My boyfriend and I are young and just establishing credit. My questions are this: 1. We just received a credit card and plan to pay every month on time. If are available balance is $500 and we ensure that monthly we pay the entire purchase amount with interest, plus another $100 to put a credit on our account will that assist in building our FICO score? 2. If a person does not have any credit and has a car note and a credit card is there any way possible to have a 750+ FICO score within 12 months? Thank you in advance for any assistance anyone may give!
What are your current FICO scores with your existing reports? If you are already paying off your balance in full each month, there is probably no advantage in further overpaying to leave a net credit balance. If you are trying to maximize FICO, from just starting, you would probably want to build up a positive credit history thru a couple other accounts, not carrying balances, and pay off the car loan in full after paying it long enough to ensure it reports. You would also probably want to have no new account applications for 6 months before you want your scores maximized, so there are no recent inquiries. You would want to ensure that your debt to available credit is maximized, by paying off all balances monthly, and by NOT closing existing revolving accounts. Beware that some mortgage brokers will erroneously advise you that closing accounts will improve your scores. You would want to follow this strategy for both of you separately. If either of you have an account with several years or so of positive history, you might make the other an "authorized user" (NOT "joint"!) to affect your "average account age" component of FICO in order to get better offers on maybe one new account between now and when you need your highest scores. You need not and probably should not actually use or carry the "AU" card, since you are doing this only for its reporting effect on your FICO scores, and once you have adequate credit history separately, you should cancel the additional AU card, but not close the main account. I don't know whether you can get from no credit to 750 FICO in 12 months, but you probably don't need to. 700 or so will get you into just about any mortgage loan you can actually afford on competitive terms. By comparison, 750 might only help if you are trying to qualify with lower or no down payments, or do "stated income" loans on good terms, and limited credit history, whether reflected in FICO, or considered directly, might be a problem in those cases. Regardless of what home purchase and mortgage you might qualify for, YOU need to do the calculations to determine which lender deal is best, whether you can do it, or whether it is worth it. The lender's qualification and approval is no substitute or protection for YOUR interests.
I am certainly not an expert, but I am familiar with FICO scores. To answer the questions: 1. Only use about 30% of your available credit, or $150 of the available credit and then pay it in full. You don't have to use it every month for it to be reported. Don't pay anything extra, put it in an interest paying account or mutual funds, depending on how soon you need the money. Part of your FICO score is utilization (how much of the available credit you are using) and that is why you may not want to run up the balance every time if it reports this way. 2. In order to have a high credit score you need a long positive credit history, various types of credit accounts ( car, mortgage, credit cards, store cards) and low utilization to name a few. Purchase your FICO scores at myfico.com and if you post them here, you can get suggestions of other credit cards and store cards you may qualify for. 12 months is a good time to show a positive credit history, but it's ahard to say if you can reach 750+ by then. HTH Jen
