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January 13, 2011

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730 isn't bad, but I understand the frustration. In my experience, it took 5 years to beat the 800 mark and 8-9 different lines of credit or ways of judging me. Take out a 0% interest loan on furniture next time you were going to buy some anyway and continue doing what you have been doing and you should be good to go. You have checked your credit report for any innacuracies, right? If not, check it out at annualcreditreport.com for free. You can check your score for free in the future at creditkarma.com.

Raise your credit limit on your AMEX card so you are utilizing less than 30% of your available credit in any given month...

How long you've have the lines of credit also matter. If you check out creditkarma.com, you can have the site estimate your score based on your credit report (Trans Union) and then use hypothetical scenarios of paying off more/less, more/fewer hard inquiries, etc etc. Pretty useful, but I think it should only be used as a guide. Like [email protected] points out, checking your actual credit reports for accuracy is very important. There are three bureaus and you can check each report once per year for free, so I suggest checking 1 of them every 4 months.

Even if you pay your card in full every month....the amount on your statement is the amount reported on your credit report. If you could pay your credit card down to less than 10% of available credit before the amount is reported to the credit agencies....then you may be surprised to see a jump in your score.

730 is a good score. There may be nothing wrong at all. HIgh 700 or 800 scores are pretty hard to get.

Is there a problem with the 730 score? Is it causing you to not get a loan or something? If not then I wouldn't worry too much. Do make sure to check all 3 credit reports from the 3 credit bureaus to make sure everything is accurate.

I would assume I'm a perfect credit risk having paid off loans, mortgages, etc, and never missing a payment ever in my lifetime, but I have a credit score of 670 (or at least thats what Credit Karma told me when I got curious). Looking at the "score card", it looks like the reason its so low is that the one line of credit I have left is a credit card that reports a credit limit of "0". Thus, my 'debt' [monthly statement amount that is reported, which I do pay off every month] is higher than my 'available credit' ;-) Not being one who cares to borrow (I do like credit card cash back so I kept and use that), its just kinda funny and shows how silly any automated scoring can be.

A credit score is a snapshot in time. Your score today may be different than your score tomorrow. There are several factors that determine a credit score:

1) Age of credit history (15%). The longer you have credit accounts, the better.
2) Debt Ratio (30%). Your debt ratio is the amount of outstanding debt you have vs the amount of credit you have available. For example, if you have a $1000 credit limit and you have $600 on that credit card, you have a 60% debt ratio. The higher the ratio, the lower your score. If you want a quick boost in your score, have your credit score pulled immediately after you pay off your credit card.
3) Payment history (35%). Any bankruptcies, judgments, liens, collections, suits, wage garnishment, etc...
4) New Credit Accounts (10%). How many of your accoutns are new vs old.
5) Mix of credit (10%). Mortgage, credit cards, car loan, retail accounts, etc.

In your case, you mention having a car loan and an AMEX that you pay off every month. In addition, you've sold properties in the last five years. Anything older than two years ago has a much smaller effect on your credit score than something more recent. Do you currently have a mortgage? How long have you had your car loan? What was your debt ratio when your credit score was pulled?

If you currently only have a car loan and an AMEX card, your score can suffer from a lack of available credit. Sometimes, having no credit is just as bad as having poor credit. It sounds funny, but you need credit to earn a good credit score.

Lastly, it is important for everyone to check their credit on an annual basis (if not more often) to make sure a negative item does not appear on your credit report that may not be yours. There is a human element and sometimes a judgment, lien or late payment may be posted to your credit report that may belong to someone else.

Is that his credit score or his FICO score. I checked my scores one time before refinancing and my transunion score was 720 and I was really upset. When I went to refinance, my transunion FICO score was 765. All of my FICO scores were at least 40 pts higher than the corresponding credit score.

This happened to me a few years ago also. I checked my score and it came back as being in the mid 700 range. I expected it would be perfect since I never charge anything, have no debt, and have never been late with any payment. I called the company and ask why. The answer I got back was that it was lower because I don't use any credit. They really just didn't have much to go on with me. My house had been paid off for years and my last 2 cars I paid cash for. I didn't really care. I could use my cards more often and then pay them off at the end of the month, but I figure mid 700s is good enough. And, I don't expect to need credit for anything again anyway.

Ya I can understand the frustration.

It's funny though that in the past credit companies would give you bad credit ratings for paying off your debt on time. At least that changed...

It might help if you knew what makes up your credit score. We wrote a blog about this late last year which includes a breakdown of the FICO score. Also, there might be false negative items that ended up by mistake on your credit report. When was the last time you checked out your credit report?

Other items that impact your credit score - credit inquiries, new cards, length of time with your credit history. If you get new cards and close old ones regularly, that will ding you from both the length of credit history and the amount of new credit applied for recently. If you shop around too much when buying a car or refinancing and let them pull your credit, you may get a ding for multiple inquiries. As other readers mentioned, if you have a low limit on the credit card you use it will cause problems even if you pay it off every month. The credit report doesn't know how much you pay off each month - it just knows you have $2500 of the $5000 credit limit used up (ie 50% of available credit is used).

From what I've seen, the best credit scores belong to people with a mortgage and/or car loan (especially if a small one) that they have a solid payment history on and a couple high-limit credit cards that they have had for more than 10 or 15 years which rarely have a large balance charged on them and which are paid off regularly. Making sure no errors are in the other information on the report is key too.

Not having any mortgage or car loan debt is great from a personal finance perspective, but not having any history of how you repay a loan doesn't provide a credit company much information on whether or not you are a responsible borrower. That can ding your credit history eventually.

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