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Is There a Tutorial on Credit Rating Calculations & Credit Decisions?

Sci 256 129 April 6, 2016 at 10:15 AM
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I would like to better understand how opening new accounts, credit limits, and account ages affect my credit rating. Beyond all accounts never being late, my understanding is calculations are largely based on age of account and credit limit. One example question I have is whether there would be any advantage in transferring credit limit from a newer Citi Card account to an older account. Is anyone aware of a tutorial anywhere?

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#2
https://www.mpoweredcolorado.org/...orial.aspx
http://your.vantagescore.com/imag...onPlan.pdf
http://www.keynotesupport.com/cre...tion.shtml

Simple info

credit karma has a what if calculator but i don't think it will change your score much.basically your score is how much credit do you have in dollars, and how much of a balance do you have for a given month. How much of a balance do you carry and how long you have had the accounts open.

This is my latest

Your overall credit card limits have increased to $161,301 on your TransUnion report and increased to $172,801 on your Equifax report.

Yet my scores have dropped by 5 and 7 points
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#3
-Credit Utilization-High impact (% of your credit balance to your total credit limit)
-Payment history/On time payments-High impact
-Derogatory Marks-High impact
-Age of Credit History-Medium impact
-Credit Inquiries-low impact (Last 2 years)
-Number of accounts-low impact (higher the better)

^Pretty much taken from Credit Karma, really good website.

What happens when you open a new account:
-Credit inquiry, negative effect on score
-Average age of credit history goes down, negative
-Number of accounts goes up, positive effect on score
-Credit Utilization improves since you added more credit your overall utilization is lowered, positive

So short term opening a new account might hurt you, but in the long run it's better for your credit.

As far as your question, do you play on closing your newer account? The age of your credit history would be higher, but if you had the newer card for more than a year I wouldn't bother.
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#4
Quote from AnthonyP6674 View Post :
-Credit Utilization-High impact (% of your credit balance to your total credit limit)
-Payment history/On time payments-High impact
-Derogatory Marks-High impact
-Age of Credit History-Medium impact
-Credit Inquiries-low impact (Last 2 years)
-Number of accounts-low impact (higher the better)

^Pretty much taken from Credit Karma, really good website.

What happens when you open a new account:
-Credit inquiry, negative effect on score
-Average age of credit history goes down, negative
-Number of accounts goes up, positive effect on score
-Credit Utilization improves since you added more credit your overall utilization is lowered, positive

So short term opening a new account might hurt you, but in the long run it's better for your credit.

As far as your question, do you play on closing your newer account? The age of your credit history would be higher, but if you had the newer card for more than a year I wouldn't bother.
Which is exactly the opposite of what popular opinion was just a few short years ago. People used to say having too many accounts hurt you. But I have a gazillion credit accounts and it doesn't seemed to have hurt me. The one thing that has is having a balance on your accounts. Even if you pay off your balance every month, it will still be reported as having a balance for that grace period. Regardless of how big it is, it's a ding. So even if you have a balance of $10 an your credit limit is $20,000 it's a ding. That's the one thing keeping me from having a 850 fico. The reason they give is that I have a balance on too many cards. That balance is generally < $100 per card on cards with 5-6 figure credit limits.
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#5
Quote from Sci View Post :
One example question I have is whether there would be any advantage in transferring credit limit from a newer Citi Card account to an older account. Is anyone aware of a tutorial anywhere?
Do you have to pay a fee on that new card? If not, leave it alone. If so, transfer and close it. Never pay a fee. Note, don't just put the card in a drawer and forget about it. If cards sit inactive, the issuer will close it. Generally, at least use it once a year. Once closed, they will not reactivate that line and you'll lose your credit history.
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Quote from ghostofposterspast View Post :
Which is exactly the opposite of what popular opinion was just a few short years ago. People used to say having too many accounts hurt you. But I have a gazillion credit accounts and it doesn't seemed to have hurt me. The one thing that has is having a balance on your accounts. Even if you pay off your balance every month, it will still be reported as having a balance for that grace period. Regardless of how big it is, it's a ding. So even if you have a balance of $10 an your credit limit is $20,000 it's a ding. That's the one thing keeping me from having a 850 fico. The reason they give is that I have a balance on too many cards. That balance is generally < $100 per card on cards with 5-6 figure credit limits.
Yes I find that quite annoying.. like why show the "balance" if it's not past due? it kind of gives a false perspective. I have a personal business and I spend a lot of money on credit cards every month buying inventory... so Credit Karma starts suggesting that I consolidate my debt or refinance etc. lol, when the balance is going to be paid off in full when the bill comes..
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#7
Quote from ghostofposterspast View Post :
Do you have to pay a fee on that new card? If not, leave it alone. If so, transfer and close it. Never pay a fee. Note, don't just put the card in a drawer and forget about it. If cards sit inactive, the issuer will close it. Generally, at least use it once a year. Once closed, they will not reactivate that line and you'll lose your credit history.
Quote from ghostofposterspast View Post :
Do you have to pay a fee on that new card? If not, leave it alone. If so, transfer and close it. Never pay a fee. Note, don't just put the card in a drawer and forget about it. If cards sit inactive, the issuer will close it. Generally, at least use it once a year. Once closed, they will not reactivate that line and you'll lose your credit history.
Well if it's a newer card it won't really hurt him if they close it. If it's pretty new it will just raise the average length of his credit history if it ends up being closed. It would be the same as him closing it himself.
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#8
Some of the generic information is very general and I would like to go into more detail how credit scores are impacted with credit card balances.

I used to believe that utilization of credit was based on High Credit Limits. However, that is not the case, and instead, it is based on utilization compared to High Credit Usage.

For example, let’s say you have a Visa Card with a $12,000 credit limit; and a balance of $5,000.
You would think that is a 41.67% utilization. Well, it is, of the high credit limit.

BUT, let’s say in the history of that card the most ever utilized was $6500.
The $5000 current balance would be a 76.92% utilization compared to the historic high credit usage.

In order to maximize credit scores with credit cards, the utilization compared to high credit usage should not exceed 30.00%.
So in this case, with $6500 maximum historic usage, a balance under $1950 would maximize the score.

I have been working with a few clients lately and have seen credit scores jump from 18-30 points just by lowering the balance on one credit card. Obviously each individual is different and there are a multitude of other factors; but cracking this ‘code’ has been very helpful to me providing clients with better pricing in cases where their balances can impact their scores and be easily adjusted.

-Adam
Old Hippy & Mortgage Pro
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-Adam
Old Hippy & Mortgage Pro

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#9
Quote from AnthonyP6674 View Post :
Yes I find that quite annoying.. like why show the "balance" if it's not past due? it kind of gives a false perspective. I have a personal business and I spend a lot of money on credit cards every month buying inventory... so Credit Karma starts suggesting that I consolidate my debt or refinance etc. lol, when the balance is going to be paid off in full when the bill comes..
Because it's still a balance. It's actually due upon receipt. It's just that they give you a 30 day grace period on interest charges.
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#10
Quote from komondor View Post :
https://www.mpoweredcolorado.org/...orial.aspx
http://your.vantagescore.com/imag...onPlan.pdf
http://www.keynotesupport.com/cre...tion.shtml

Simple info

credit karma has a what if calculator but i don't think it will change your score much.basically your score is how much credit do you have in dollars, and how much of a balance do you have for a given month. How much of a balance do you carry and how long you have had the accounts open.

This is my latest

Your overall credit card limits have increased to $161,301 on your TransUnion report and increased to $172,801 on your Equifax report.

Yet my scores have dropped by 5 and 7 points
Quote from AnthonyP6674 View Post :
Well if it's a newer card it won't really hurt him if they close it. If it's pretty new it will just raise the average length of his credit history if it ends up being closed. It would be the same as him closing it himself.
Quote from tiedyed1 View Post :
Some of the generic information is very general and I would like to go into more detail how credit scores are impacted with credit card balances.

I used to believe that utilization of credit was based on High Credit Limits. However, that is not the case, and instead, it is based on utilization compared to High Credit Usage.

For example, let's say you have a Visa Card with a $12,000 credit limit; and a balance of $5,000.
You would think that is a 41.67% utilization. Well, it is, of the high credit limit.

BUT, let's say in the history of that card the most ever utilized was $6500.
The $5000 current balance would be a 76.92% utilization compared to the historic high credit usage.

In order to maximize credit scores with credit cards, the utilization compared to high credit usage should not exceed 30.00%.
So in this case, with $6500 maximum historic usage, a balance under $1950 would maximize the score.

I have been working with a few clients lately and have seen credit scores jump from 18-30 points just by lowering the balance on one credit card. Obviously each individual is different and there are a multitude of other factors; but cracking this 'code' has been very helpful to me providing clients with better pricing in cases where their balances can impact their scores and be easily adjusted.

-Adam
Old Hippy & Mortgage Pro
Quote from ghostofposterspast View Post :
Because it's still a balance. It's actually due upon receipt. It's just that they give you a 30 day grace period on interest charges.
Sorry, exams have kept me away. Thank you for responding. I will look at the suggested sites when I have more time. FYI I pay no fees, mostly use cards with cash back, typically use the two to three cards with the best cashback for the quarter on given purchases, pay off my balance monthly, and use the other cards for a small purchase every six months or so. Citi allocated my credit limit between the two cards I have with them, both are over a year old, but one is many years older, so I thought there might be an advantage in allocating to the the older card. It appears not.
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