Credit Tiers

[leakypipeDCI]

So I searched and found no answer, so here goes:

I hear people talking about credit tiers 1,2,3 or A,B,C. My question is, what number ranges are represented by each designation? I made some bad decisions in my early history (about three years ago), and have worked hard to up my score since then. I opened a credit card ($1000 limit) this year specifically to make purchases to keep my balance around $300 and make payments each month that are well over the minimum, the goal being to up my FICO score. My mortgage payments being on time for the past year have also helped, and my score has jumped 20 points in just the last two months. So, what do the tiers mean, and what should my goal FICO score be?

[ChrisMD]

Quote, originally posted by leakypipeDCI »

So I searched and found no answer, so here goes: I hear people talking about credit tiers 1,2,3 or A,B,C. My question is, what number ranges are represented by each designation?

720+ = A
680-719 = B
640-679 = C

I don't happen to remember what the levels are under that. IMO, anything less than 640 is just bad.

Quote »

what should my goal FICO score be?

The highest is 850. That's your goal. You won't get there (very, very few people do) but the closest you can get the better. You definitely want to be over 720 with a nice cushion.

[leakypipeDCI]

Cool, looks like I jumped into the B level, and A should be obtainable within six months.

[Hotpockets]

Quote, originally posted by ChrisMD »

The highest is 850. That's your goal. You won't get there (very, very few people do) but the closest you can get the better. You definitely want to be over 720 with a nice cushion.

So, what can one do to get 850? I presume you have to be old to get the 40+ years of credit history, have no late payments, have a credit utilization of 0.1% on a total credit available of like... a billion dollars. And having a mix of y'know, a bunch of different credit accounts.

Apparently the median credit score in the States is 725... hmm

[ChrisMD]

Quote, originally posted by Hotpockets »

So, what can one do to get 850?

To be honest, I don't think it's even possible. You might get an 848 and no matter what you do, you just can't get those extra two points!

Rumor has it even Suze Orman only has something like an 820.

[BAM6I4]

IMO there is NO point to leave a balance on any credit card, AFAIK it doesn't "help" build your FICO score up any faster. I personally have NEVER left a balance on any CC, and I am in the A-tier w/ a little cushion.

[leakypipeDCI]

If you show you can consistently make payments, how can it not help?

[Hotpockets]

Quote, originally posted by ChrisMD »

To be honest, I don't think it's even possible. You might get an 848 and no matter what you do, you just can't get those extra two points! Rumor has it even Suze Orman only has something like an 820.

I bet she flogs herself to sleep over the 30 points she's missing . if you get over 800 you'd get qualified for pretty much anything, I'd think.

Speaking on this topic with 30% appropriateness: what is your credit utilization percentage, Chris?

[tjl]

Quote, originally posted by leakypipeDCI »

If you show you can consistently make payments, how can it not help?

Paying the whole bill within the grace period (not paying interest) looks as good on the credit report as paying on time but letting a balance carry over (costing interest).

Charging a little every month and paying the whole bill within the grace period builds up a good payment history on that account without costing any interest.

[ChrisMD]

Quote, originally posted by Hotpockets »

Speaking on this topic with 30% appropriateness: what is your credit utilization percentage, Chris?

It varies a little bit but it's currently about 6% using rounded numbers from what I remember. I'm not at home to check what my exact balances are.

[Hotpockets]

Quote, originally posted by ChrisMD »

It varies a little bit but it's currently about 6% using rounded numbers from what I remember. I'm not at home to check what my exact balances are.

Excellent! .

[kitty]

Quote, originally posted by tjl »

Paying the whole bill within the grace period (not paying interest) looks as good on the credit report as paying on time but letting a balance carry over (costing interest). Charging a little every month and paying the whole bill within the grace period builds up a good payment history on that account without costing any interest.

bingo! i'm glad someone knows this.

you have a $1000 limit on your card... whether you charge and pay off $300 every month, or you charge $25 and pay off $25 every month, it doesn't matter. also, it doesn't matter if you keep it at $1000, as long as it's brought down before you apply for something.

around 30% credit usage is ideal, however the only time it matters is WHEN THE REPORT IS PULLED. if you have no need to apply for anything for six months, keeping a high balance is fine. just pay it down about two months before you plan to apply.

as for obtaining the elusive 850 (or whatever the highest happens to be for the scale being used) it takes at least 30 years of credit history on the report. many people ask me why they don't have an 830 (the highest on our scale, the plus score) because they've NEVER MISSED A PAYMENT. that's NOT the only factor.

paying balances off sooner, whether it's installment or revolving, does not instantly raise your score like many think. it WILL effect the score, just because numbers have changed.

now, about those TIERS. they're not a guarantee. you can go to five lenders in one day and walk out with five different scores. not every lender uses FICO, there's about 25 different scoring models. this is why people shop around, and why one company may offer you a credit card with a $5k limit while another might only offer you $2k. each lender has it's own criteria and will rate you differently.

in the same light, you may go to a lender and receive a 700, someon else may also receive a 700, with a completely different history. you both go to another lender, you get a 720, they get a 670.

credit scoring is VERY complicated, and there's a lot of myths and bad information out there. it makes my job very hard