If you’re trying to build your credit score, having a bunch of credit that you’re not using can help very much.
That, in and of itself is the key: having credit that you’re not using.
If you immediately use any credit you claim, then you’re going to eventually sink (go bankrupt), which takes 5 years, sometimes longer, to clear from your credit score.
The insanity of the system is evident. Understanding what the credit score really means, can inform your decisions about how to best maximize your score, if that’s your desire.
I know people who are classifiably wealthy with terrible credit scores because they’ve never needed credit for anything, so they don’t have any credit sources and certainly have not ever held a balance on a credit account for any length of time. So they look very bad on paper to creditors. Consequently I know very diligent people who are remarkably poor by comparison with near perfect scores because they know how to game the system in their favor, and do everything the way creditors want it to be done. They’re never so leveraged that it negatively impacts their score, they have plenty available and they’re never so much in debt that they can’t pay their interest.
I’m not saying the system isn’t stupid, I’m saying that blindly applying for every credit offer carries risk in and of itself. Plus hard credit pulls will temporarily hurt credit scores anyway. I just wanted to caveat that piece of advice for folks because I think being cautious and intentional with personal finance decisions makes more sense.
I would agree that the system is insane.
If you’re trying to build your credit score, having a bunch of credit that you’re not using can help very much.
That, in and of itself is the key: having credit that you’re not using.
If you immediately use any credit you claim, then you’re going to eventually sink (go bankrupt), which takes 5 years, sometimes longer, to clear from your credit score.
The insanity of the system is evident. Understanding what the credit score really means, can inform your decisions about how to best maximize your score, if that’s your desire.
I know people who are classifiably wealthy with terrible credit scores because they’ve never needed credit for anything, so they don’t have any credit sources and certainly have not ever held a balance on a credit account for any length of time. So they look very bad on paper to creditors. Consequently I know very diligent people who are remarkably poor by comparison with near perfect scores because they know how to game the system in their favor, and do everything the way creditors want it to be done. They’re never so leveraged that it negatively impacts their score, they have plenty available and they’re never so much in debt that they can’t pay their interest.
It’s a stupid system.
I’m not saying the system isn’t stupid, I’m saying that blindly applying for every credit offer carries risk in and of itself. Plus hard credit pulls will temporarily hurt credit scores anyway. I just wanted to caveat that piece of advice for folks because I think being cautious and intentional with personal finance decisions makes more sense.