improving cedit, advice and help

[88jbody]

I will be debt free when I apply for a morgage if I continue as I am now anyway, Its not like I am looking to buy in 6 months or a year. I am loking for ways to improve my score so a few years from now I can qualify for better terms and rates for a morgage.

I think it would be much easier to wait until my lease is up in may and move to a place that is 500 or so cheaper a month then put that extra directly into savings or to pay off the car and loan faster

Originally posted by Escape


Umm why??? Why not pay off the full balance every month?
What's the point of leaving $100?

I was told that it is better for credit building if there is a balance carried. if thats not the case than I will start paying it off regularly.

[s2k_boi]

Originally posted by 88jbody
I will be debt free when I apply for a morgage if I continue as I am now anyway, Its not like I am looking to buy in 6 months or a year. I am loking for ways to improve my score so a few years from now I can qualify for better terms and rates for a morgage.

I think it would be much easier to wait until my lease is up in may and move to a place that is 500 or so cheaper a month then put that extra directly into savings or to pay off the car and loan faster


I was told that it is better for credit building if there is a balance carried. if thats not the case than I will start paying it off regularly.

Leaving a balance doesn't build credit. What will affect your credit is utilization (don't put more then 60/70% of your credit limit), payment - weather you pay the minimum payment or full balance. Obviously you should pay the full amount and avoid the interest charges.


If you're negative equity for the car, just keep it and pay it off. As you mentioned you will want a mortgage in 3 years and at that point all your loans are paid off. The one big question you should ask yourself is if you're able to save for a down payment while having these loan payments. Also, if you're making payments on time it will help build your credit too.

I might get blasted but I will defend you on the new purchase a bit. As your $12k loan at 14% cost you more interest than you buying a new car + negative equity for 45k at 3-4% (assuming both are 5 year loans). I would say it's a win win. Lower rate and better car. However, your payments would be way higher....which could've been used to pay off your old car faster or put it towards a down payment.

You have done quite a bit to get your credit score up. Rule of thumb is minimum 650 as a fico score.

[ExtraSlow]

Originally posted by 88jbody
I was told that it is better for credit building if there is a balance carried. if thats not the case than I will start paying it off regularly.

pretty sure that is false.

Also, best way to have good credit is to stop wasting money and save more. Your vehicle choices haven't been the best, but you need to look at every payment you make. If you are paying interest on anything, it should make you concerned. Examine every bill, from car to cellphone to cable, and see where you can make reductions.

Best of luck, none of this is easy, but it's worth doing.

If you want to chat about this over a coffee, I can find time.

[sabad66]

honestly I think you are on the right track except for carrying a $100 balance on your CC. pay that thing off in FULL every statement so that you don't pay a dime of CC interest.

I think the thing that looks 'bad' for now is your recent personal loan, which is probably also the same reason your bank declined a CC. Give it a year or so before re-trying ANY credit applications.

don't listen to the other about selling your car... IMO the peace of mind of having a good reliable newer vehicle for your family is worth it. plus if your car is going to be paid off by the time you apply for your mortgage then you'll be ok.

if you keep up to date with your car + personal loan, pay off your CC in full every month, get a couple of monthly bills under your name (utils/phone/internet/cable) then you'll have a good score in 3 years time when you go for a mortgage.

also like someone else mentioned, try to save a bit extra every month to pay off your loans faster. every $500 or so, add it towards one of your loans assuming they are open.

[zhao]

Originally posted by 88jbody


ok, so lets say I did not do this, my credit score would still be low

the point of the used car at 14% was 2 reasons,
1. my wifes car had been hit and run and written off
2. build credit.

it acomplished both those becasue my score is now 615 and my wife has a safe reliable car to drive kids around in. (I still drive an old cheap veichle myself 2001 with 375,000kms)

You're just justifying your bad decisions and all that.

You did not need a used car financed at 14% to build credit. You also did not need a new car to build credit. You wanted those because you felt you needed them and deserved them or whatever. It was a bad decision, and most people do it. You could have easily built your credit very quickly by not buying a car. It's fine you do not know exactly how credit works because no one teaches this crap. I took finance and barely understand it lol. But you should be under no illusions and you did not need a car loan to build credit and it hurt you more than helped you.


My credit is well into the 800s. My very first car loan ever in my life was this year and the only reason I took it was because it was at 1.9% on a car that was 10g less than what I can buy it for now.

What built my credit is:

- not having bank accounts sitting at zero. You need money in your accounts or it looks bad.
- most of what else I did for building credit was just using a credit card. I use it for every single purchase and pay it off in full every single month.
- not having stupid debts. My credit cards or lines or credit, or whatever were not sitting at max utilization. as said above I kept that at zero balance. I also kept things simple to make it easier on me. One CC, one line of credit for emergencies.
- I had a small personal loan once prior to my first mortgage; that was used to buy and sell some junk for profit, paid it off early aka within a year.
- I never missed a payment on anything. Setup auto deducting or auto transfers or whatever you need to do. If you keep a few thousand in your account minimum you should never ever have to worry about NSFs or missing payments doing this.

The above there had my credit sitting at high 700s prior to my first mortgage (Even if you were at a 440, you'd probably be deep into the 500s within a year doing the above). Now 3 mortgages in and doing nothing else different i'm sitting in the 800s.

So 14% on a 10g+ car, and then a 45g car at god knows what did not help you. 50g sitting in your account and a 3g car on your driveway would help you far more creditwise. That 45g car is setting you back from buying a property years, and now I have no good advice to what to do with it. you rolled 7g into your loan, so you burned 7g on fire getting a 'lower' interest rate... that could of better been used for a downpayment. all your depreciating on a 45g car could of better been used on a down payment.


And my opinion is if you have trouble zeroing out a 600 dollar credit card, you have issues with money management that are beyond what anyone can give you advice for fixing. It's a mental issue. I'm willing to bet you buy a lot of shit you don't need that was all bought on impulse to fill some void. I'm always boggled by how many people that live paycheck to paycheck that I work with always have the newest phone or electronic device, go out for fancy dinners all the time, are always buying some random shit, vacations all the time, etc etc. Then they're always bitching how they have $20 to make it to payday in 3 days....



For those who chastised people 'blasting' him rather than giving advice, it's not blasting him, it's advice with a tough love reality check. Prioritize what is important to you and have some discipline. If you dont have discipline with saving, setup a tax free savings account or something and setup an auto deduction of XXX per month from your main account. If you're really bad dont even invest that money, or just buy GICs (shitty investment but guaranteed) locked in for short terms so you can't pilfer the account...

[Amysicle]

.

[revelations]

Originally posted by zhao


You're just justifying your bad decisions and all that.

You did not need a used car financed at 14% to build credit. You also did not need a new car to build credit. You wanted those because you felt you needed them and deserved them or whatever. It was a bad decision, and most people do it. You could have easily built your credit very quickly by not buying a car. It's fine you do not know exactly how credit works because no one teaches this crap. I took finance and barely understand it lol. But you should be under no illusions and you did not need a car loan to build credit and it hurt you more than helped you.


My credit is well into the 800s. My very first car loan ever in my life was this year and the only reason I took it was because it was at 1.9% on a car that was 10g less than what I can buy it for now.

What built my credit is:

- not having bank accounts sitting at zero. You need money in your accounts or it looks bad.
- most of what else I did for building credit was just using a credit card. I use it for every single purchase and pay it off in full every single month.
- not having stupid debts. My credit cards or lines or credit, or whatever were not sitting at max utilization. as said above I kept that at zero balance. I also kept things simple to make it easier on me. One CC, one line of credit for emergencies.
- I had a small personal loan once prior to my first mortgage; that was used to buy and sell some junk for profit, paid it off early aka within a year.
- I never missed a payment on anything. Setup auto deducting or auto transfers or whatever you need to do. If you keep a few thousand in your account minimum you should never ever have to worry about NSFs or missing payments doing this.

The above there had my credit sitting at high 700s prior to my first mortgage (Even if you were at a 440, you'd probably be deep into the 500s within a year doing the above). Now 3 mortgages in and doing nothing else different i'm sitting in the 800s.

So 14% on a 10g+ car, and then a 45g car at god knows what did not help you. 50g sitting in your account and a 3g car on your driveway would help you far more creditwise. That 45g car is setting you back from buying a property years, and now I have no good advice to what to do with it. you rolled 7g into your loan, so you burned 7g on fire getting a 'lower' interest rate... that could of better been used for a downpayment. all your depreciating on a 45g car could of better been used on a down payment.


And my opinion is if you have trouble zeroing out a 600 dollar credit card, you have issues with money management that are beyond what anyone can give you advice for fixing. It's a mental issue. I'm willing to bet you buy a lot of shit you don't need that was all bought on impulse to fill some void. I'm always boggled by how many people that live paycheck to paycheck that I work with always have the newest phone or electronic device, go out for fancy dinners all the time, are always buying some random shit, vacations all the time, etc etc. Then they're always bitching how they have $20 to make it to payday in 3 days....



For those who chastised people 'blasting' him rather than giving advice, it's not blasting him, it's advice with a tough love reality check. Prioritize what is important to you and have some discipline. If you dont have discipline with saving, setup a tax free savings account or something and setup an auto deduction of XXX per month from your main account. If you're really bad dont even invest that money, or just buy GICs (shitty investment but guaranteed) locked in for short terms so you can't pilfer the account...

Excellent post. Tough love is the reality when it comes to finances. Sadly, most large financial decisions are emotion-based, rather that logic-based.

A 3000$ vehicle can be just as safe and reliable as a 30,000$ vehicle.

[ercchry]

I'd up your cc limit so you can freely use it without utilizing over 50% of the limit, also pay it off in full.

Personally on your timeframe and strategy I'd put as much effort into crushing those loans, and getting into a house within 2 years. Just based on my personal thoughts of where calgary real estate is heading and potential for rules or rates to worsen

I'd also check to see if your loans are actually being reported to the credit agencies... if they are not then it's not helping you.

Credit history and proof that you can carry larger debts is an important factor in acquiring future debts

[88jbody]

Originally posted by zhao


You're just justifying your bad decisions and all that.

You did not need a used car financed at 14% to build credit. You also did not need a new car to build credit. You wanted those because you felt you needed them and deserved them or whatever. It was a bad decision, and most people do it. You could have easily built your credit very quickly by not buying a car. It's fine you do not know exactly how credit works because no one teaches this crap. I took finance and barely understand it lol. But you should be under no illusions and you did not need a car loan to build credit and it hurt you more than helped you.


My credit is well into the 800s. My very first car loan ever in my life was this year and the only reason I took it was because it was at 1.9% on a car that was 10g less than what I can buy it for now.

What built my credit is:

- not having bank accounts sitting at zero. You need money in your accounts or it looks bad.
- most of what else I did for building credit was just using a credit card. I use it for every single purchase and pay it off in full every single month.
- not having stupid debts. My credit cards or lines or credit, or whatever were not sitting at max utilization. as said above I kept that at zero balance. I also kept things simple to make it easier on me. One CC, one line of credit for emergencies.
- I had a small personal loan once prior to my first mortgage; that was used to buy and sell some junk for profit, paid it off early aka within a year.
- I never missed a payment on anything. Setup auto deducting or auto transfers or whatever you need to do. If you keep a few thousand in your account minimum you should never ever have to worry about NSFs or missing payments doing this.

The above there had my credit sitting at high 700s prior to my first mortgage (Even if you were at a 440, you'd probably be deep into the 500s within a year doing the above). Now 3 mortgages in and doing nothing else different i'm sitting in the 800s.

So 14% on a 10g+ car, and then a 45g car at god knows what did not help you. 50g sitting in your account and a 3g car on your driveway would help you far more creditwise. That 45g car is setting you back from buying a property years, and now I have no good advice to what to do with it. you rolled 7g into your loan, so you burned 7g on fire getting a 'lower' interest rate... that could of better been used for a downpayment. all your depreciating on a 45g car could of better been used on a down payment.

And my opinion is if you have trouble zeroing out a 600 dollar credit card, you have issues with money management that are beyond what anyone can give you advice for fixing. It's a mental issue. I'm willing to bet you buy a lot of shit you don't need that was all bought on impulse to fill some void. I'm always boggled by how many people that live paycheck to paycheck that I work with always have the newest phone or electronic device, go out for fancy dinners all the time, are always buying some random shit, vacations all the time, etc etc. Then they're always bitching how they have $20 to make it to payday in 3 days....

For those who chastised people 'blasting' him rather than giving advice, it's not blasting him, it's advice with a tough love reality check. Prioritize what is important to you and have some discipline. If you dont have discipline with saving, setup a tax free savings account or something and setup an auto deduction of XXX per month from your main account. If you're really bad dont even invest that money, or just buy GICs (shitty investment but guaranteed) locked in for short terms so you can't pilfer the account...

I dont have any trouble paying off my credit card, i just had not becasue I was told once that it helps the credit beter to carry some balance, now I know that is not the case I will pay it off monthly.

so if paying that off monthly will help more than that is a very easy fix for me.

my score on the report i have was showing my credit at 615. so my goal was to try and get that as close to 700 as I can within 3 years when i planned to buy and would be debt free when I did.

and aside from the car I spend nothing on things I dont need aside from a coffee a few times a week, I really dont waste money, I am using the cell phone I have had for years, and I am not generally an impulse buyer. I dont quite live pay to pay, but I also dont have a very large cushion, I reduced my expenses to help with that but then my income also went down about 10k/year so I didnt manage to get further ahead sorta treading watter, and had to travel for my dads funeral, and a $3000 lawyer for my son all in a short span used up a good part of what i had

I have a TFSA, a RESP in my kids names, and my daily use account as well. not alot in any one of them, but i dont run a near 0 balance either.

You see why getting rid of the car just is not a good option now that I have it. I will just ride out until its paid off. compared to those telling me to get rid of it there is no easy way to get out of the car, so if it means 3 years of payments i can easily accept that and it still does help my credit positively becasue my score is higher now than when I first got it.

[Xtrema]

https://www.ic.gc.ca/eic/site/oca-bc...g/ca02178.html

Pay off full every month.

Stop applying for new credits.

Pay off all your outstanding debt.

Then your score should go back up.

My score dropped almost 100 points just by signing up a bunch of cards (store card with bonus) in the 3 months after I got my house. It took almost 3 years for it to get back to 800.

Originally posted by 88jbody

and aside from the car I spend nothing on things I dont need aside from a coffee a few times a week, I really dont waste money, I am using the cell phone I have had for years, and I am not generally an impulse buyer. I dont quite live pay to pay, but I also dont have a very large cushion, I reduced my expenses to help with that but then my income also went down about 10k/year so I didnt manage to get further ahead sorta treading watter, and had to travel for my dads funeral, and a $3000 lawyer for my son all in a short span used up a good part of what i had

I have a TFSA, a RESP in my kids names, and my daily use account as well. not alot in any one of them, but i dont run a near 0 balance either.

You see why getting rid of the car just is not a good option now that I have it. I will just ride out until its paid off. compared to those telling me to get rid of it there is no easy way to get out of the car, so if it means 3 years of payments i can easily accept that and it still does help my credit positively becasue my score is higher now than when I first got it.

And talk to an adviser. Internet is good for general theories but you have to open up your total history for someone to analyze and that's something you should not do on an open forum.

I think you should get some coaching. Getting a car loan at 14% is really bad. Being upside down on a $40K car loan is also bad. Signing up a $600 CC just for credit building also not the right thing to do unless it is your 1st credit card ever. Sound like you have been picking up bad advices on the internet.

If you don't have any huge asset, you should not have car loans unless it's critical to you earning income (HD truck or something). You can also get Corollas and Elantras at 0-1% year end lease for $200-$250 a month for safe reliable transportation (that will probably show up as a $10-$12K loan on your credit for a new car).

Wants and needs my friend, you need to keep a control on the wants.

And have a open mind about ditching your car.

Here's a sample:

$45K loan, 3% 60 months yields almost $800/month of payment.

Since you say you are upside down, I assume that you are 2 years in and car worth say $25K that you are paying $800/month for. You probably lose $5K.

But if pick up another $25K car on a great lease, your monthly will drop to ~$250-300/month. The $5K you lose, you can make it back in 10 months or less in differential payments. Then you have another $500/month for the remainder of your 26 month term.

It's not a small sum if you are finding hard to have a cushion of cash.

[zhao]

Originally posted by 88jbody


I dont have any trouble paying off my credit card, i just had not becasue I was told once that it helps the credit beter to carry some balance, now I know that is not the case I will pay it off monthly.

so if paying that off monthly will help more than that is a very easy fix for me.

my score on the report i have was showing my credit at 615. so my goal was to try and get that as close to 700 as I can within 3 years when i planned to buy and would be debt free when I did.

and aside from the car I spend nothing on things I dont need aside from a coffee a few times a week, I really dont waste money, I am using the cell phone I have had for years, and I am not generally an impulse buyer. I dont quite live pay to pay, but I also dont have a very large cushion, I reduced my expenses to help with that but then my income also went down about 10k/year so I didnt manage to get further ahead sorta treading watter, and had to travel for my dads funeral, and a $3000 lawyer for my son all in a short span used up a good part of what i had

I have a TFSA, a RESP in my kids names, and my daily use account as well. not alot in any one of them, but i dont run a near 0 balance either.

You see why getting rid of the car just is not a good option now that I have it. I will just ride out until its paid off. compared to those telling me to get rid of it there is no easy way to get out of the car, so if it means 3 years of payments i can easily accept that and it still does help my credit positively because my score is higher now than when I first got it.

I didn't say get rid of it. I said I don't have any good advice for how to deal with it. There are negatives on both ends of that car no matter what you do with it.

However, suffice it to say, you will likely have to get rid of that car loan before you can buy a house and that may mean selling it. It is very unlikely your debt to income ratio will allow you to buy a house with a 45g car, because a car payment on a thing like that takes a huge chunk out of your maximum allowable debt to income ratio.

With the old rules you might have been ok (but i'd still be surprised if you were if you're buying a typical house in calgary), but with the new rules even without knowing what you make, I'd be surprised if you make enough to afford a house while paying off an expensive vehicle. Just about everyone I know who has ever bought a house had to sell their financed vehicle to do it, and then since financing a vehicle is extremely loosey goosey, they usually bought a new vehicle right after with no issues.

[88jbody]

Car has 3 years left at $545/month it will be paid for when I go to buy a house I did not plan to buy before it is paid off. So at the very least it will be 6 years of good payment history on my report.

What is a normal debt ratio to not exceed? With and without a morgage?

As far as the elantra at a 1% and moving my negative into it at a better rate smaller overall payment I did not qualify for those rates that low. So I will just ride the loan put until it's paid

I don't think my income is a issue for the price range of homes I've looked at. Mid 300s seems to be about what I need to spend to get what I need to have. So morgage will be about 300-320k

So I guess as of right now the easiest and best thing I can do is change my habits of how I use my credit card and move to pay it off monthly that won't be too difficult so when I make my payment in November I'll pay it off start paying it off in full and see how well that helps out for starters. And put all of my extra cash into my personal loan because it has a higher intrest rate.

[88jbody]

My current landlord even offered to sell me the house I'm in which I love but I would not be comfortable with a morgage that big plus needing a larger down payment because of the value of it also would double the amount of time it would take to save up the down payment

[tpurcell4]

Originally posted by 88jbody
I have been working on fixing and improving my credit. over the last 4 years it has gone up about 50 points.

looking at my equfax (full copy not one i got online) I got a photo copy o the one they pulled for when I was considering a car purchace.

as it looks right now the biggest negative on the report is for my credit card. it has been in good standing for quite a wile but there were some previous late payments showing. a few 30 day alte and one 60 day late. do these late payments showing on there get removed after a period of time? or is there something i can do to ofset what that is bringing my score down?

otherwise I have been seing a steady but slow improvement of my credit over the last 3 or 4 years.

the only other negative was a very old bill in collections that I have made a settlement with and have paid in full. I havent checked since to see if it has been reflected on my credit (was about 3 months ago)

credit utilization is about 50%,
current credit is my small credit card owing $500 on it ($600 limit)
a car loan original balance 45k, owing just under 30k now
and a 7k personal loan that is recent. was used to pay the collection account, some expenses I had for my kids and things like that.

just trying to set my self up to buy a home and so I want to start with getting my credit up to par.

any suggestions or helpfull tips on credit building apreciated,

I was recently declined a credit card from my bank still though.

A lot of the advice provided already is fantastic and I would recommend utilizing as much as you can for improving your credit.

In addition, as your long term goal is to purchase a home, you should know what you will need in terms of credit to qualify.

1. If putting less than 20% down your score will need to be at least 600 (most lenders will want to see at least 620)

2. You will need a minimum of a 2 year history on at least credit accounts (ideally revolving credit)

3. The two tradelines if revolving credit will need to have a minimum limit available of $1,500 each (your current personal loan and vehicle loan will qualify as a second trade, but you will need to get your credit card up to $1,500)

NOTE: if you pay off all of your debt prior to purchasing a house you will not have the required minimum credit requirements. Additionally, your credit rebuild does not need to take as long as it has. The info-graphic pie chart that was posted gives a general breakdown of how different items affect your credit score, but in addition, revolving trade lines (credit cards and lines of credit) have more impact than installment plans (such as car loans, student loans and other personal loans). Also, accounts with major banks and unsecured accounts build your score faster than accounts with smaller institutions such as Citi, Home Trust, Peoples Trust, etc.

If you want to build your score up faster over the next couple of years add a second credit card now (for at least $500) unsecured with a major institution if you can qualify. only use an amount that can be paid off monthly (recommended on both credit cards if you can), and slowly increase the limits on each until they are both at $1,500.

You will notice that the addition of a second revolving account will grow your credit faster than your current set up, as long as you make sure you make your payments on a regular basis, and lower the percentage of the limit you owe on both to less than 50% at any given time.

Doing this, you could potentially see an increase of 50 points over the next 6 months to a year (if not a larger increase).

When it comes to late payments, you will need to have less than 2 late payments in a two year period (no more than 30 days late), when you go to qualify.

A general piece of advice to anyone still reading, if you have been bankrupt, gone through credit counseling or consumer proposal and it shows on your credit bureau, you need to be perfect with your credit afterwards (ZERO late payments) otherwise your only option for financing will be 20%+ down with an equity lender at rates typically 1.50%+ higher than best rates on the market.

Hope this helps!

Cheers and all the best as you re-build your credit further. You are doing great so far.

[tonytiger55]

There has been some good advice on this thread.

To answer your question on how to improve your credit. Its not so straightforward
There have been some good answers, but I think a better question to start with is what is your plan or long term goal for this..? or better still have some financial planning instead. maybe talk to a adviser.

When I used to work at a bank a lot of my new clients were focused on their credit score. They would dance around my office telling me how glorious it is and how hard they worked to get it up. I would sit there rubbing my belly trying to figure out a diplomatic way to tell them your credit application for a mortgage/line of credit would not be approved. Or if it would be there would be conditions.

Credit is based on four things. Your Income, Debit, Credit Score and Savings. Based on those four factors a financial institution will determine if they will lend to you.
A example, a guy came in and had his line of credit declined. he banged the counter and shouted he earned $100k a year and has excellent credit. The problem was, he had no savings and the debit that he had made no sense. Yeah he made good money but where it went made no sense looking at his account profile.

That last sentence 'making sense' is a key word. Yes there are multiple ways you can do things. For the sake of the thread I will keep it simple.
A credit card is your record to borrow money and pay it back. So if you borrow $600 and can't pay back $600 why would I lend you $300k for a mortgage? Its that simple.

So if you are earning good money, where is it going..? How are you managing it. Do you have long term and short term savings? Do you have a small emergency fund in cash? Is there a boring pattern of money being put aside? Lenders like boring patterns.
How much is your rent, how much is going on food, bills etc. Are you living within your means?
Does your financial profile make sense..? That's the main question I used to ask before I started the credit process with clients.

You have answered some of your own questions, pay off your card in full, pay off your debit asap and start saving regularly. Keep it simple.. because if you apply for mortgage.. its not just your credit score lenders look it, its your financial profile and they will pick at things to allow them to charge you higher rate.

Good luck and I hope this helps.