Financially Tough » Credit Score

Too Many Credit Inquires? How I Improved My Credit Score with New Credit

Tue, 04 Oct 2011 00:31:36 +0000

I use a credit monitoring service and nothing seems to slip by them. Case in point, I got an email regarding a potential change in my credit score. Well, it turns out that it was a new hard inquiry credit report; the terrible idea that I applied for more credit. This action allow set off a red flag. It is like my over protective mother is watching my credit report.

While this is nice too know that someone is watching I began to think is this new application enough to lower my credit score? Is the act of applying for me credit in this era of financial uncertainty enough to cause the credit bureau to drop my score with no regard? The answer is no. I just checked my credit and it actually went up since the last time I checked.

The fact is this credit inquiry was for a new line of credit that I used to move money from a credit card that was charging an obscene rate of interest. I fell victim to offer in the mail. Zero percent for a year and half? Are you kidding me? How can I pass that up. I don’t have much debt but really zero percent for a year and half is a great offer. How could I pass it up.

I knew that applying for this new line of credit would be a new hard inquiry on my credit report, but I was looking at the bigger picture. I keep low lines of credit on purpose, to discourage me from spending large amount and to keep the balance low enough that I can pay it off in a month of two. When I applied I let them decide my limit and bam, I have a credit line more than enough to cover my balance transfer. After transferring the money, I lowered the debt to credit ratio on the first card thus improving my overall credit standing.

I knew the fact that credit inquires don’t play as large of a role as my debt to credit ratio. This action improve the more important factor my level of debt and I saw a return of a better credit score.

When to avoid credit inquires

While my story is positive, this is not the case for everyone. I have good credit and I actively maintain and watch my credit report and score. And because I understand things like the FICO score formula, I used a method like this to improve my score.

But there is another side to this. I have very few hard inquires. Actually I can’t even remember the last time I applied for new credit. I don’t apply for store credit cards like sears and target. I usually avoid everything that is mailed to me. I apply for credit as I need and that is it.

If you go around applying to every offer out there you will suffer the consequence of too many hard inquires and your credit score will pay the price. You need to apply for credit as you need. If you use methods like the one above to get out of debt you need to careful. If I make one late payment to this credit card, I am sure they will show me no mercy and my rate will sky rocket. You must pay on time and never miss.

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Generic Credit Scores Versus Custom Credit Scores

Fri, 09 Sep 2011 05:32:59 +0000

A consumer today has potentially thousands of different credit scores. This leave the consumer in a difficult position. They must determine what score is most important to them based on the lending they will use or are already using.

Generic Credit Scores

Generic credit scores are usually what you think about when you think of your credit score. The credit scoring model uses the same formula each time. The most popular score model is the FICO score calculation. These scores are used by lenders to do the majority lending.

Custom Credit Scores

Custom credit scores are a bit more complicated. These are scores more specific for the lenders conditions. An example would be your auto loan credit score. This is a custom credit score that focuses more on the likelihood that you will pay your auto loan. Your auto loan credit score takes a closer look at your payment history to your auto finance companies and provides a better judgment to the whether or not you will make your car payments.

Obtaining a custom credit score is usually only possible through a lender. They will usually let you know at the time of a loan what your customer credit score is. Now, you might have just checked your score before you applied and got a generic score. Variation between the two is likely. Each scoring model uses a potentially different formula and based on the information used IE. which of your three credit reports, will produce several possible scores.

Navigating this as a consumer is also impossible. The best thing to do is know what is on your credit report and pick a popular credit score to know like the FICO score. By knowing a popular credit score, the better the chances your lender will use this score or at least a version of this score.

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How Your Credit Score is used

Thu, 08 Sep 2011 05:22:58 +0000

The primary purpose of a credit score is determining creditworthiness and likelihood a consumer will not default on a loan or debt. It is one of the main tools used by lenders when making the initial lending decision. While this is seen as the main use there are a few others:

Credit Score in Marketing

You might see a few credit card offers in the mail each week. This is not by accident, you are being targeted. The credit card companies use your score to determine what to send to you. This allows them to market more effectively by matching your credit worthiness to their offers.

The interest Rate a Consumer Will Pay

The interest rate on your loan might also be determined by your credit score. The better the score, the better the interest rate a consumer will be offered.

The Amount of the Load

A credit score will also be used in determining the size of the loan you will receive. This can have a great impact in large purchases such as homes (mortgages) and cars (auto loans). For credit cards, your credit score will help set the limit of your card.

The account standing

Credit will often review your credit score to determine the risk your represent currently. As your score can change over time, lenders want to know the new risk you represent. Using this they determine to raise or lower your limits and interest rates.

Be aware of all these uses because they all can effect your financial well being.

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