Credit score of 640, will it rise?

Question

Here is my situation I'm 25 years old. I just checked my credit score, it says 640. I have two credit cards and a personal loan. My first Credit card is a small Capital One of $500. My 2nd Credit Card is a Circuit City account for $1000. My personal loan balance is $2000.

Both credit cards were maxed out, plus my personal loan. I just finished paying off everything this weekend. I have no debt now. Can someone give me an estimate on what my credit score should look like, once they know everything is paid off.

Should I open a Target account and a gas account, will that help or hurt my score?

At, 25, Am I on the right path to excellent credit, or do I still need a lot of work?

Thanks!

So now that I have no more debt because I payed off my 2 credit cards and my personal loan, should I just leave the balances at zero???? Or should I buy like DVDs and stuff at Circuit city, maybe use 100 bucks and pay that off again?

Answer 1

I personally would buy small items on your Capital One and pay the entire balance immediately to avoid the interest charge. Keep doing this and your credit score will go up.

Answer 2

It'd hurt at first, but don't apply at the same time because it looks like you're trying to increase your available credit so you could max out again. The problem with Capital One is that they don't report your credit limit to the bureaus, so it looks like you're maxing out your cards, even if you aren't. I'd suggest paying your bills on time and NOT maxing out your cards and this should raise your credit score without needing more credit. Try to keep the debt-to-available credit ratio low (under 25% if possible.)

I'd suggest trying to get another "standard" credit card if possible other than from Capitol One or American Express. You want to have your limit reported because potential creditors will assume that your limit is much less. You have room for improvement, but I'd say that getting out of debt is a GREAT first step and if you can stay out of it and keep paying on-time (and in-full if you can... it'd save you on finance charges) you should have a higher score by this point next year.

Answer 3

Credit scoring is very tricky and not well understood by those except the ones that create and use it for lending. It is a long-term evaluation of your responsibility with credit so paying it off rigth now will not likely do a whole lot for the immediate future. Be sure to use no more than 30% of your available credit (example: Using $300 of your total $1,000 of available credit). Be sure to pay all bills off on time and check your credit history for free 3 times a year for errors (free at annualcreditreport.com, just check one bureau every 4 months). Another great but often overlooked strategy would be to NOT USE CREDIT. This is not widely used in our society today but can often be a great formula for success in a world of ever-accumulating debt. Check out a very smart, succesful, motiviatioal finance guru named Dave Ramsey. He has incredible programs, radio shows and advice, including a great website that can help you become financially independent without the use of any "schemes". He has no real product to sell, only advice, motivation and strategies for those that want to stop using debt. Good luck and feel free to contact me via e-mail with any questions.

Answer 4

I wouldn't open another card. I would work on getting your balances from the max usage to less than 30% of the available credit. If you open another card, you will have another inquiry on your report. This will negatively affect your score.

Answer 5

just keep the cards you have now and pay them on time and your credit will rise...you don't want to apply for too many credit cards because too many inquiries will hurt your credit