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I saw my credit score for the first time today. 646.
This is interesting - I'm surprised how low it is, but then again, I have little credit history. I took out a car loan (which I paid off prematurely, and was small to begin with), about $20,000 in student loans (which I have not paid a single dime on, as I have qualified for a string of deferments and forebearances), and two store card accounts - Newegg and Amazon.com. I used the Newegg one to buy a laptop in 2009 and remembered to pay the whole thing off right on the due date, although I was hit by an additional charge which I refused to pay. The Amazon.com card I mostly have good history paying off, although it does not deduct automatically from my bank account so I have missed occasional payments, even though they are very small (minimum of $25.00).
Could the deferments / forebearances be negatively impacting my credit score, or is it my lack of credit history that's the problem?
Your score is most negatively impacted by the things I bolded.
However, it could also be negatively impacted by the deferments, and here is why. While in deferral, interest continues to accrue. Therefore, each of your student loan "current balances" are higher than the "credit limit", which could have a negative effect.
Quote:
Originally Posted by Electron
Ever look at how your credit score is figured? It's an 'I love to be in debt' score. BTDT, ain't goin back.
To some extent, yes, but not in the way I think you mean. It is true you can't get a good score without buying things on credit and temporarily going into debt. But having excellent credit really doesn't require you to carry a bunch of balances or pay a ton of interest. My only debt is my mortgage, and my score is over 800. My parents pay off all their cards every month and just have a few mortgages and their score has been over 800 for years. When I had other debt I was servicing, my score was lower, even though I never missed a payment. Once I paid everything off, my score went up about 50 points. I see a ton of credit reports at my job every month, and the people with the highest scores typically have no non-mortgage debt. They just have a long history of paying what they owe.
Your score is most negatively impacted by the things I bolded.
However, it could also be negatively impacted by the deferments, and here is why. While in deferral, interest continues to accrue. Therefore, each of your student loan "current balances" are higher than the "credit limit", which could have a negative effect.
To some extent, yes, but not in the way I think you mean. It is true you can't get a good score without buying things on credit and temporarily going into debt. But having excellent credit really doesn't require you to carry a bunch of balances or pay a ton of interest. My only debt is my mortgage, and my score is over 800. My parents pay off all their cards every month and just have a few mortgages and their score has been over 800 for years. When I had other debt I was servicing, my score was lower, even though I never missed a payment. Once I paid everything off, my score went up about 50 points. I see a ton of credit reports at my job every month, and the people with the highest scores typically have no non-mortgage debt. They just have a long history of paying what they owe.
Does paying off the credit cards increase your score? I have heard that it accounts for as much as 35% of the score.
Does paying off the credit cards increase your score? I have heard that it accounts for as much as 35% of the score.
It is incredibly more complicated than that. All I can tell you is that my instance, paying off my balance raised my score about 50 points. And that the people I know with the best scores have little to no debt.
Credit is debt, period. If you want your score to go up, get more debt and make your minimum payments. I'll take the lowest score I can get!
Sorry, but this is just completely untrue. If you believe this, you don't understand how credit is calculated. If I went out and charged a bunch on my cards, my score would go down, because I was using a higher percentage of my available credit. If I went out and opened new cards, my score would go down because my "age of credit" would be decreased.
Your percentages are likely correct (or at least in the ballpark), but your interpretations of what those percentages mean is totally wrong. "Amount owed" does NOT mean that more debt = better credit. It means that the amount owed part of the calculations figure 35% into the score, but that part of the calculations is much more complicated than you are making it out to be, and is much more about debt to credit ratios rather than total due, and more is not better.
Credit scores are meant to be a measure of whether or not you can handle credit responsibly. Charging on your cards and then immediately paying them off is an acceptable means of handling credit responsibly when it comes to credit scores.
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