Comments on: Top 10 Credit Score Misconceptions

By: janey

janey — Tue, 01 Jun 2010 15:09:47 +0000

@devon: I am that exact first person, and my score has been the same for 3 years. Had no debt, but ended up with plenty of it thanks to a car payment and then a nice pile of medical bills a few months later.

By: J. Money

J. Money — Mon, 31 May 2010 16:53:02 +0000

I actually gotta check out my score soon too…more out of curiosity than anything – wanna see if I’m still around 740 but afraid to jinx it ;)

By: usario clave

usario clave — Fri, 28 May 2010 22:56:20 +0000

Devon White is incorrect on two counts.

Your credit score is a reflection of how you manage your debt, not how profitable you are.
In addition, credit card companies make money from both people who pay in full (they get a percentage of the transaction) and from people who carry a balance. The 150k earner who charges $5k/month and pays in full is a low-risk 3% return. The 40k revolver is an 18% high-risk return.

In this day and age, they’d much prefer the former than the latter.

By: Devon White

Devon White — Fri, 28 May 2010 12:39:24 +0000

Credit scores aren’t about your ability to repay debt. They are all how profitable a target you are for credit products.

Credit scores basically project how likely you are to carry a balance over a long term and pay lots of interest charges without defaulting on the creditor.

That’s why a person earning 40k a year and carrying 6k of revolving debt, but making payments every month will have a much better score than someone who earns 150k a year, carries no debt and pays off their balance every month.

They are making money off the first person. They aren’t off the second one. So they give the first person a nice high score because they are the perfect “target” to suck money out of.

By: Favor

Favor — Thu, 27 May 2010 19:11:59 +0000

Great post indeed!!! :)

By: Impulse Magazine

Impulse Magazine — Thu, 27 May 2010 14:20:22 +0000

I think most people think that they should have good credit just because they pay all of their bills on time

By: Everyday Tips

Everyday Tips — Thu, 27 May 2010 13:58:03 +0000

I am now motivated to check my credit score again, it has been awhile.

In the case of your credit score, I think not all debt is bad debt. As you said, as long as you are responsible, having some credit cards/loans, etc may help your score. However, just pay that balance every month, so it really isn’t ‘debt’.

Did that make any sense?? :)

By: Bern

Bern — Thu, 27 May 2010 13:39:38 +0000

T.V., I’ll add my two cents. It’s great that you pay off your credit card every month. But, this will not improve your credit score.

Think of it like this. Whenever your credit score is pulled, it is like a snapshot in time. They don’t know if you pay off your credit cards every month. The look at what you are doing at that point in time.

This is why I tell people to utilize only 30% of their credit limit. If you are maxed out on your card and your credit is pulled, you will look high risk. It doesn’t matter that you pay off every month. What matters is what you are doing when they pull it.

To do this, as scary as it may sound, I would increase your credit limit as high as you can (this can also act as an emergency fund). Keep your charging under 30%. This will increase and maintain a good credit score.

Best of luck!

By: T.V.

T.V. — Thu, 27 May 2010 13:25:12 +0000

Great post! Helpful and straightforward.

Quick Question:
I use my credit cards a lot, but I pay in full before my statement is even out (via online banking). Does paying my “bill” before any bill is due negatively affect my credit? For example if I charge $1000 from April 1 to May 1 and the bill isn’t due until June 1; Does paying it on April 30th have the same effect as paying it in May? Do the credit agencies see this as not using my credit? I am essentially making my credit card a debit card.

I would not be required to pay interest as long as I pay in May, right?

I still want to pay my bill in full every month, but I want to make sure I’m gaining “credit-ability”.

Thanks in advance

By: Kevin

Kevin — Thu, 27 May 2010 12:22:04 +0000

The part about if you miss a payment they’ll report it, but if you pay on time they won’t report it never made sense to me. That doesn’t really give a fair picture of your payment history. I really can’t believe how one number can affect your life.
I read that the new financial reform bill is supposed to be keeping employers from being able to look at your credit. Hopefully that part passes so the credit bureaus don’t control your life as much.