LESSWRONG
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All of credibility's Comments + Replies

Open Thread, May 26 - June 1, 2014
credibility10

Thank you, this is the most helpful reply.

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Open Thread, May 26 - June 1, 2014
credibility50

I already do this, and credit scores have been an issue for me several times already. For example, when renting an apartment, lots of landowners want to see your credit score. It also doesn't take very much effort to use it well, it's mostly a matter of knowing what to do. And in absolute terms it still makes a large difference, even if it is only a second-order term.

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Open Thread, May 26 - June 1, 2014
credibility80

How do you optimize your credit score? I am getting my first credit card soon, and I want to do everything right so that in a few years when I might need a loan, everything is really good. I made a mistake by applying to too many cards, so now I have more inquiries than is good. Any other pitfalls to be aware of?

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9TylerJay
I wouldn't worry about having too many inquiries right now. That's just a temporary mark and it has a low impact on your credit score. Here are some tips to help build a good credit score: 1. Credit Cart Utilization: Keep your total % of credit used at under 30%. 10-20% is probably ideal. Also, try not to max out any individual cards. Raising the total amount of credit you have available is a good thing and it allows you to charge more while still staying in the sweet spot of card utilization. 2. Credit History Length: If you're young, I would recommend applying for a new card every 6 - 12 months. This will pay off down the line as you'll have a longer "average age of credit cards" and a higher "total amount of available credit". Having 10-20 credit cards is not a bad thing. They all contribute to the age of your credit history and to your total credit limit. 3. Payment History and Derogatory Marks: Always pay on time. This has a big impact on your credit score. Set up a savings or checking account with some money in it as a buffer and set all of your credit cards to auto-pay the minimum from this account and set up overdraft protection using this account. I do this to avoid getting any bad marks on my card, but usually end up making a manual payment for the whole account balance before it has a chance to accumulate any interest. With this in place, you can use a credit card for most purchases to get the rewards and to contribute to your credit history. 0 late payments out of a small number of purchases is good, but 0 late payments out of a large number of purchases is better. 4. Total Accounts and Account Mix: This has a lower impact on your credit score, but having more accounts is better and having a mix of account types is better (mortgage, car loan, credit cards, student loans, etc.). It shows that you have been granted credit by many institutions and that you are equally reliable at different forms of credit. 5. Increase the credit limits of cards y
RolfAndreassen160

In my experience, people pay way too much attention to credit scores, relative to the underlying cash flows. Suggest you concentrate on building up savings, which you control to a much greater extent, instead of trying to optimise a mostly opaque system that has, in any case, at most a second-order effect on your prosperity.

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9John_Maxwell
Set your bills to auto-pay from your bank account. Then you can treat your credit card like it's effectively a debit card and make your everyday purchases with it in order to collect the rewards. (Though, I think I remember reading that you'll still build your credit rating holding a credit card you don't use.)
4edanm
I once read "I will Teach you to be Rich" by Ramit Sethi. It went into a fair bit of detail on this. I didn't finish the book and can't really recommend it, since most of the advice was very US-centric (e.g. optimizing credit scores isn't relevant for me). But it might be a starting place.