Questions about statements on my credit report.

creditreport wrote:

I got my credit report in the mail today (we're refinancing our mortgage), and it lists the "Key factors that adversely affected your credit score." I'm not sure I understand the following two factors....can you help me decipher? Thanks.

1. Proportion of balances to credit limits is too high on bank revolving or other revolving accounts.

2. Lack of recent installment loan information.

1. Your outstanding balance on your credit card is too high compared to your credit limit. Either pay down your balance or open more credit accounts. If your total credit line (on all cards) is, for example, $10,000 than keep your balance below $1000.

2. Your credit card companies have not been making reports.

creditreport wrote:

I got my credit report in the mail today (we're refinancing our mortgage), and it lists the "Key factors that adversely affected your credit score." I'm not sure I understand the following two factors....can you help me decipher? Thanks.

1. Proportion of balances to credit limits is too high on bank revolving or other revolving accounts.

2. Lack of recent installment loan information.

well #1 means you carry a balance over 50% of available credit on 1 or more credit cards.

oddly, owing $400 on a card with a $500 limit is worse for your credit than owing $10k with a limit of $25k.

Thank you. That makes sense.

Geesh, pay off your credit cards.

That's ridiculous.

I usually spend about $1k/month on my credit card and I always pay it off at the end of the month, so I never pay interest/fees. I do have a second card that I almost never use...it's a backup in case a vendor doesn't take my AmEx. My score was 791...not great, but decent. I think?

791?!?!

You got the lowest rate anyone was possibly going to give you.

No need to sweat anything.

Also explains #2 as there is nothing to report if you don't carry a balance.

creditreport wrote:

I usually spend about $1k/month on my credit card and I always pay it off at the end of the month, so I never pay interest/fees. I do have a second card that I almost never use...it's a backup in case a vendor doesn't take my AmEx. My score was 791...not great, but decent. I think?

In that case, tell them, and have them check it again.

This time be sure they're paid off.

creditreport wrote:

I got my credit report in the mail today (we're refinancing our mortgage), and it lists the "Key factors that adversely affected your credit score." I'm not sure I understand the following two factors....can you help me decipher? Thanks.

1. Proportion of balances to credit limits is too high on bank revolving or other revolving accounts.

2. Lack of recent installment loan information.

#2 is about installment loans, not revolving loans. Installment is stuff like a car loan, student loan, etc...

A small part of your credit score is determined by the variety of credit you have on your report. So, in order to get the highest score, you need history in revolving (credit cards), installment (as mentioned above), mortgage, etc.. Each of these is in a different category.

As you demonstrated, it is still possible to get a very high score without having all varieties of credit on your history. Payment history, and loan balances/% utilization are by far the biggest factors.

#1 - For the most part, what others told you on this one is correct. The actual details work as follows:

% credit utilization is the second biggest factor in your score. (payment history is #1). There are two parts of this: a) % limit utilization on individual cards/loans/etc, and b) % of overall limit utilization of all open cards.

There are different levels of utilization that will whack your score. The key percentages I'm aware of are: 10%, 30%, 50%, and 70%. Each level will hit your score more. So, if you want the best score, keep your utilization under 10% on each and every card. As somebody else mentioned, you can do this by paying down the debt, or increasing your credit limit. The percentage is the key thing for the scoring systems (though a human evaluating you for a bank loan will care about your overall debt level, unlike the scoring systems).

One other thing to be aware of about how the reporting works for your score, and the % utilization.... even if you pay off your entire balance every month, and have never paid a penny of interest, the "debt level" on your card that is reported is the statement balance on the statement closing date.

So, you have a $1000 credit limit card, use it to charge $900 this month, statement posts, you pay it off immediately. You think you have $0 debt. The credit scores go by the $900 reported on your statement closing date. So, if you need to pretty up your score before applying for a loan/mortgage/etc, it is a smart idea to make sure your payment posts BEFORE the statement closing date. That way, a $0, or very small amount is reported to the reporting agencies.

Thank you. That's very helpful. I think I might try to increase the limit on my main credit card.