Thread: Credit Scores?
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Old 01-03-2014, 02:50 PM
igneous igneous is offline
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Join Date: Oct 2012
Posts: 15
Default Re: Credit Scores?

This is how your credit score works. As you pay your debtors (either on-time or late), all this info is put into your credit history. Late payments are not good so avoid them.

You may have a car loan and apartment or house to pay for each month and that goes into the equation, but you also have revolving credit with credit card(s).

Now you have say, 2 credit cards with $5000 limits on each. Of course you needed to furnish your apt. or house and buy new tires for your car and so all this maxed out one of your credit cards. So, the 3 big CRA's (credit reporting agencies, Equifax, Experian and Trans Union) all see that you have used 50% of your available credit. This sends up a red flag so they sit back and see how you do paying it off. If you pay on time, all is good and if you don't pay the minimum amount on the card, you get it paid off in 2 yrs.
This will reflect in your credit score increasing, but if you make late payments or miss payments you get a drop in your score.
So adding another card to your lines of credit may be a good option. You see, it's all about the percentages. How much of a percent your total credit line is in use.
So if you get another card with a $10k limit, you now have only a 25% 'risk'. That's the original $5000 divided by your total credit of $20k. So basically, having more cards than you use is not necessarily a bad thing.
For instance, I currently owe only about $200 on one of my cards and I have $50k of available credit. I'm doing good since I'm not paying the banks a high interest rate on my balance, but I could go out and buy a car with my credit card. That would be stupid because of the high int. rate, but that's part of the risk the banks take in giving people credit. Bottom line, find a low interest rate card and never pay the minimum. Pay it off as soon as possible.
Good luck
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