It is an interesting question though, because that would mean that your credit score would improve faster with a 36 month loan than a 72 month loan.

You said “Two car loans that are one year old will not help your credit at all. Even if you put 50% down on the car, what’s looked at is the original loan balance to the current balance.”

So if I spent $15,000 on a car and wanted to pay $8000 up front and finance the rest, the best way would be to get a $15,000 loan and send in an $8000 check as soon as I got home, rather than make an $8000 down payment?

$44,000 of credit card credit limit and $10,000 owed–only a credit card company would care they are all on the same card. (Why you might ask? They want some idea that the person will actually use the new card, and using four cards as opposed to one is a sign they will.). Only a credit card company would care about the age of the accounts. (Why you might ask? Because they would rather have a long term customer than someone who opens and closes accounts frequently–although there a home lender might have similar concerns.)

There are a lot of other areas where the credit score system makes no sense in the context of trying to decide whether or not to make a home loan. They really need an alternative scoring system that does make some sense.

BTW, on the four credit card system, having one card with $10,000 owing when you have three others with $33,000 of credit line isn’t living to the max. It very well might be making a prudent financial decision. Perhaps that card has the lowest rate. Very unlikely that four credit cards would tie for the lowest rate. So the credit scoring system rewards making poor financial decisions.

Kary says

“I assume by “ideal” you mean ideal for a good credit score. Ideal for making a home loan would be 4 tradelines of any age, on which nothing but current charges are owing, and no defaults of record in the past 7 years.

But that brings up another absurdity of the credit score system. Owing $10,000 on one credit card is worse than owing $2,500 on four, assuming in both cases the debtor has four credit cards and the credit limit on each is $11,000. That’s nuts, and should not even be a distinction when it comes to making a mortgage loan.”

An “ideal” credit score is now anything 740 or higher. It used to be anything 700 or higher was good. The bar’s been dramatically raised.

I had stated on the other post of Jillayne that Kary was wrong but re-reading it…he’s right. Funny how you have to re-read something a few times sometimes.

A person is better off with 4 credit cards with each having $2,500 owed and limits of $11,000 than 1 card with $11,000 limit and $10,000 owed. BINGO.

The system is trying to make sure that someone isn’t living to the “max”. It’s far from perfect. I’ve seen folks who get a very low interest rate on a credit card, transfer balances and then ding their scores. I think it’s fine to do (pay less interest) as long as you’re not planning on buying or refinancing soon. This also depends on what your entire credit report looks like and what the scores currently are.

If you have a zero balance now, then there’s no need to raise your limit.

With your Visa’s, if you’re beyond 50% of the available limit (the next scoring level is 30%) you will be dinged with your scores. Review your four balances to see if you are above 30 or 50% and pay that account down first while making minimum payments on the others until you pay the accounts beyond 30/50. Also, there are some accounts who do not report what your credit line is to the credit reporting agencies (like AMEX and I believe Capital One) which makes it appear as though you’ve maxxed your credit line, when in reality, you have not.

It shouldn’t take long to bounce back 13 points…perhaps a month or so. Good luck.