.

  Utilities do not report , but the companies can be asked for a reference which can be added to a credit report and the report will be rescored for the purposes of a particular loan.

Absolutely you can use a utility as a reference to be added to a loan application; however, that information will not be added to the official credit report generated by one of the three bureaus unless the utility reports directly to them.

I know it is a part of FHA mortgage rules for utilities, rent, and other things to be included as part of the credit history if there is insufficient history in the credit bureau report, but I don't know if it is required of all lenders.

Sasha

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