How to aquire good credit?

SWMBO's credit is about 595 average. She's missed a few payments on credit cards in the last 6 months that I know of. She's had an auto loan, but she paid that off before we met. I never really inquired about past finances, so I have no idea about what she did to create such crappy scores.

What can she do to bring it up? Obviously make payments on time, but what else? Take out a small loan and used the loan money to pay it back? What advice can you give me to give to her? The quicker we can build good credit, the better.

Appleseed said:The quicker we can build good credit, the better.

I'm serious when I ask this, but why is credit rating so important to Americans?

Get a new SWMBO with a better score? The internet is such a big place that I'm sure somebody has created a credit score-based version of Tinder by now.

Suprf1y said:

Appleseed said:The quicker we can build good credit, the better.

I'm serious when I ask this, but why is credit rating so important to Americans?

Because we just love buying E36 M3 on credit. 

And now insurance companies are basing insurance rates on credit score. 

Pay down her debt if any exists.  A portion of credit score is calculated based on the debt to credit ratio.  You do not want maxed out credit...  For that reason, plus the fact that age/duration of credit seems to be a factor, means you generally do not want to close old credit cards if your score is already low.

In reply to Suprf1y :

A high credit rating gives lenders more confidence and therefore more willing to lend and at a lower interest rate. 

Suprf1y said:

Appleseed said:

The quicker we can build good credit, the better.

I'm serious when I ask this, but why is credit ratings so important to Americans?

Directly relates to your interest rates on loans for cars and houses, but also indirectly affects things like whether or not you qualify for job postings or rental housing.

Many people run credit checks to see if in general, a person cares about their commitments or not. It's not always accurate, but it is a good confidence factor.

spitfirebill wrote:

Suprf1y said:

Appleseed said:The quicker we can build good credit, the better.

I'm serious when I ask this, but why is credit rating so important to Americans?

Because we just love buying E36 M3 on credit. 

And now insurance companies are basing insurance rates on credit score. 

And some jobs/industries can be closed to people with a low credit score.  Housing.  Everything.

In reply to WilD :

That's insane

Suprf1y said:

In reply to WilD :

That's insane

Not really. Do you want to rent your house to/hire someone who has shown a long history of not honoring the commitments they have made in the past?

Well, you might. But you probably want to be able to know before getting into a long-term financial agreement with them.

I owned rentals for 20 years and never once did a credit check.

None of my friends do either. Some say they're going to, none actually do it.

But I was more so commenting on the jobs/industries/everything comment.

FWIW, I'm 56 and only recently found out my credit score, and only incidentally.

Short answer:  Pay off the CC and then continue to send a $5 payment every month to a credit card.  

Some will say buy stuff with CC and pay it off quickly.  That still puts you at risk that you will miss a payment and get hit with all the interest.  My way...buy nothing!  Just send in a $5 payment every month and in a few months you will get all your $5 payment money back in the form of a check.  

I knew I had recently wrote a book on this topic.  See the last post on page number 1 of this thread.

If $5 is too much to spare, send $1.  Same effect.  Set it up through your electronic banking to just send the $1/$5 automatically and never have to think about it.  

In reply to John Welsh :

I was just about to link to that, thanks John. 

Short summary: payments on time, secured credit card or loan through the local credit union, get added on as a user to an existing persons credit card, like a parent. 

Just taking some cash and getting a secured card should help after a year or so, but if there's a parent that shares mutual trust, getting added to an existing good standing account helps in record time. It's just risky in that if she loses her mind one day, she could destroy that persons credit too. 

My example was getting added on to my mom's 20 year old discover account. The interest rate sucks, the available credit is ridiculous, but it increased my "average account age" by 10 years overnight and took me from a 600ish to just shy of an 800 in one cycle. Well, the combination of age of account and credit used vs available. I rotate about 400/month in credit cards, my mom about 500/month, but the credit limit on the discover is $14k, so revolving 1% of available credit every month seems to keep everyone happy. 

My cellphone and streaming services are auto billed to my credit card every month, then paid AFTER the bill arrives. That's the easiest way I can recommend with a secured credit card. You're already making those payments anyway, set it to auto and let it work for you. Been trying to drill that into someone's head explaining it will drop insurance and utility bills some but "I'm 40 now, haven't had a credit score in 20 years and don't want to start now" despite the fact that things are far more expensive than necessary by not having a credit score. 

In reply to John Welsh :

So funny I had my wife do this method to see what would happen since her credit isn't as established as mine after i read your post. Some credit card companies refunded it instantly, some did exactly what you said would happen, some didn't like the no-usage.

Edit:

This method has no risk but there is reward, depending on the CC company. It didn't hurt her credit and her score did increase. There was no other credit types in use for her at the time FYI. 

In reply to yupididit :

Has it had any positive affect on her credit rating?  

John Welsh said:

In reply to yupididit :

Has it had any positive affect on her credit rating?  

lol whole reason for me posting that was it only affected her positively. I apparently left that out. Sorry!

Here is another that I can not prove...  I think it is better to send some money, rather than no money even if that "some money" does not meet the minimum payment.  

On the Credit Cards that she does have, with the use of your on-line banking set up to send a $1/$5 payment every month, automatically.  Sure, her minimum payment may be $50 and this $1 will have little impact but I believe that "insufficient payment" of $1 is better for your rating that "missed payment" of sending zero.

The $1 will go automatically.  She would then still have to go in on payday/bill day and send the $50 like she has been (or has not been, as the case may be.)  

Sending just the minimum payment will result in never paying off the card.  However, if she could in this example set up an auto pay of $50 (to satisfy the minimum) then she would both make positive payment and also avoid the fees and interest hikes that come with missed payments.  

Suprf1y said:

In reply to WilD :

That's insane

 

In addition to Robbie's comments, some jobs that deal with sensitive information can consider a person with a low credit score to be a security risk.

It seems a long history of credit helps.  If I were willing to actually carry some debt, my score would probably be higher, but it averages over 800.  My two main credit card accounts have been active since the early 90's. 

Suprf1y said:

I owned rentals for 20 years and never once did a credit check.

None of my friends do either. Some say they're going to, none actually do it.

But I was more so commenting on the jobs/industries/everything comment.

FWIW, I'm 56 and only recently found out my credit score, and only incidentally.

It matters to Canadians just as much.  We just don't have the access to it that is advertised on the States.  I got 2.39% on my house mortgage a few years back, based on my credit rating,  a boring life and never missing a payment. On anything.  Ever.

Good credit or bad credit is not indicative of anything that a person might or might not do.  

To the OP, get her credit card balances completely paid off, use the card or cards once a month each for a small purchase like a tank of gas, and pay them off the day the bill shows up.   When her credit score has risen (this might take a year or two or longer) get a car loan in her name and make sure that gets paid on time every month.  Then just sit back and wait.  The above took me from a literal non-scoring credit report to a 700+ score in about 1.5 years.  Having been a member of the same credit union for over a decade is the only thing that let me get a car loan without a 17% interest rate.  

I like having an account on Creditkarma.com just to see what my score is doing and for the alerts when there's a data breach.  It shows the major ingredients that go into a credit score and how they affect things.  

Suprf1y said:

Appleseed said:The quicker we can build good credit, the better.

I'm serious when I ask this, but why is credit rating so important to Americans?

It determines what things that are important to you will cost.  

Shelter( house/ home/ apartment ) will cost less depending on your credit score. 

Transportation.  The cost of transportation is seriously affected by your credit rating. 

Job/ income. All better paying jobs check your credit rating. It’s a good indicator of how responsible you are.  How trustworthy you are. How reliable you are

Opportunity.  Some great opportunities will simply pass you by without the required credit score.  

spitfirebill said:

Suprf1y said:

Appleseed said:The quicker we can build good credit, the better.

I'm serious when I ask this, but why is credit rating so important to Americans?

Because we just love buying E36 M3 on credit. 

And now insurance companies are basing insurance rates on credit score. 

 

Insurance companies have been doing that for more than 2 decades. 

Just read Welsh's other post. We are gonna work like hell to zero out the cards and then do the auto $5/month. Can anyone elaborate further on getting added to another's card?  Do you just have to get added? Must you, personally, have to show activity?

"It’s a good indicator of how responsible you are.  How trustworthy you are. How reliable you are"

It's an indicator of how much you use credit and repay on it.  Using cash for 100% of your life means you would have essentially a zero credit score.  That's what happened to me after the one credit card I had was closed after the lender itself was dissolved during the 2009 credit crisis.   I ran for about five years on cash alone, zero debts carried (and that means not using credit), and when I decided I might want to buy my first home I was denied by three different lenders.  Two off them seperately made the comment that they hadn't seen this happen before, and that I didn't have a score of zero, I had a blank score.  I had to rebuild my credit through no fault of my own.  

Short version:  It's a score for people who are playing the game, and if you don't play they won't give you a very good score.  And if you make some mistakes the only way to raise your score is to play more.  It is not an accurate judgement of the person.

pres589 said:

"It’s a good indicator of how responsible you are.  How trustworthy you are. How reliable you are"

It's an indicator of how much you use credit and repay on it.  Using cash for 100% of your life means you would have essentially a zero credit score.  That's what happened to me after the one credit card I had was closed after the lender itself was dissolved during the 2009 credit crisis.   I ran for about five years on cash alone, zero debts carried (and that means not using credit), and when I decided I might want to buy my first home I was denied by three different lenders.  Two off them seperately made the comment that they hadn't seen this happen before, and that I didn't have a score of zero, I had a blank score.  I had to rebuild my credit through no fault of my own.  

Short version:  It's a score for people who are playing the game, and if you don't play they won't give you a very good score.  And if you make some mistakes the only way to raise your score is to play more.  It is not an accurate judgement of the person.

But that makes sense. If you do not use credit, why would they then extend an enormous amount of credit to you? Someone with zero recent history of borrowing money is a poor risk for someone loaning out hundreds of thousands of dollars. Yes, one such person in a million might be responsible, but the majority of people with no credit history are 100% clueless and as likely to default as someone with a low score.

Credit score has zero to do with how amazing you are as a person. It has everything to do with how reliably you pay back debts. No debts, no credit score. And the 7-year rolling history wipe means if you haven't had debts in 7 years you have no credit score. Makes perfect sense ot me.