Al Ritter
Years ago when I was in business I had a Company
Credit Card through Bank of America. I continued to use this card even after I
closed my business down. One day when I needed a new car I went to the
dealership and made application to use the 0% interest loan for 60 months.
I was turned down for that loan because “sir you have
a low credit rating.” I wondered how that could be, I had a $50,000 credit
limit on my card, and I could have purchased that car outright on my credit
card! I paid cash for the car but vowed to delve into this credit rating thing
a little more.
I had never subscribed to one of these reports offered
by one of the three reporting groups but I was sure to get to the bottom of
this one way or another. I was certain that I had a good credit rating after
all I had paid off my first house in 14 years, and had paid my credit card religiously
and never held a balance from month to month. There had to be a mistake!
This is where I made my first mistake, I called Bank
of America to see about getting a card in my personal name rather than my
company. The bizarre part of this whole thing was, even thought it was MY name
on the card and not the company name, the credit worthiness was in the company
name. Here’s where things got strange they refused to give me a credit card because
my credit score was so low, even though I was purchasing and paying for items
over $1000 monthly!
My temper got the best of me and I made my first major
mistake. In retrospect I should have kept that card to use and found another
card with a low credit limit and worked my way slowly into a better credit
rating.
I’ve always been from the old school of “if you didn’t
have the cash you don’t buy it.” Sadly you will never build a credit rating
that way. I cancelled that card through Bank of America but finally found a
credit card with a credit limit of $3000 through my bank, but they sure made a
point of telling me that I was on a probationary period. Each year on the
birthday of the credit card I would request a raise in my credit limit to which
they agreed.
Ok there are really strange rules the credit rating
bureaus use and I‘ll try to explain some. There are three main reporting
bureaus otherwise known as CRAs. Experian, Transunion, and Equifax. They
collect things such as past history of paying bills on time monthly also any
and all loans including mortgages, car personal and if you paid them on time.
These three CRAs then hand that information to two possible companies that use algorithms
to calculate a score. Those two companies are FICO (Fair Isaac Corp.) or Vantage
Score.
These scores go from 350 on the poor side to 850 on
the excellent side. On the bright side I have gone from poor to well into the
excellent side within 5 years. Sadly an excellent FICO score isn’t the
determining factor of getting the help you need.
One thing you must know is that your credit score has
NOTHING to do with your assets! You could have a million dollars in your bank and
they may still not issue you a credit card. You could have a job paying
$250,000 a year and a credit rating in the upper 700’s and they may not issue
you a credit card with over a $3000 limit!
The CRAs use a strange rating system to raise and
lower your credit rating. In the beginning they told me that as long as you don’t
exceed 10% of your credit limit on your card you will be in good standing with
us. But that statement wasn’t exactly true. Now understand that they have total
access to your monthly spending on a credit card. If you spend ANY amount
higher than you did last month they hit you for 4-7 points on your rating. Now
the rebound period is not very long, for instance if you spend less the next
month your points return within 30 days usually.
Another instance where you will get hit for credit
rating is what they call soft and hard inquiries. In other words if you request
a raise in credit limit on your card, apply for a loan, even make application
to rent an apartment they will normally hit you for points , but they last
longer.
They are basically telling you to spend very little on
your card and make regular payments. Sadly we don’t live in a perfect world and
expenses arise. If you are a homeowner you know exactly what I’m talking about!
Some months you just can’t spend less.
Now let’s talk about “Rewards Cards”………..smh…….massive
contradiction in terms! The more you spend the more you get back right? There
is an incentive to put more on your card, but if you do you get hit points for
spending more. So you think let’s just ask for another credit limit raise on
the card so you do that and bang you get hit for another hard inquiry!
I recently asked for my annual raise in credit card
limit, but it didn’t just come right away like it had in the past. I appears
that I have now hit some sort of wall on my credit card limit. My income wasn’t
contested as being too low, my credit rating was well into the 800’s. I have
personal credit history of paying a mortgage off, and a 5 year history with
them on my credit card that is flawless, but here is the reason they sent to me
for refusal.
*Lack of comparable credit for the amount and or type
requested*
Whatever all this means is strictly in their minds,
but understand that Credit Ratings are never cast in stone and few things make
logical sense.
To access your credit ratings merely google any of the
aforementioned companies most are available for free, monitor them monthly to
see the crazy up and down swings!
