Return to the Household Finances Forum | Post a Follow-Up

Just because you pay your bills on time.....

Posted by myfask (My Page) on
Sat, Nov 4, 06 at 7:04

doesn't guarantee you have good credit
The "Paying off credit cards thread got me thinking and reminded me of a situation a friend went through.
As a few of you know my friends and family call me a "credit geek" and am a firm believer in pulling your Credit Report once a year to make sure everything is "in line". I remind them every year.
I have a good friend that use to always say "I have really good credit" I would say have you pulled your report this year? His response would be "yes, it shows everything in good standing, all paid on time"
So my next question was "Whats your score?" I almost fell over when he said " I don't know, they wanted $6 or $7 each so I figured that since everything showed paid on time that means I have good credit so it didn't matter"
I told him he needed to get the "numbers" so he could either skip eating out one night or I would pay the less than $20 if he was going to be such a "bozo" but get the numbers. lol this is a really good friend so I could "bully" him a little.
Imagine my surprise when he called me yelling "What is this crap, my credit score is 628 I pay my bills on time, I should have a higher score than that"
I told him if he stopped yelling we could take a look and find out the situation and fix it.
It turned out that he had 32 !!! 32 open accounts with a couple hundred here, a few hundred there. He did have a couple biggies but a majority were the local store cards. His reasoning with the store cards was "well it is easier" I told him that the "easier" has reduced his credit score and it was time for a plan. Especially since he wanted to buy a new house with in the year.
He had just received a commission check so we used that to pay off the small store cards then he closed them .(this is one time when closing cards was important)
We also called the "biggies" (major credit cards) and requested to have the interest rates lowered. He took the small payments he was making to the "store" cards and added it to the payments to the "biggies" which help pay them down faster.
Fast forward 1 year later his Credit Score was a nice 720 and he was able to start house hunting knowing that with his actual "good credit" that he will get a good mortgage rate.
So I thought !!!!
This post is long enough so I wont "bore you" with the details
But take me going on a cruise the week he is to sign the papers
add in one "look what I can offer you " loan person and the words words "good deal"
mix them all together and you get
"An adjustable rate interest only mortgage"
Yup he did lol . I have to laugh because if I don't the temptation to "smack him upside the head" would be to great
So now a year later his monthly payment has gone up $200 a month and we are in the middle of "fixing" his latest "venture" into the land of credit.
The only good thing about this is he has become more credit "savvy" and knows that "a good deal" is not always that and most important "just because you pay your bills on time doesn't mean you have good credit
So folks get your credit reports once a year and pay the extra to get your scores.

Follow-Up Postings:

RE: Just because you pay your bills on time.....

Thanks Karla for your gentle remender that I need to pull my repost 'and' credit score sometime soon.

Yes, I agree, so many folks really don't know enough to be even handling their own affairs. They are continially taken in by those offering 'great offers'.

I have one friend who has made so many costly financial mistakes, that she finally said she would consult me on any purchase, or contract over $200.

"An adjustable rate interest only mortgage"
...surely he did not understand a thing about what he was signing. What 'was' he thinking, or was he? I think sometimes when someone is not financially savvy, all they hear when finances are discussed is blah, blah, blah, and trust that all is well and good.
I hope he has learned enough to check with you or someone knowledgeable b4 signing any 'good deals' on the dotted line.

Fools and their money are soon parted...or so they say.


RE: Just because you pay your bills on time.....

Question: Is this the correct official site for requesting your credit report?


Here is a link that might be useful: Annual Credit Report

RE: Just because you pay your bills on time.....

Harriet - Thats the one my Dh uses and it was accurate
Sue - all he heard was "good deal" and his common sense went right out the window. I have been "on his case" for the past year to refiance it. He has been "talking to various mortgage brokers" lol I finally said to him last week "are you done messing around"(well i used a stronger word than messing but this is a family site) are you ready to listen and it finally sank in that he should call the current mortgage company and see what they can do. I am happy to report that he called me today to let me know that he is refiancing it to a FIXED 6.5 % !!! ring the bells lol I told him if he walks out with anything but that, there would be "he**" to pay.

hey I have an idea
lol we should start a "I checked my credit report and all is ok thread"
what do you think

RE: Just because you pay your bills on time.....

I was confused at first because I misunderstood what you meant by "paying all bills on time". I see you mean paying the MINIMUM due and carrying a balance. I thought you meant paying the balance due on time!

I wonder what percentage of accounts are paid in full every month? Is there some positive financial reason for not doing that? (You have money invested that is earning MORE than the credit card charges?)

If you are NOT going to be applying for credit anytime soon, it seems to me that it is adequate to just get your report without a score -- right? (Especially if you do pay every balance due on time?)

RE: Just because you pay your bills on time.....

6.5 sounds high, rates are down

RE: Just because you pay your bills on time.....

Chisue yes if you aren't planning on any new credit purchases with in 6 months just getting just the report is fine. However if you haven't gotten you score in a couple years or more it's not a bad idea to get it so you can have a "baseline"

It is about 6.25 avarage
I did some research on the "lower" rates that you see out there since we are in the process of starting the mortgage process and they are usually with a "buy down"
We won't be locking till 60 days b4 closing (end of feb) so I am curious to see what the next 2 months bring.

RE: Just because you pay your bills on time.....

FWIW, it probably was not the number of open accounts that hurt your friends credit score. It was most likely the number of credit inquiries from opening the accounts. For those people who have balances on their accounts, closing accounts can actually decrease credit scores as it causes credit utilization percentages to go up.

I do agree that if someone doesn't have any balances that it can make sense to close accounts just not to leave them out there. But alone it usually won't do much to the credit score.

RE: Just because you pay your bills on time.....

Is there a catch to checking your credit rating at the link noted above? Any joining fees that will show up after you've given them all of your information?

RE: Just because you pay your bills on time.....

it is free unless you want your actual score then it is around $6 or $7
if you are not aware of your credit score I would pay so you can have a baseline for future reference


RE: Just because you pay your bills on time.....

I recently have been pre approved for a loan to buy a new home. What impressed them most was my 8 year old home was paid for, no debts at all except maintenance that life requires. They asked my how much of my savings I wanted to use and they would loan me the rest. This is a bank that doesn't make out of state loans, but they found a way to do it for me.

In case you don't know credit cards will bring your rating down. When applying for a new card or canceling a card the rating takes a hit especially if you apply for their card to save money then cancel it right away.

RE: Just because you pay your bills on time.....

About 8 years ago I co-signed for my bf to get a car loan. We later broke up so I signed up with Experian and got a monthly credit report and score. Years later, his loan was paid off and my credit remained excellent (per Experian). I don't know my other two scores but I figure they are close. I too recommend people check their scores at least once a year.

Growing up I played the credit card game and transferred balances and opened up several cards. At one point I had 12 credit cards and about 10,000 in debt. I never missed a payment and my available credit was about 30k so I never suffered with my credit score. Today I'm down to only using 2-3 cards and manage things much better. Through it all, I always had good credit because I paid on time and kept my available debt ratio under 50%. A lot of people think closing cards help your credit, but sometimes it can do the opposite. Always consider how much you owe, vs. your available credit. If your available credit isn't much then don't close all cards. Your debt ratio will sky rocket and your score will likely suffer quickly.

I use to tell one of my best friends, whatever you do with credit cards - remember these two things: 1. Never miss a payment and 2. Always make at least the min. payment (it's better to pay more but if all else fails, at least pay the min. payment ON TIME). I even told her, if she can't afford the min. payment then I would pay it for her.

She didn't listen to me and later paid about 15% interest on a car loan because her credit wasn't any good. Years later her and her husband wanted a new house. She stayed off the loan because her credit would have gotten them a higher rate. Funny this is, she makes good money, she just didn't care to pay her bills on time. You live and learn I guess.

I've taken full advantage of my good credit. I have gotten several 0% interest loans for things like appliances, TV's, and other big purchases that I couldn't pay all at once. Every loan I ever took advantage of was paid off in time to avoid any fees or interest.

People don't realize that bad credit can mean the difference of paying $100,000 MORE on a home loan over a long period of time. It's sad that schools don't teach the importance of maintaining good credit. The crap I had to learn in school hasn't helped me much thus far. Oh well, I was lucky enough to figure it out on my own I guess.

My advice to people - always pay your bills on time. Keep your debt ratio low, and always make at least the min. payment due. This sounds simple, but people are proof it's not that easy.

RE: Just because you pay your bills on time.....

>> It's sad that schools don't teach the importance of maintaining good credit. The crap I had to learn in school hasn't helped me much thus far. Oh well, I was lucky enough to figure it out on my own I guess.>>

I agree. We were lucky as well, plus I ended up working in several segments of the financial svcs industry and learned a lot from some very good folks.

I get a lot of catalogs and there is a wonderful T-shirt emblazoned with the words, "...And another day passes that I didn't use Algebra"


RE: Just because you pay your bills on time.....

It's parents who should teach their children social and life skills. Schools have more than enough to do focusing on academic subjects and shouldn't be expected to pick up the slack for parenting deficiencies.

Your credit score isn't a goal, it's a report card. Teach your kids that they can't buy something until they have money to pay for it and the rest will take care of itself.

Algebra like some other subjects is taught to give developing minds experience with and tools for critical and analytical thinking. It's only partially about algebra itself. If you don't see that, you missed the point of it all.

RE: Just because you pay your bills on time.....

I used to work in a bank; I ran credit reports daily, we looked at people's credit and scored it on our own system to determine their rates of loans etc we used to get two of the score then compute them with ours. Anyway, I learned a lot about credit reports. Here are things that affect your score:

1) too many open accounts. (it's a risk that you'll go off the deep end and start spending wildly or that you could be a victim of fraud)

2) address continually changes. Nobody looks at that but unless you're military, ability for creditors to contact you makes it difficult (part of my job was repossessing cars and also skip tracing people)

3) too many inquires on your credit. It's a red flag to creditors who think you are out to do a lot of stuff and about to become over burdened in debt you can't repay. So don't let every car dealer and dept store see if you're eligible etc for this or that deal.

4) too much credit card debt. What it is, is a balancing act. A good credit report will have say a mortgage, maybe a car and maybe one or two credit cards; if you have too much revolving debt, that's not good.

5) income to credit ratio should be balanced. In other words, if you make 20k a year, you should not have a very large amount of credit open to you (or debt to income ratio either)

6) charge off accounts. If you've not paid something and it goes into charge off status, you can bank on the creditor reopening your case and calling you just before the statute of limitations runs out. I HATE to say this publicly but I'm going to share a secret with you; do NOT pay it. Once you agree to pay back the debt, it goes back to open status and will remain on your credit report, for as long as it takes to pay if plus they can possibly (for a while anyway) see it was a charge off or delinquent. It's far better to NOT start payments again.

7) paying late - really, creditors will not judge you for a payment or two late. It shows up on there but they all know stuff happens. It's chronic lateness that's the problem. It's also 30-90 days overdue. We used to contact people at the 15 day past due mark to remind them and I used to give interest only extensions so they didn't go into 30 day and get reported to the credit bureau. So if you are late and can't pay, call the credit and arrange for interest only extension. You'll pay basically one month's interest extra and extend your loan an extra month.

I hope that helps people. Oh and the longer you have credit but don't use it, the better. New credit is bad. And do NOT take out credit cards to save 10-20% one time. They have high interest rates, it's new credit, it's revolving, and it's a new inquiry... ding, ding, ding, ding... all bad.

 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!

Return to the Household Finances Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Please review our Rules of Play before posting.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.

Learn more about in-text links on this page here