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Finance Gurus: Help me setting an argument

 
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89comp
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PostPosted: Jun 01, 2006 5:30 am    Post subject: Finance Gurus: Help me setting an argument Reply with quote

My friend asserts that having several open credit cards/lines of credit is good for one's credit b/c it shows that people are willing to extend you a line of credit.

I've always been told that each open line of credit is a knock against your credit score. Furthermore, I asserted that paying your rent/utility bills on time helps you build good credit b/c it shows you are trustworthy/pay on time/etc.

Note: This discussion was based on someone with little credit history (recent college grad).

So who is right?

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Commodore
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PostPosted: Jun 01, 2006 6:40 am    Post subject: Reply with quote

Both.

Multiple applications can hurt your credit. Having a credit card (if paid PERFECTLY) can be helpful, but about as much as a mouse pushing a cadillac. Your bills, rent (house), and Cars (that's a big one), are what really help your credit.

When I was in college I had to lease a car, I couldn't afford to buy one. My pops co-signed with me to get the lease, and that would help me with credit while in college. Once I was outta college, and perfect car note on my report. I was good to go.

But as a whole you have a better picture of what's a good idea to get your credit up. By the way, I don't have one credit card, at all. They are nothing but trouble IMO.
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goofyboy
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PostPosted: Jun 01, 2006 7:02 am    Post subject: Reply with quote

it is better to have ZERO credit than bad credit. I have bad (not horrible, but not great) credit. I no longer have any credit cards. However, when i bought my Jeep, I had a couple of credit cards with the thinking that this will help build my credit. At the time my credit was great. I was still not able to get a low interest rate without a co-signer.

My brother-in-law has NO credit cards and NO credit history. He just bought a new car with no job and no credit. His interest rate was 7.25%. Sidenote - he had to finance it in order to get the $500 credit for college grad. His fam is paying it off at the end of the month.

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J-Ro
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PostPosted: Jun 01, 2006 10:21 am    Post subject: Reply with quote

Open lines are good if they are not at 1/3rd the max on the card. Large open crdit lines only hurt people who have limited credit history because they haven't proven they can control their spending. Car loans have little affect on the underwriters opinion because the general concept is that it is collateralized and therefore no pay = no car. PG&E and phone bill payments are an old wives tale and have zero to do with credit score unless a judgment is placed on you. Homes help a lot and paying off a home is good. Don't close cards just because you don't use them if you're trying to increase your score as it will soon be off your credit and technically in the eyes of the underwriter, you never had it.
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callen
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PostPosted: Jun 01, 2006 10:39 am    Post subject: Reply with quote

You have to put credit to work for you. If you get an airlines card and put all your expenses on it and pay it off every month it looks really good on your credit as well as getting you airline miles. Also if you have something that has a 0 to 5 % intrest rate that is very good, you should take that credit because you can make more than that easily investing.
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5280HighButter
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Joined: 16 Mar 2005
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PostPosted: Jun 01, 2006 8:43 pm    Post subject: Reply with quote

A part of your credit score is determined by how long your lines of credit have been open, so don't close old cards. Another big part of your credit score is your debt to credit ratio. If you have 1 card with a $2,000 max and a $2,000 balance your ratio is obvioiusly 100%. Open up another credit card with a 2G max and your ratio is now at 50%. This will help your credit score. So openeing a credit card is good for your credit score, I think it is stupid, but that is how things work.
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