# Need Advice: How to raise my credit score



## Arklatex (May 24, 2014)

Hi, I have a crappy credit score. I was recently interested in purchasing a new to me vehicle. Talks with the credit union resulted in some distressing information. For a vehicle loan they want to charge me around 10% interest. Outrageous in my opinion. I have not gone to a dealership yet so I do not know what their interest rates are for folks with my score. 

Some generic background. All bills are setup with automatic payment. I am never late. The only revolving lines of credit I have is a charge card with Home Depot that I used once to buy a new washer and dryer. I paid them off early (mistake, hindsight is 20/20) and have not used it since. I have taken out several small loans over the last few years from my credit union. All were under 3 grand and we're for fun stuff like vacations and big boy toys. One was paid off early (hindsight) and the others were all paid as per the terms. 7 years ago I had a vehicle repossession due to a layoff. That must be a big part of the problem. I also think the fact that I generally do not finance things is an issue that has risen to bite me in the butt. I usually just save up and buy outright. Don't like payments or living beyond my means. But I cannot afford to outright buy the vehicle I would like... it costs too much! I am not about to cash in my retirement funds for a truck! 

So far I have been told to:

Get a credit card, use it and pay the balance off every month. 

Go ahead and finance at +/- 10%. Make payments for a year and then refinance at a lower rate. Rinse and repeat. 

Quit dreaming that a young man with a stable, well paying job should be able to have a nice ride. Those are for the welfare rats and wealthy folks.

So, I am asking all you experienced people of PF. What is your advice? I can easily afford payment. I balk at that interest rate. Am I crazy? Give me tips and tricks on how to do raise my score. Or have I already been given the proper advice?


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## Suntzu (Sep 22, 2014)

Let me preface this by saying no one except the credit companies know the exact formulas they use, but I've got a pretty solid picture. 
1. By FAR the most important, payment history. How many late payments, and they track how late the payments were too. Foreclosures and repos are the worst hits one can have.
2. Debt to Credit Ratio, they like to see you're not maxing out all your lines of credit.
3. Age of accounts in good standing - the older the better.
4. Don't ever hesitate paying off loans early, that's just good money sense, paying interest for the sake of few points on your credit report is silly.
5. Yes, there are a ton of other little factors, things like installment loans vs credit card loans, credit inquiries, etc, but they really don't move your score much, don't worry about those things.
You're suffering from the repo with a very small history to make up for it. Having a credit card from home depot and not using it does nothing for you. Credit scores dont care if you have zero balance, it'll show as 'No Data' for months or years at a time. 
I recommend you get a simple Discover card or Amex, pick something with good rewards (My favorite is Amex Blue Cash). Use it instead of a debit card, or a check book. Never spend a penny you don't already have in the bank. earn your 1-5% cash back bonus for the same things you would be buying anyway, while you build credit history.

Paying 10% interest for a car 10 years ago would have been high, in today's market, its outrageous! I wouldn't even consider buying at 10%.


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## Ripon (Dec 22, 2012)

Paying off loans early never hurt credit scores as far as I've read. Based on what you wrote,

1) I agree with get a credit card. 
2) you won't refi a used car in a year at a lower rate. Opt for a lessor car if 10% is too much. Opt for more down if they lower the rate,
3) the repo will stick you for 10 years, and in the car business it's worse then a BK or foreclosure,
4) keep your payment max schedule low, your available credit high, and your score will go up.


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## BagLady (Feb 3, 2014)

We are somewhat in the same boat. When we got married 15 yrs ago, we had AAA credit. We bought a truck, paid it off in 2-3yrs. We don't use credit cards. Never have. We don't borrow unless absolutely nessecary. Everything we have is paid for.
So, we go to our local, long time banker lady, who went to school with Hubby, and ask for a small loan. She tells us that since we havent borrowed any money in so long, our credit score has decreased a lot(!) 
We still got our little loan...but it sucks to be penalized for NOT borrowing money! 
BTW, that's no help at all, is it Ark...:icon_wink:


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## pheniox17 (Dec 12, 2013)

Read something on this a few years ago...

Goto a bank... (A major) get a $500 lone.... Pay it back within terms

Get another one a few months later...

Repeat this pattern for a year or so

Get a 10k lone...

Pay it back within terms

You will have a really nice score (idk if that will work or not tho... Won't work here


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## Arklatex (May 24, 2014)

Credit union loan officer told me that paying off a loan early "does not help my credit score"

Lie?


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## Suntzu (Sep 22, 2014)

Arklatex said:


> Credit union loan officer told me that paying off a loan early "does not help my credit score"
> 
> Lie?


She doesn't know exactly how it effects your score any better than we do, but she does collect interest every day you have an outstanding loan.


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## Suntzu (Sep 22, 2014)

pheniox17 said:


> Read something on this a few years ago...
> 
> Goto a bank... (A major) get a $500 lone.... Pay it back within terms
> 
> ...


Taking out loans for no purpose. Paying interest for the sake of increasing credit score... Poor choices.
Credit cards paid off monthly allow you interest free credit building + big bucks rewards. 
Redeemed another $500 cash back from Amex, just a couple weeks ago. Have never paid Amex one cent in interest or card fees in the roughly 10 years of using the card.


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## HuntingHawk (Dec 16, 2012)

Two years ago I got a used car loan & am paying 2.99% interest. My credit card is 10.99%.

I think the first thing you need to do is find out what your credit scores are. Credit karma is free as long as you don't go outside their guidelines.


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## pheniox17 (Dec 12, 2013)

Suntzu said:


> Taking out loans for no purpose. Paying interest for the sake of increasing credit score... Poor choices.
> Credit cards paid off monthly allow you interest free credit building + big bucks rewards.
> Redeemed another $500 cash back from Amex, just a couple weeks ago. Have never paid Amex one cent in interest or card fees in the roughly 10 years of using the card.


Yeah terms on $500 type lones is generally short term and the biggest expense would be the "set up fees"

Its more to boost your standing... After the 10k lone is paid apparently (yep this is old info from one of those USA financial guide things) your rating should be high enough to purchase a house...


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## Diver (Nov 22, 2014)

The manner in which these scores are calculated is that items from your application are measured across a large population for their correlation to paying back the loan on time. Regarding some of the points above: Paying back on time helps. Paying back early neither helps nor hurts. It just counts as paying back on time. Lack of credit history means they don't know anything about you, so having used credit responsibly scores better than no use of credit.

There are some surprising things that count in your favor. One big deal is just being able to find you if there is a problem. Having more than one year at your address counts positively. Having phone numbers and email addresses helps because they can get in touch with you. Don't leave these blank thinking you don't want a bunch of advertising. Having more than one year at your job helps.

For establishing credit you can take a credit card, regardless of rate, and just use it and pay it in full every month. That will give you a credit history. There is little to no cost in doing this.

A lot of young people get over their head with credit. I don't think that's you, but just be careful. It isn't the bank's job to keep you from overspending. That is your responsibility and getting behind is the one thing you don't want to do.


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## HuntingHawk (Dec 16, 2012)

Credit card is based on percentage of what your balance is. But not sure how they use that percentage. And not sure if your limit has anything to do with it.

Mortgage is based on taxed value which is often 20% below market value.

Auto loan is also based on percentage. What Kelly Blue Book value is compared to what you owe. That is base value of the vehicle.

If you don't have a mortgage they ASSume you rent. I own my home outright so that hurts my credit score.


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## HuntingHawk (Dec 16, 2012)

The way paying off something early is it raises your credit score faster. But eventually that score would not be any higher if you paid on time or early.


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## Camel923 (Aug 13, 2014)

First, what is your credit score? That is the starting point. Get copies of your credit history from all three major credit reporting companies (Experian, Equifax, Transunion) and see what is on there. I once did that and found about 30 negative items that did not belong to me. Oh the reprehensive will contest anything you say but logically a one year old is not going to open a revolving charge account. Similar name, address close to yours, etc. are all reasons to screw up your credit. Know the law and how long a repossession stays on your report. I know bankruptcy can only stay on for 7 years. Keep in mind every time you apply for credit your score will temporarily go down. The dealership will shoot out your info to about 12 banks at once and each inquiry from each bank will drop your score.


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## Tennessee (Feb 1, 2014)

Arklatex said:


> Hi, I have a crappy credit score. I was recently interested in purchasing a new to me vehicle. Talks with the credit union resulted in some distressing information. For a vehicle loan they want to charge me around 10% interest. Outrageous in my opinion. I have not gone to a dealership yet so I do not know what their interest rates are for folks with my score.
> 
> Some generic background. All bills are setup with automatic payment. I am never late. The only revolving lines of credit I have is a charge card with Home Depot that I used once to buy a new washer and dryer. I paid them off early (mistake, hindsight is 20/20) and have not used it since. I have taken out several small loans over the last few years from my credit union. All were under 3 grand and we're for fun stuff like vacations and big boy toys. One was paid off early (hindsight) and the others were all paid as per the terms. 7 years ago I had a vehicle repossession due to a layoff. That must be a big part of the problem. I also think the fact that I generally do not finance things is an issue that has risen to bite me in the butt. I usually just save up and buy outright. Don't like payments or living beyond my means. But I cannot afford to outright buy the vehicle I would like... it costs too much! I am not about to cash in my retirement funds for a truck!
> 
> ...


Get a Credit Card only if you don't have credit, but not to fix a low credit score. If you have a low credit score getting rid of your CC will increase your score. Because it will decrease your risk of debt. Also if you apply for a CC it will increase risk of debt and decrease your credit score.

The best way to increase you score is to pay your bills before or on their due date and decrease you debt.


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## Slippy (Nov 14, 2013)

First, do not take out the car loan with a 10% interest rate. In my opinion, do not buy the car on credit unless you get 0%. 

The Repo is the one thing that is killing your score and time is the only thing that will solve that problem. You are a few years older than my son's and I would never tell them to get a credit CARD so I'll tell you the same. 

But there are a few ways around that to help your score and not put yourself into the SLAVE to the LENDER situation; 

My Credit Union offers a VISA account. When I opened the account many years ago they sent me a CARD, I immediately destroyed the CARD but kept the account open. Since I don't have the actual card, I cannot use it on stupid impulse buys that tend to get people in credit trouble.

I use the account mainly as an emergency "fund" as well as to keep my score high. A few times a year I'll the use the Visa Account to buy something by transferring the borrowed funds into my checking account and using cash for the purchase. 

BUT here's the kicker, I SAVE THE MONEY FOR IT FIRST. As with most banks and credit unions I can do it all using transfers within my credit union accounts on line. 

I do have a couple of mortgages for investment property that the total of the loans are only about 30% of my annual income (think small slum lord type real estate that I'll hold for a year or so then sell or pay off if I can). I also use an American Express for Reimbursed Business Travel (and monthly whiskey purchases) but AMEX gets paid monthly. That's it, no other debt. My credit score (average of the 3 reporting agencies) was about 814 last I looked. You can maintain a good credit score without going in debt.

DEBT is BAD, CREDIT is GOOD but it needs to be managed.


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## Kauboy (May 12, 2014)

You could take the Dave Ramsey approach, and disregard credit altogether.
He likes to claim that his credit score is zero because he has no debt, or anything tied to debt.
When you have the cash, credit doesn't matter. We've become a culture that pretends it does.

Just a thought.


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## Arklatex (May 24, 2014)

Thanks everyone. When I was at the credit union asking about the loan the banker told me what my score was. I need to get the report though. That will be my next step. I think the consensus so far is that I simply do not have much history. Only a handful of loans. No mortgage. 1 repo a long time time ago due to job layoff. I don't think they care about excuses though.  I'll go and check out the report to see what all is on there. Thanks again.


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## Kauboy (May 12, 2014)

For those that may not know, you can visit annualcreditreport.com to get a free credit report from each of the three credit agencies in the US.
You can only get 1 free one per year, so it can be good practice to get one from one agency every 3 months in a revolving cycle.
They used to provide your score, but now ask for extra in a full fledged report.

For my score, I use creditkarma.com.
It is free, but they do offer other services for a fee.
I've not paid a dime.


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## Arklatex (May 24, 2014)

Kauboy said:


> You could take the Dave Ramsey approach, and disregard credit altogether.
> He likes to claim that his credit score is zero because he has no debt, or anything tied to debt.
> When you have the cash, credit doesn't matter. We've become a culture that pretends it does.
> 
> Just a thought.


I kind of like the idea. Finance it myself at 0% interest. Only catch is the wait time until I get my new ride.


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## ApexPredator (Aug 17, 2013)

Ok the one thing I figured out to raise my score about 50-75pts because I was in the same boat its kinda a catch 22. I had just recently reenlisted so I had plenty of cash but no credit and it had been troubling me so I wanted to do something about it so like you I started researching it and I found one small gem that can help people like you and I. Get a secured card with your cash make sure it is at least a 5k limit this is akin to buying a house that actually raises your credit score. It works because the amount of credit you have available to you but unused is the 2nd biggest item after delinquencies. So someone who has 500$ available and only uses 50 is only using 10% but really these days 500$ isnt what it used to be thats not a whole lot of responsibility and the scoring models know it. Someone with 5000 and isnt using it demonstrates a much higher level of self control and the scoring model knows it. so it could literally bump your credit overnight 68pts like mine did when it first started reporting.

Or get added to an existing account with a long history and good standing.


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## Denton (Sep 18, 2012)

> Quit dreaming that a young man with a stable, well paying job should be able to have a nice ride. Those are for the welfare rats and wealthy folks.


This is all about a new car?

There are four vehicles on the Denton property. A 1997 Dodge pickup, a 2001 Ford sedan and a 2009 Yamaha motorcycle. Oh, and a 1972 Ford Maverick in the back that has been in the family since my father bought it new in 1972.

We are proud members of the Whoopty Club. The car exploded? Whoopty-doo. I'll fork out another 1,500 for another whoopty and roll it until it explodes in a few years.

Turn off that stupid TV set so you don't see those idiotic commercials that give you new car fever. Your friends who are rolling around in new, pimped out rides? Ask them how tasty the fenders will be when good times turn bad.

Going into debt is an idea that should make a prepper's brain explode.


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## Kauboy (May 12, 2014)

Arklatex said:


> I kind of like the idea. Finance it myself at 0% interest. Only catch is the wait time until I get my new ride.


If it's worth it, it's worth waiting.
If it's not worth the wait, it's not worth it.


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## Arklatex (May 24, 2014)

Denton said:


> This is all about a new car?
> 
> There are four vehicles on the Denton property. A 1997 Dodge pickup, a 2001 Ford sedan and a 2009 Yamaha motorcycle. Oh, and a 1972 Ford Maverick in the back that has been in the family since my father bought it new in 1972.
> 
> ...


I've been in that club for a long time. But it is new car fever that sent me to the bank in the first place... I am at the point in my life where I can afford to drive a nice gently used vehicle. But I do not need one at all. It's a want. My little 02 Toyota Tacoma has been rock solid reliable and I have the ability to work on it myself. I can probably keep it running long enough to do the self financing Kauboy mentioned.


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## Murphy (Oct 9, 2014)

Pull your CBR, Anything thats bad on there you can always dispute, you'd be surprised at what can't be validated.
Shop around for your loan. You are not going to improve your Score overnight.

Make payments on time
Never use more the 3/4 your credit limit.

And remember a car just gets you from point A to point B


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## Denton (Sep 18, 2012)

Here is an example of how being a Whoopty Club member offers peace of mind.

I work for a little L-3 company that handles aircraft maintenance at Ft. Rucker. I am also held hostage by a union. L-3 is the Devil, and the union is the brain damaged child. Me? I am stuck between a rock and a hard place.

Every five years is contract negotiation time. That is when the Devil sits down at the negotiating table with the brain damaged child and decide what sort of contract will be offered the workers. You never know how the negotiations are going to go or how dopey the contract they will offer us will be. 

Last year was the perfect storm. The membership was pissed the heck off at both the company and the union. Not a very harmonious atmosphere, as you can well imagine. We went on strike for a month. 

The years leading to last year's strike was filled with Denton's Dire Warnings to the younguns not to let the lure of good income and easy credit get them stuck making payments on new rides. Not only do you not know when there is going to be a cutback and people are going to get laid off, and it had been forty years since the last strike.

The kids who ignored Denton's Dire Warning rants about debt? They were nervous wrecks. Denton doesn't seem so goofy, anymore, rolling around in his Whoopty-mobiles or his little, paid-for Yamaha.


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## Arklatex (May 24, 2014)

Good point Denton. We had a very similar situation at the last contract negotiations and almost had a strike. The membership and union ended up caving to the company for fears of exactly what you mentioned. They could not afford to strike. Now we are stuck with the same unequal pay scales of legacy employees and new hires. Glad I'm a legacy but I was willing to strike with the new hires because I can afford to take off, even still, but if I was financed out the butt then it would be a different story! I still need to build up my credit score though. I think yall have talked me out of going into debt for a new car.


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## Denton (Sep 18, 2012)

Another thing to consider. Parking lots!

Notice how people park their new cars waaaay out in the back 40 to prevent people from parking their whoopties next to their status symbols? I like walking, too! I particularly like watching them panic when they see my whoopty parked next to their precious, shiny car payment! :highly_amused:

There are many good reasons I carry. My warped sense of humor is only one of them.


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## Diver (Nov 22, 2014)

Getting a car and getting an improved credit score are two different issues.


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## paraquack (Mar 1, 2013)

Have you actually looked at your credit history? A car repo 7 years ago should be gone or nearly gone. I had screwed my very early life up with credit cards and had to get 2 different loans to pay them off. Then did with out credit except the house for 10-12 years. I don't want to say what for, but when I needed credit, I found my credit sucked because of NO credit history to speak of. I cord credit card and also a separate one in wife's name. We use them for everything and pay off the bill as soon as it hits my In Box. I keep track of the credit card transactions, so i know withing a dollar how much I owe. When we've needed cars, we find as low a % as possible.
Forget buying the car for 10% and refi later on. The interest on a used car is usually worse than a new one.


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## Arklatex (May 24, 2014)

I am going to check out the credit karma later today. That will tell me if the repo is still on there. All the same, even if it's not on there it still messed up my score.

Also I may order that Amex card.


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## Camel923 (Aug 13, 2014)

Just make sure credit karma shows you what all three of the big boys have. Sometimes its different with each company.


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