Value of credit rating

[reb]

Apparently a lot is tied to one's credit rating now. We have been thinking about dropping a credit card with an annual fee, since we got another without a fee last year. A neighbor told my wife that would cause my credit rating to drop. If so, should we care? We have no plans to borrow any money. I hear that insurance companies consider credit scores in setting rates. Are there other pitfalls?

 

[riptides]

I doubt dropping a card does things to ones ratings. Have you looked at your credit history through the free on line services yet?
Here is the FTC link -
FTC

Here is the site -

Once a year

You will not get a score without payment. But you can examine your credit history.

In my case, a number of cards do NOT show up. In fact, credit cards in general were not well represented in MY report.

Loans and notes on the other hand...... /forums/images/graemlins/blush.gif

-Mike Z. /forums/images/graemlins/grin.gif

 

[KubotaSteve]

I have Erie insurance and they do look at your credit score when assessing your premium.
I also learned that the more your credit rating is checked also has a bearing on your score too.
Too many open accounts can cause your score to drop also.

 

[RonR]

I requested my yearly free report starting in 2005. Do one each quarter, staggered, so you get current data 3 times/yr.

What I saw that bugged me the most was the number of inquiries from Chase Bank. I have zero dealings with Chase, but they send each of the four in our family about one "deal" a week to get a "can't live without it" credit card from them.

IIRC, they hit my credit deal about 20 times last year--to see if I'm good and then try to hook me I guess.

I'm surprised my dog hasn't gotten one yet...................

Ron

 

[HGM]

Over the past few years I have learned allot about credit /forums/images/graemlins/crazy.gif.....

Anyhow, regarding cards.. You would be better off having 3 cards with 1/3 the limit used on each than 1 card maxed out. This shows that you can manage credit availability.. As far as the card in question, if it is one of your longer standing accounts, you may want to leave it open as this will show credit history, the longer "good" history can be proven, the better...

I dont know if you have ever heard of Clark Howard but he is a cheapskate, that offers prety wise financial advise.. That website will give you some good tips, you may want to check it out..

 

[Richard]

I was told by a friend of mine that sells car insurance, that your credit score will DIRECTLY affect your car insurance premiums /forums/images/graemlins/shocked.gif

I challanged him a bit on that thinking since it's prepaid how could it matter. he said they've found out statistically that the higher the credit scores, the more "responsible" the driver.

!!

 

[reb]

I hadn't heard of Clark Howard. After checking out the website I know why--he is on a local radio station from 10 to midnight, past my bedtime. Besides, AM radio reception is lousy here at that time of night. Looks like he might have some interesting message boards on his site. Thanx for the tip.

 

[riptides]

</font><font color="blue" class="small">( ....
What I saw that bugged me the most was the number of inquiries from Chase Bank. I have zero dealings with Chase, but they send each of the four in our family about one "deal" a week to get a "can't live without it" credit card from them.
....
Ron )</font>

For nearly 10 years, consumers have had the option to opt out by mail, Read the very fine print on your offers. Now, thanks to the FTC and major credit statistical firms you have two more methods available to them -- by calling
(888) 5-OPTOUT, or by visiting opt out

-Mike Z. /forums/images/graemlins/grin.gif

 

[Bird]

I agree that dropping one card may not have much effect on your credit rating, but there's no way I'd have a card again with an annual fee; just too many available that don't have a fee. But having too many credit cards, even with no outstanding balance, may affect your credit rating. I know an older couple (family members) who only got married about 3 years ago, and built a pretty expensive home about a year and a half ago. Each of them had several credit cards before they got married; each is retired with substantial pensions and savings. However, they ran into a problem getting a mortgage because of the large number of "open" accounts.

I have 3 credit cards; use one of them regularly, another when I encounter a place that does not accept my primary card, and the third has been used once in the past 5 years just to see if it was still active; it was. So last year, I decided to cancel that card and called to tell them to cancel it. The guy wanted to talk me out of cancelling it and even sent me a $50 gift card for Home Depot for not cancelling it. /forums/images/graemlins/laugh.gif Why they would even want me to keep it, when it isn't being used, is a bit beyond my comprehension. /forums/images/graemlins/laugh.gif And of course there's never a week that goes by without us getting 2 or 3 offers in the mail for additional credit cards that we have no use for. In fact, that's the primary reason I bought a paper shredder. /forums/images/graemlins/laugh.gif

It is true that many things are tied to your credit score now. We bought this house in September, found with our credit rating, every mortgage company around wanted our business, then when we had the phone service connected (new phone company I never heard of before), they checked our credit rating and said "no deposit" would be required. I told the lady I knew that; I've never had to pay a deposit and she said, "You'd be surprised, but over half our customers do." /forums/images/graemlins/shocked.gif And of course, the auto insurance company checked credit rating, also.

 

[heehaw]

i just found this out yesterday: to get homeowners insurance on a house cost me @ $400 a year: for a relative to get insurance on the same house, over $1000. with drastically reduced coverage, they would bring it down to the mid $700's.
heehaw

 

[rogdan]

I think it goes to far when potential employers ask to check your credit rating on applications.

 

[gamble77]

I find it interesting that credit scores can affect such a wide ragne of purchases and companys views about your lifestyle...although I must say in my experience I believe they are right. Most people that I have come across that have great credit are stand up people who can be trusted...thats not to say that people who don't have good credit are the opposite, thats obviously not the case.

Here is a good story that I can tell from a dealer standpoint...

Last summer had a gentlemen come in and want to purchase at Cub Cadet utility vehicle. Had him fill out the credit form, he went to look around the machine a little more while I stayed in the office and called it in. Now here is the good part, he put that he makes $315,000.00 per year. I thought I would have an easy sale on my hands. Me and the lady that was taking the credit app. information were joking about wishing we made that much money, etc. Well long story short he was denied. The lady said he had more money going out than he had coming in...I cannot fathem having more than $315,000.00 a year going out!!!! Makes me wonder how someone who is making that much money can't make good financial decisions?!?!

 

[RonR]

Gamble,

It's like one of the commercials on the tube now. The guy is in front of his huge home, new cars, pool, kids, etc, and says "How do I do it? I in DEBT up to my eyeballs!"

Well, duh. Spend more than you make, or plan on more than you reasonably expect to earn, and you are in hock!

In the early 90's, I was at my credit union applying for a vehicle loan. It breezed through. Out of curiosity, I asked them what the max was they'd loan me for a vehicle. $50,000 was the answer. That was about two and a half times what I wanted to borrow!

I laughed and exclaimed "ARE YOU NUTS?" According to them, I was good for it, but no way would I put that much strain on our spending..............

ron

 

[midlf]

When we were shopping for the place we have now I asked my bank for a preapproval letter. It came through with a number on it I could not believe. I called and asked if that was correct. They said it was. I told them they were nuts, I would never go into hock for that much. Their answer was the same, that I could have what I wanted because my ratings indicated I would not ask for more than I could afford.

It is easy to see how some people can get into trouble. I would never have wanted to have a credit limit like I have now when I was married to the starter wife. Of course if I was still married to her I would not have a good credit score.

 

[Bird]

Yep, Ron & midlf, these financial organizations seem to think I can afford a LOT more than I think I can afford. In 1991, while we were full time RVers living in a fifth-wheel trailer, we happened to be in Las Vegas and saw a new motorhome we thought we'd like to have, so we stopped to visit with a salesman and I told him I'd like to take it out for a test drive. And we did. While I was driving it around, the salesman and I finally reached an agreement on price, but I told him they'd have to remove the outside mirrors and replace them with a particular kind of power and heated mirrors, replace a vent with a power vent, put extensions on the dual tire valve stems, install a good CB/weather radio, etc. When we returned to the dealership and I started to park it on the lot, he told me to just drive it on back to the service department. He got out and went to telling the service writer to do all the things I'd mentioned, and I told him to hold on a minute. The last time I financed anything, I was gainfully employed and making more money than my pension, so he'd better check to see if he could get the kind of financing I wanted (I'd told him the term and maximum interest rate I'd accept). He said, "Oh, I've already checked your credit rating and they're going to finance whatever you want." /forums/images/graemlins/shocked.gif

 

[HGM]

</font><font color="blue" class="small">( Gamble,

It's like one of the commercials on the tube now. The guy is in front of his huge home, new cars, pool, kids, etc, and says "How do I do it? I in DEBT up to my eyeballs!"

)</font>


Thats actually one of my favorite commercials. It perfectly describes a large portion of our population... These are generally the same folks that cant stand the idea that the government wants to make banrupsy more difficult.. If you dont put yourself in that possition, welfare and bankrupsy are not an issue.. Get a job, live within your means and enjoy... /forums/images/graemlins/grin.gif Thats my theory, I learned my lesson avoiding bankrupsy...

 

[BB_TX]

There was an interesting article (on msn.com I think) about the subject of canceling a credit card and it affecting your credit rating. It goes like this. If you had 3 credit cards, line of credit of $5000 each, for a total line of credit of $15,000 and you owed a total of $5000, then you would have $10,000 credit available to use. If you canceled one card, you would only have a line of credit of $5000 available to use. To the credit score it appears you have suddenly become less credit worthy. Reality doesn't come in to play here. /forums/images/graemlins/confused.gif

 

[heehaw]

the bad part is, this relative of mine that is going to have to pay outragous prices for homeowners insurance, has bad credit, because the co they worked for shut down and moved to mexico: they had a rent house they had borrowed $30k on, and they lost it...now they work 2 part time jobs at just barely above minimum wage: and are getting the shaft again.
i cancelled 2 credit cards last year, when i retired: was using one because it gives me 5% back on gas purchases: up to a max of $300 a year: so i requested another cc from the same co. to double the 5% refund, at the recommendation of the folks at the cc company: when i filled you the application, i put down that i earned about half of what i actually earn: so i got a card with a $500 limit...the joke is on me...
heehaw

 

[midlf]

Just use that $500 limit card and keep paying the balance each month. I suspect you will be surprised by how fast the limit gets raised.

 

[2nstonge]

Another thing to watch for is when the CC company bumps up your limit without asking, you get the letter "congratulations, becuase of your outstanding payment record we've raised your limit to $25,000 - and here's some convenience checks so you can start spending today".

2 of my CC's did this to me within weeks of each other, I thought nothing of it. I didn't even use the extended limit and the bank that holds my mortgage and equity line bumped up the interest rate on our equity note because it suddenly looked like we were over extended (the amount of credit available to you - whether you use it or not - impacts your credit score). In the banks eye I had the potential of another $15,000 in CC debt available to me which "might" impact my ability to pay the bank note thus I was considered a higher risk. You can't imagine what a PITA it was to get the CC companies to DECREASE my credit limit and provide a letter for my bank stating it was done at my request!

-Norm