i thought having credit cards would improve my credit!?

Question

My credit score is a very low 537 i pay all my bills on time, and have had 3 different credit cards for the past 6 months to a year that i pay in full and on time, so where is the problem, because i'm having a hard time getting a decent mortgage with this score.

Answer 1

1) Close all of your credit cards but one. It reflects in your credit report and it is a very good sign. For instance say that you have 5 credit cards with $1000 credit limit for each. Therefore you are responsible for $5000 of possible debt. But when you close 4 of them, now you are only responsible for $1000 of debt which lowers the level of risk of lending money to you.

2) Paying off all of your debts immediately does not help you with improving your credit. Because you should show lenders that you are a good BORROWER. Your existing report shows lender that you pay your payments in full once you have money and you dont when you are financially in trouble. Therefore you are not a good borrower to a lender (you are risky and they dont make money out of you). So here some stuffs I suggest to do to polish your credit report and improve your credit:

-- Do not spend more than 1/3 of your limit. That's a rule. You said you have $500 credit limit. So do not spend more than $150 with your credit.

-- Do not pay your existing credit balance in full every month. Pay more than minimum payment but do not pay full. Say your minimum due is $10. I suggest you to pay like $50-$70 each month. Yes you should pay some interest but that's a price to improve your credit.

3) There are lots of articles here which you can find useful to boost your credit.
http://www.howtoestablishgoodcredit.com/Credit_Articles/index.php

Answer 2

To improve your credit score you need to increase the limit on your cards and spend less on your cards. They like to see a high credit limit but a low percentage of it being used. This shows you are responsible. Call your credit card companies and ask them to increase your credit limit and start using less of what they give you. It will take more then 6 months to improve your score, just keep at it. Also make sure the credit cards are reporting like they should so you get those good points. Another thing, dont close the cards unless its 100 percent a must. If you dont want to use it anymore just stash the card away in a saftey deposit box. Closed lines of credit can look bad on your score. A credit line that is open but not used is better then many close accounts. Just call and ask for the increase in the credit limit, you will be surprised what they will give you when you ask! Good Luck!

Answer 3

Credit score has all kinds of strange variables... but to get a 537, you have to have done something VERY wrong.

It can take up to 7 years to recover your credit score if you do everything right.

The credit cards only do you good if you use them well... That means you DO NOT carry a ballance, but you do charge stuff.

There's a couple of cards (Chase for one) that don't report your credit limit the same as others. Those companies you have to charge the card up for the limit to show. Unfortunately that means the card is maxed and you have a bad credit ratio. (used credit compared to available credit)

I practically live on my credit cards, but pay the FULL ballance EVERY month.

The credit companies don't care what my income is any more... They'll give me any card I want and any loan I apply for.

But I will not take out a loan I can't afford, and it shows. Thus... 750+ credit score.

Answer 4

It is how much money that you can "potentially" owe. So, the balance doesn't matter, but the "available balance" matters. Also, in order to build your credit, you need to keep the ones that you already use for long time. They calculate how long you hold to a card and bank account. You can read some books by Suzy Orman or watch her shows on CNBC. There are different ways to lower your mortgage rate, paying every two weeks instead of monthly etc.

Answer 5

Don't close accounts, pay them off and keep them open. This looks better than having closed accounts. You need to pay all your bills on time for two years for it to improve your scores. Also the length of time the cards have been open impacts teh score, as does the limit. You should keep your total debt to around 30% of the credit available.

You should also look to see what else is on your creidt report.

Answer 6

No they dont I would just use one and use it and pay it off and on time sometimes when you have too much credit it hurts you too and if you apply for too much credit it is very difficult to get you score up. My score was 540 and I got it to go up to 620, them I applied for student loans you know to better myself and it's back down to 570. I was pissed but there is nothing I can do until I finish school. I would probably close 1-2 of the accounts and just keep one open not having credit hurts you too.

Answer 7

Ditto. If you have a $5000 limit on each card and 3 open, the picture is that you have $15000 in debt. Close 2 after paying in full and you'll likely see a better picture.

Answer 8

Depends on your debt to income ratio. Having to much available credit to lenders is just like debt even if there is a 0 balance on the cards. They look at it as you COULD owe this amount of money. You can close a couple of them and improve your ratio.

Answer 9

The probelm is the credit limit on the cards. Banks see it as a risk if your credit limit is high. They think that you will max out your cards so they rate you low. You should only have one Visa or Mastercard.

Answer 10

Have you ever filed for bankruptcy, late outstanding student loan debt, have you co-signed anything for someone else who has bad credit, late payments before these credit cards, opened and closed a lot of accounts.