I'm embarrassed! Wake up call! (credit card debt, loans, debt, payments)

[gonefishing]

I was cleaning out my insurance file and noticed what I hadn't originally read when I got the letter.

The letter said that I had been turned down for a discount on my automobile insurance after checking my credit. At the bottom it showed it was because of us having credit cards with too much credit available! (We only use them to get frequent flyer miles or other rewards and pay them off as soon as the bill comes in. We have no loans/mortgage of any kind and haven't for several years.)

I only have two cards and DH has about 4 or 5. We started calling and found that we had $100,000 credit limit on those cards. (We immediately started dropping them to as low as we could!)


At the insurance agency she looked and said it showed we had a D rating and it was only because we had so much credit available to us.

I had always assumed we had excellent credit...."need to pay bills for what you owe before you do something you want to do (eat, for example) mentality".

She said people call all the time after getting those letters and that it is very common as so many people are not aware of that.

She also told me that some of these credit card companies will automatically do a credit check on you every single year and every time they do it effects your credit.

It was a wake up call for me because I am aware that a crummy credit score can cause us to get a higher interest rate when buying a home than someone with excellent credit---meaning it could cost us money each and every month....and we had been talking about moving to another home.

[MoMark]

Imagine what my credit score must look like! I paid cash for my house, own everything in it, have owned my truck outright since 2002, have no equity loans, and I don't use credit cards and haven't since I paid them off four years ago!!
I'd use it for air fare payments to Europe and then send in a check immediately for the whole amount before I left the country. I got letters telling me to use the cards more often or lose my cards...oh, and I always called in and bitched on AMF fees when they were charged and got them reversed (credit card management is my career background!)! My middle finger activated and I cut them up! I know how credit cards cheat people and charge horrendous fees for anything. We had records pulled daily, weekly, and monthly adding up total fees versus fee reversals. Too many fee reversals and you could lose your job. The ones that particularly tick me off are Check by Phone fees. They used to be free, then $5, and then $15 and the customer was pressured to pay it on accounts in arrears to avoid an overlimit or late fees of $35 each. As far as a credit rating, I'm probably a G!!!! And you know what?! They can kiss my...well. I'll stop here

[recycled]

Ditto MoMark, I don't have any debt either (but I pay a monthly rent check). I keep one credit card that gets used occasionally for trips out of town to pay for hotel/motel, car rental and airfare. I pay that card balance off before the payment date and never pay them interes. Rest of the time use my debit card to pay right out of the checking account (I don't write any paper checks).

Keeping just one credit card makes it easier to keep an eye on the account against fraud. I can log into my bank and credit card accounts at the same time and instantly see what's going on.

I gave up on all those credit card "rewards" and frequent flier points games. It's so much hassle to try and redeem those things, especially frequent flier points, I decided to forget about them. Not worth it. The more credit cards you have, the more junk mail that gets sent to you. Credit card companies are notorious for selling their address lists to others unless you made it a point to fill out their "opt out" forms. Too much risk of identity theft.

[gonefishing]

Don't close your accounts. When you do, it lowers your scores. (it will affect your score- length of credit history is a big score factor). If you close unused accounts, your total credit card limit may immediately be maxed out because you would be using 100% of your revolving credit. however, by keeping your account open, you may only be using 50% of your credit limit. Secondly, it shortens your credit history.

Even as accounts are paid, leave them open (just don't use them) and it will help with the debt:credit limit ratio. An account with a CL of $2500 and 0 balance is better than an account with a $2500 CL and a $2400 balance.

Anytime you take out new credit, it's a short term drop in your score." Likewise every time someone gives permission to a lender to pull his or her credit report, the score also drops. Shopping for a mortgage or auto loan at five different places within 14 days, wil only count as one inquiry and won't show up for 30 days.

Don't open new credit accounts often.

[gonefishing]

The credit card companies are going to hate it if this gets around! But it is your money and most of us want to keep all that we can. Let's beat them at their game and lower credit card debt quickly.

If you simply call your current credit card company company and tell them that you have found a better interest rate from another credit card company, many times they will lower your interest rate to keep you from transferring to another company!

They will probably ask who is offering it to you at a lower rate- Check out bankrate.com (copy and paste the link) http://www.bankrate.com/brm/rate/cc_...ard&&cc_freq=1

[Karla with a K]

"At the insurance agency she looked and said it showed we had a D rating and it was only because we had so much credit available to us.
I had always assumed we had excellent credit...."need to pay bills for what you owe before you do something you want to do (eat, for example) mentality"."

shyandretiring brought up many very good and correct points. The most important thing said is "the % of owed to what is available".
I had a friend who kept saying "I have great credit I pay all my bills on time" Imagine his surprise when he pulled his report and found he had a 610 score. Because his % was to low he had too many small department cards with low credit limits and balances. Took a year to get him up to a 715 credit score.

There was a great pie chart on bankrate that showed how the different parts of your credit (balances,length of credit, payment history & credit limits) make up your score. Hang on I will look for it ... ok found it
35% payment history
30% amounts owed
15% length of credit history
10%new credit
10% types of credit used

The "d" rating the insurance company claims you have is THEIR rating system. Credit rating is based on number form 450 to 850
This is why I "preach" that everyone get their free credit report every year and pay to get their credit scores at least once so you have a "baseline".

This will also let you know if there is any incorrect information so you can correct it quickly.

So before you may actually damage what I have a feeling is a great credit score
STOP and get your credit report and score.

Karla

[mystree]

You just can't win,use too much credit your score drops,use too little your score drops. I think they need to re-evalute the credit scoring system.

[FL_TN_Nana]

[quote=myfask;378032
Credit rating is based on number form 450 to 850
This is why I "preach" that everyone get their free credit report every year and pay to get their credit scores at least once so you have a "baseline".

This will also let you know if there is any incorrect information so you can correct it quickly.

So before you may actually damage what I have a feeling is a great credit score
STOP and get your credit report and score. Karla[/QUOTE]

You are so right! A few years ago my husband had an 810 credit score. A couple of years later when we were refinancing our house, it had dropped to something like 600 yet no late payments, etc. Seems he had someone else's repossession of a motorhome, among other things, showing on his credit. That was a shocker...it took a while but we got it all straightened out but he'd probably still have all that garbage on there if we hadn't had a reason to get a credit report. It pays to check!

[sharirobinson]

I'm a loan officer, and I can tell you most people don't realize that in order to have a good credit rating, you must carry a balance. It should be no more than 25%-33% of the available credit. The catch is this: if you have too much available credit,it looks like you could go on a shopping spree and go into debt; if you don't have much available credit, it looks like you have done just that! Carrying a samll balance shows that you can manage credit, which is what lenders like to see. You also should not close out your unused accounts, because that destroys your history.

[HIF]

I got into trouble when my husband died, dug myself out and now have one cc with 0 balance (found out I have another, but have never used it- think I shredded the card), own my car outright and have a good sized HELOC that I used for a new roof- almost paid off- giving me a chunk of funds if I need them. Have equity above the HELOC amount. Is that the way to go if you don't want cc debt, yet want to have a high FICO score? My score now is very good.