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How to rack up a "thin file" credit score?

toxicfume 325 30 February 25, 2012 at 07:09 PM
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So apparently I have a "thin file" according to creditkarma.com.They couldn't give me a credit score, I couldn't sign up for the AMEX $25 gift card because they couldn't find my credit score info *and* I've been rejected by Citi Platinum Divident College student credit card because my permanent address is outside the US.


I did sign up for and got the Discover More card.. but is there anything else I can do to get off the right foot with keeping a credit score? Are there any other good credit cards I can start off with?

Thanks a lot for any advice. Smilie

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#2
Are you a member of a credit union?

Are you under 21 years old?

A couple things you can do with the card you have are never go over 7% of the credit limit and pay your bill on time 100% of the time.
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Quote from Brian1 View Post :
Are you a member of a credit union?

Are you under 21 years old?

A couple things you can do with the card you have are never go over 7% of the credit limit and pay your bill on time 100% of the time.
No, not a member of a credit union. (how do I become one? Just open an account with one?)

No, I'm older.

Thanks for the tips, Brian1 Smilie I'd like to be able to get the Chase+AMEX 25$ gift card, but alas.
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Quote from toxicfume View Post :
No, not a member of a credit union. (how do I become one? Just open an account with one?)

No, I'm older.

Thanks for the tips, Brian1 Smilie I'd like to be able to get the Chase+AMEX 25$ gift card, but alas.
Check out http://www.creditunion.coop/ to see which credit unions your eligible for and join one. Once you're a member, ask them about a credit card that you put up a deposit for (typically into a CD or savings account). Your credit limit on the card will be roughly equivalent to the amount you deposit into the savings account or the amount of the CD. This is very similar to a secured card, however, this card will be reported to the credit bureaus as a traditional unsecured card which will build your credit much faster.

If you're unable to find a credit union that offers one of those cards, ask them, instead, about a secured card (again, your credit limit will be roughly equivalent to the amount of money they require you to deposit into a savings account or CD). Make sure the annual fee (because more than likely there will be one) is reasonable.

With either one of these cards you want to make sure there is no application fee and you want to make sure that after 12 - 18 months of on-time payments you will graduate to a traditional unsecured card. If not, keep looking.

The three main things that will help you build credit are: 1. Paying your bills on time, 2. Staying below 30% utilization (how much credit you're using vs. how much your credit limit is) or 7% if you want the very best score, and 3. Time (how long you've had credit).
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Quote from Brian1 View Post :
Check out http://www.creditunion.coop/ to see which credit unions your eligible for and join one. Once you're a member, ask them about a credit card that you put up a deposit for (typically into a CD or savings account). Your credit limit on the card will be roughly equivalent to the amount you deposit into the savings account or the amount of the CD. This is very similar to a secured card, however, this card will be reported to the credit bureaus as a traditional unsecured card which will build your credit much faster.

If you're unable to find a credit union that offers one of those cards, ask them, instead, about a secured card (again, your credit limit will be roughly equivalent to the amount of money they require you to deposit into a savings account or CD). Make sure the annual fee (because more than likely there will be one) is reasonable.

With either one of these cards you want to make sure there is no application fee and you want to make sure that after 12 - 18 months of on-time payments you will graduate to a traditional unsecured card. If not, keep looking.

The three main things that will help you build credit are: 1. Paying your bills on time, 2. Staying below 30% utilization (how much credit you're using vs. how much your credit limit is) or 7% if you want the very best score, and 3. Time (how long you've had credit).
Hey thanks so much for the info! I looked up that site and found a couple CUs that popped up, I'll visit them and find out about a secured credit card more. Smilie

One thing I don't understand: "2. Staying below 30% utilization (how much credit you're using vs. how much your credit limit is) or 7% if you want the very best score, and 3."

Do you mean if my credit card provides me a credit limit of $500 per month, I should try and use only $150 or $35 dollars per month to maintain a good score?
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Quote from toxicfume View Post :
Do you mean if my credit card provides me a credit limit of $500 per month, I should try and use only $150 or $35 dollars per month to maintain a good score?
That 7% is to get the best possible score. Under 30% will help you get a pretty good score, and under 50%, you'll be ok.

However, this is your total credit utilization, not just on one card. So if you open up more cards, or get your limits increased, your utilization will be lower.

You need to balance that with credit card rewards though. If the card gives you 5% cash back on certain categories, use it for those categories, and get your cash back. That cash back overall will be worth more than the short-term decrease in your credit score.

Unless you're planning to buy a house or finance a car in the next couple years (or trying to increase your score to get another card), don't worry too much about the utilization. Don't go over 50%, try to stay under 30%, but if you're getting money for using it more, then use the card more.
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Quote from toxicfume View Post :
Hey thanks so much for the info! I looked up that site and found a couple CUs that popped up, I'll visit them and find out about a secured credit card more. Smilie

One thing I don't understand: "2. Staying below 30% utilization (how much credit you're using vs. how much your credit limit is) or 7% if you want the very best score, and 3."

Do you mean if my credit card provides me a credit limit of $500 per month, I should try and use only $150 or $35 dollars per month to maintain a good score?
Yes, exactly.

If you added another credit card to the mix with a $1,000 limit, you'd want to keep your spending on that card to $300 for a good score and $70 for the very best score. The FICO scoring model takes into account your utilization on each individual card as well as your overall utilization.

I agree with most of what DWad said, but there is something I respectfully disagree with.

He's right that to have a good credit score you should stay at or under 7% utilization and to have the very best score you should stay at or under 30%.

However, regardless of if you'll be needing a loan for a house or car soon, you always want to have the best credit score you can have because so many things non-credit related use your credit score to determine how much they're going to charge you. Homeowner's and auto insurance are two good examples. Except for the states that outlaw this practice, many insurance companies factor in your credit score when determining whether or not to take you on in the first place and then, if they do write you a policy, how much you'll pay in premiums each year.

So, in short, your credit score affects your wallet in ways other that just credit related things and I would keep this in mind at all times when considering decisions that can or will affect your credit.
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Wow, that is some really good information guys!! Thanks to both of you, otherwise I wouldn't have known about the 7% and 30% rates to keep a good score.. I was planning on casually using the card (under the limit but paying it back all 100% on time, of course). I already went a little over 7% with my first transaction with my Discover card (still under 30%) though, so I'll try to keep it low.. and maybe spend only a little bit more on items that will give me cash back.

Really appreciate the feedback, guys. Smilie
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What's a good site I can check for more information on how credit score works? I didn't find any site mentioning the 7% or 30% credit utilization that you guys mentioned. Could someone point me to a good site? Thank you. Smilie
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Quote from toxicfume View Post :
What's a good site I can check for more information on how credit score works? I didn't find any site mentioning the 7% or 30% credit utilization that you guys mentioned. Could someone point me to a good site? Thank you. Smilie
"What's a Good Percentage? [mint.com]

According to FICO, the consumers who have the highest scores in the country (760 and above) have an aggregate utilization of 7%. That's about as clean of an answer you're ever going to get to a FICO score question. Of course that doesn't prevent people from giving answers that are all over the place. I've seen 30%, I've seen 50% and I've even seen 70%.

The way the scores are designed rewards consumers for having a lower rather than higher utilization. So, generally, the lower the number the more points you're going to earn in your score. 30% is better than 50%, but not as good as 7%. And I'm not sure where in the world someone got 70%, that's just terrible."
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How does credit score work? Basically, three different groups use secret formulas to determine how likely you are to pay back a creditor (someone that gives you credit, such as a credit card company, mortgage broker, etc).

Specifics? Similar to Google's secret search formula, the world may never know. Here are some important factors though-

1. Credit utilization - The lower the better, but once you get down below 7% it doesn't really matter how much lower you go. You can still get a decent score with 7-30%, but higher than that and your score starts dropping more and more.

2. Paying on time, and not carrying a revolving balance - This is a big one. If you miss a payment, BOOM, instant drop in credit score. That stays with you for awhile (7 years I believe), so make sure you pay on time. If you carry a revolving balance, that can hurt you as well, so pay in full each month.

3. Average length of credit - The longer you hold onto your credit cards (or having loans/mortgage/etc), the better. If you don't have a long credit history, it can be a good thing to open a few cards now, then in a few years your score can improve a decent amount.

4. 'Hard Pulls' or 'Hard Inquiries' - Every time you request credit (credit card, loan, mortgage, etc), the credit pulls your credit score, to determine how credit-worthy you are. That pull takes a little off your score, but it should go back up to what it was at before in about 6 months. There are some exceptions, such as multiple hard pulls in the same month for a mortgage only count as one (can anyone confirm? I know I read this somewhere before). This allows you to find the best loan rate, without killing your credit score while you're looking.

I'm sure I'm missing some, but hopefully that's a good start for you, Toxic.
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Here's a chart showing the percentages [myfico.com] of each main category and how it affects your FICO credit score as well as additional information explaining, in detail, what makes up your FICO credit score.
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