I am not so sure that they prefer people who run balances. When you purchase something from a store the credit card company get 2% to 3%. If you pay that off with in the billing period lets say 1.5 months that means the credit card company is getting from 16% to 24% annual return on the money they lent you. That is approximately the interest rates they charge. It is probably even better than that. They probably don’t pay the merchants immediately. The merchants probably get paid once a month or so. The bank is probably out the money for a few weeks which vastly increases the annual rate of return on the money they receive.
Can the lender tell the difference between someone making a very large one time purchase on a credit card, but planning to pay off the entire balance by the end of the period, and someone who has carried a high balance over a long period of time and only making the minimum payment every month? In my credit report, it seems that they only report a snapshot of the balance of my account on a certain day, and it doesn’t contain a history of my balance. Somehow it doesn’t seem to be very fair if they can’t tell the difference. If that is the case, should I refrain from making large purchases with my credit card for a few months before I plan to apply for a loan, even if I plan to pay off the entire balance?
On your credit report will be all accounts, the max credit, the current credit (as of 30 days or so), and the number of times you’ve been 30 days, 60 days and 90 days late. Accounts include all credit cards, utility companies etc. I wouldn’t be surprised to see grocery store discount cards showing up soon.
Additionally, it’ll also reflect when someone you’ve authorized looks at your credit report. All of those pre-approved card offers you get, they’ve had a cursory glance at your credit report that is not reflected AFAIK. However, were you to respond to those pre-approved cards, apply for a lease or get a different job those activities will be on there.
I had a tenant move out owing me 2 months rent. A quick run down to the credit office and we find her new employer and new apartment complex w/new address. Within 24 of dropping off the keys (on a Friday night) she’s served with papers to appear in court. Beyotch.
I’m fairly certain that certain scoring models take into account the credit you’ve been extended. If a person has 20 credit cards for $150,000 credit limit and makes $35k it’s probably not a good idea to extend that person any more credit.
Finally, if you want to build credit, you’ll have to use some credit. No history = badness. If your parents buy you a car, make sure you’re on the title with them etc.
You can send a letter to the credit agencies and request that they not allow non-authorized entities to see your credit report. You’ll stop receiving all those unsolicited pre-approved blah blah offers. It’ll also help to protect you against credit fraud.
sinemora
Depends on the type of credit report the lender is using, some will show trends if the lender buys that option, philster would know more about that. But I can tell you that I don’t pay for that option and the other 2 places I have worked did not either. Can’t imagine a lender taking a lot of time to analyze balance pattern. If anything they may be more suspect if the balance is rapidly increasing. Rapidly escalating debt, especially unsecured is a big red flag. This would have to be on multiple cards though. If report shows opened date of 08/2001 and credit limit of 5000 and balance of 4900 your score would be adversely affected.
So far as defering large purchases until after applying for a loan, that would depend on the loan type. If it is a mortgage and you can wait then yes wait. If it is just for a car loan or other consumer debt then should not matter. (YMMV) if you have strong credit now it should not matter. If your credit is weak it may push you into a lower scoring category and cause you to get a higher interest rate or even denied.
Hope that helps, sorry to ramble on 
K
How about if you manage to pay off your credit card balance & keep up your mortgage payments but there are other debts where you fall behind? This has happened to us with medical payments. (We’re trying to stick with the schedule we arranged with the collector for our late payments).
::dodges a raging Kamikazee::
We still get credit card offers in the mail almost daily, but if we move & have to sell our house & try to buy another, is it likely we’ll have difficulties getting a new mortgage?
Thanks Kamikazee. Just to be safe, I guess I’ll be more careful about what to charge to my credit cards when the time comes for me to buy a house. Well, not that it’s going to happen any time soon. It’s probably worth it to temporarily forgo the convenience of paying by plastic and to start writing checks for large purchases.
A year ago this company, Fair Isaac, were protecting their software(?) from those that wanted to know how a FICO score was arrived at (read: The public, you and I).
Now they willingly provide it???
Why the change???
OK, I have good credit, but I don’t know HOW good (wehre do I get that rating number? It’s not on my Credit Report)…
But here’s the question:
I have about $30,000 available via various visas and master cards. At first, when I only had a few cards, I would use one to pay the other off, at a lower interest rate. This seemed to affect my credit in a good way, because it showed that I paid off my cards. (even though all I was really doing was transferring the debt to a different card, at a lower rate of interest). Now I owe about $10k on 2 cards. Both cards are 3/4 “full” - that is I owe about 3/4 of my available credit. But I have about 8 other open accounts on which I don’t owe anything. Meanwhile, I am paying off the 2 that I owe, paying as much as I can, each month, usually 2-5 times the minimum payment, sometimes $700-800 at once.
So, the question is, how does using one card to pay off another affect one’s credit? Do they know I used one card to pay off another, or is it as if I had paid cash? Do I get a “bad reputation” for doing this? Note: it is not a case of my not being able to pay my accounts, but merely a case of transferring to lower-interest cards. At this point, all my debt (the 2 cards I owe) is at 8-10% because of this, which enables me to pay them off quicker than if I’d left them at the 12-14% they were at originally.
phartizan
The collections will still show up on your report, so you should talk to the mortgage lender up front and be able to show proof of consistent payment. You should be able to still get a mortgage YMMV (rate and fees may be higher though). If other credit has been very good for the past two years (which I assume it has based on CC offers) and, collections are all more than two years old score should not be affected too badly. Doesn’t sound like a deal breaker.
P.S. I pretty much only post from work, thus the delay in responding. Weekends with chores, 4 kids, high maint. wife etc. makes it tough to post from home!!
K
Troutmask, the CC companies do not know that you are “surfing” they may assume that but does not say that on credit report. Amount of available credit is a bigger factor in score, BUT be aware the newness of the cards may bring score down a little. As long as you don’t close the card you transferred from your amount of available credit should be large enough to offset any new account info.
The website for credit score is http://www.myfico.com/ Never have used the site for credit info so not sure what they charge or what strings are attached.
K