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Old 11-13-2012, 12:28 AM   #26
nutsfl0pper
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Re: Credit Primer & Discussion w/ JL

A few months ago I decided to build credit and opened my first CC which was a Cap1 secured card. It has a $3000 limit which I deposited. Credit Sesame says my score is N/A because not enough time has gone by. Will I have a score after 6 months has gone by (I have paid off in full every statement) and if so, should I then open a new "real" card at that point and close this secured card to get my $3000 back? Should I keep this one open because my credit will go back to N/A if I close and/or will it hurt my credit? Thanks.
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Old 11-13-2012, 01:31 AM   #27
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Re: Credit Primer & Discussion w/ JL

Quote:
Originally Posted by Jim14Qc View Post
Second, my score in Canada is 703 (good). It seems the scale is the same and the credit agency is the same (Equifax or TransUnion). However, they also show the Canada Population spread and it goes like this:

4% Poor (300-559)
10 Fair (560-659)
15% Good (660-724)
14% V. good (725-759)
57% Excellent (760+)

Is it Canadians being badass since our housing market is going up up up or is it similar in the US? I was somewhat surprised to be this low in the quintiles (didn't expect to be great since I'm young, but still, only at 23% percentile sucks...).
Canadians in general are in much better shape than Americans thanks to being spared the worst of the recession. This will likely change once interest rates rise and/or our housing market goes down, which should be soon (and in fact is already happening in some cities). The average household debt load in Canada is already worse than it ever was in the US.
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Old 11-13-2012, 01:55 AM   #28
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Re: Credit Primer & Discussion w/ JL

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Originally Posted by gtpitch View Post
Well... here's the good news -

Most scoring models include closed cards when calculating "age of accounts" so you won't see a significant change immediately. So long as you have other accounts that are open on your bureau you shouldn't see a significant change in 7 years when the account falls off your report as well.

Negative accts fall off in 7 years. Positive accts fall off 10 years after being closed.


I just wrote a long post about payment history that got eaten. Bottom line, Fico doesn't release their exact scoring model to the public. In my experience total payments has a large cumlative effect, up to a point*. If you're looking to have the best possible score 3 years from now to buy a house and you have 2 three year old credit cards now. By opening 5 accts tomorrow you'll more than double your total positive months reporting by that time. That's not to say you'll double your history score as not having any negatives is a huge issue, but total AMOUNT of history is a big factor as well, and history is by far the most important basket. There are a lot of points on the table here.


*My example is tame and should be totally uncontroversial in the credit building universe. You can get more extreme and still see gains, but you will face diminishing returns with opening new accts at some point.


I wouldn't dick around with opening credit cards for a score boost if you plan on buying a house in the next year or so.
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Old 11-13-2012, 12:55 PM   #29
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Re: Credit Primer & Discussion w/ JL

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Originally Posted by TheCanoe View Post
Wow. Credit sesame.com is amazing

Going to save myself around $200/mo on auto loans, and $450/month on my mortgages if this is legit. Exciting times, thanks again JL
I don't have experience using their suggestions, but those type of "offers" are how the site makes money. Make sure you do your own research.

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Originally Posted by TheCanoe View Post
Thanks

Long story short, she had some medical bills way back when that are finally paid off, and now we're working on getting her credit score up. She already has her own capital one card that she pays off immediately, plus I co signed a car loan for her. I figure as long as it can't hurt, why not add her as an authorized user to my account. She won't actuall be using the card
If you cosigned a car loan then you are already trusting her to do the right thing so I don't think it matters.

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Originally Posted by d10 View Post
So if I have a couple cards that I've been using for a long time do you recommend bumping up the credit limit every couple years? I've always heard that's bad for your credit but it sounds like you're saying it's a good thing.
Requesting a credit limit increase almost always results in a hard pull and that's why people say it's bad. For the same hard pull you could get a new credit card with it's own limit and new perks. And if you wanted to, you could transfer a portion of that credit line to your old card if it's with the same lender without a hard pull.

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Originally Posted by Jim14Qc View Post
First off, great OP. The information really sets off discussion.



I just bought my credit report from Equifax (in Canada, you can get them for free once a year but only by mail and I can be impulsive). It seems the only late payments are those above 30 days (they are categorized as 30 days late, 60 days and 90 days+). I have only one in my credit history back in 09 or 10, for example, but I know for a fact I missed some payments by a few days or even a week or two since then. Some, the bank has removed for me but others slipped through for sure.

Second, my score in Canada is 703 (good). It seems the scale is the same and the credit agency is the same (Equifax or TransUnion). However, they also show the Canada Population spread and it goes like this:

4% Poor (300-559)
10 Fair (560-659)
15% Good (660-724)
14% V. good (725-759)
57% Excellent (760+)

Is it Canadians being badass since our housing market is going up up up or is it similar in the US?
According to Wiki, it's a negatively skewed distribution:

Quote:
A FICO score is between 300 and 850, exhibiting a negative skewed distribution with 60% of people falling between approximately 650 and 799.[13] According to FICO the median score in 2006 was 723.[14]
Quote:
Originally Posted by Jim14Qc View Post
Another point: When in good financial standing, open a line of credit. Not a credit card, a line of credit. Those are lines, like credit cards, that are revolving. You can use them whenever to take on a loan but you don't have to. They have a set amount, and a set interest, available to you whenver.

The main advantage is the rate is MUCH Lower than CC (think 4-6% rather than 18+). If you sign up for one when in good financial standing, if you hit a rough spot, you can hit that rather than friends or CC's for money if you lose your job or hit a tough spot for wathever reason. It's much tougher to get that same line opened when you try to go and meet them AFTER losing your job than it is BEFORE. You do NOT have to use it if you don't need it. It basically is how businesses operate for their short-term credit needs.
The other option is to just keep savings in an "emergency fund" so to speak to add some slack.

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Originally Posted by jmakinmecrzy View Post
JL,

Holy ****. Solid OP. best I've seen in years. gtpitch or JL, maybe you can answer this -

I have 11k in hospital debt. That was from 2008, and from what I've read on the sites you recommended, 7 years is all it will affect you for. I have one 300$ limit capital one card which I've been using for this year to build credit. Paid it off every month, checked my scores, and it's ~650. My question is - since I don't really plan on taking out any loans for the next few years (auto would be the only one I can think of) is my best course to continue to ignore the hospital debt, open a few more cards, and continue paying off my balances? seems like I definitely need to open a few more cards at least since my credit limit is so low. I definitely don't have the money to pay off the hospital debt and I have long stopped receiving letters.
650 actually isn't that bad. You need to check the SOL on your debt (varies from state to state) just to make sure they won't sue you. But once that falls off you should be in very good shape. If you need more credit ask for a limit increase or apply for a card with the bank that has your checking/savings account. You may be able to leverage your relationship with the bank to get a larger limit.

Quote:
Originally Posted by nutsfl0pper View Post
A few months ago I decided to build credit and opened my first CC which was a Cap1 secured card. It has a $3000 limit which I deposited. Credit Sesame says my score is N/A because not enough time has gone by. Will I have a score after 6 months has gone by (I have paid off in full every statement) and if so, should I then open a new "real" card at that point and close this secured card to get my $3000 back? Should I keep this one open because my credit will go back to N/A if I close and/or will it hurt my credit? Thanks.
Is there a reason your first card is a secured card? Most people who don't have a history but have a income can usually get approved for a basic department store card. I would try to open a "real" card and close the secured card to get your money back. I don't think it's worth having 3k tied up just to keep your credit history. Check creditkarma also to see if they have info for you.
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Old 11-13-2012, 12:58 PM   #30
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Re: Credit Primer & Discussion w/ JL

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Originally Posted by losing all2 View Post
Negative accts fall off in 7 years. Positive accts fall off 10 years after being closed.


I just wrote a long post about payment history that got eaten. Bottom line, Fico doesn't release their exact scoring model to the public. In my experience total payments has a large cumlative effect, up to a point*. If you're looking to have the best possible score 3 years from now to buy a house and you have 2 three year old credit cards now. By opening 5 accts tomorrow you'll more than double your total positive months reporting by that time. That's not to say you'll double your history score as not having any negatives is a huge issue, but total AMOUNT of history is a big factor as well, and history is by far the most important basket. There are a lot of points on the table here.


*My example is tame and should be totally uncontroversial in the credit building universe. You can get more extreme and still see gains, but you will face diminishing returns with opening new accts at some point.


I wouldn't dick around with opening credit cards for a score boost if you plan on buying a house in the next year or so.
This is actually pretty interesting and I look forward to seeing my score in 6-12 months as my cumulative history adds up. Before I close cards w/ annual fees that is.
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Old 11-13-2012, 01:37 PM   #31
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Re: Credit Primer & Discussion w/ JL

Someone's credit score will always be fine if they do two things: pay your bills on time and don't tap out your available credit.
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Old 11-13-2012, 03:43 PM   #32
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Re: Credit Primer & Discussion w/ JL

JL, I got the secured card as just a way to guarantee starting building credit with more than a minuscule limit. I'll wait until I have it for 6 months, then close it after I get approved for a regular card, hopefully I can get some kind of reward card. thanks.

So having the highest limit of credit possible with lowest utilization is always best? I think I read having too much available credit while not using much was actually a bad thing.
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Old 11-13-2012, 04:04 PM   #33
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Re: Credit Primer & Discussion w/ JL

Please advise if I have any holes in my credit card rewards game:

Chase Freedom - rotating 5% categories
Citi Forward - approx. 4% on restaurants, Amazon purchases (5 TY points for $1, but point redemption is skewed unfavorably for this card)
Citi Diamond Preferred - rotating 5% categories
American Express Costco - 3% gas
American Express Fidelity - 2% on everything
Discover - rotating 5% categories

I guess the big thing is that I'm suboptimal with gas and travel. I'm sure I can find a 5% card for those. Any suggestions?
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Old 11-13-2012, 04:09 PM   #34
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Re: Credit Primer & Discussion w/ JL

My professional friends say the amex costco card is the best rewards card by far. You must have some good credit
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Old 11-13-2012, 05:11 PM   #35
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Re: Credit Primer & Discussion w/ JL

Costco AMEX card is a jack of all trades. Travel and restaurants @ 2%, gas @ 3%. The Fidelity AMEX is far superior because of its 2% back on any purchase. I feel like I should find a gas-only card.
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Old 11-13-2012, 05:33 PM   #36
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Re: Credit Primer & Discussion w/ JL

Quote:
Originally Posted by skunkworks View Post
Please advise if I have any holes in my credit card rewards game:

Chase Freedom - rotating 5% categories
Citi Forward - approx. 4% on restaurants, Amazon purchases (5 TY points for $1, but point redemption is skewed unfavorably for this card)
Citi Diamond Preferred - rotating 5% categories
American Express Costco - 3% gas
American Express Fidelity - 2% on everything
Discover - rotating 5% categories

I guess the big thing is that I'm suboptimal with gas and travel. I'm sure I can find a 5% card for those. Any suggestions?
The US Bank+ card is a good one. It has no AF and allows you to select two of their 5% and one of their 2% CB categories each quarter, but you can pick the same ones each quarter if you wish. The best thing is that one of the 5% categories is "Bill payment" which does not include all possible bills but does include utilities, cell phones, insurance, etc. You can also pick up a bonus $25 if you redeem $100 at a time. The downside is that if you are denied for the Bank+ card, they will substitute a lower-tier card.
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Old 11-13-2012, 06:57 PM   #37
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Re: Credit Primer & Discussion w/ JL

Quote:
Originally Posted by skunkworks View Post
Please advise if I have any holes in my credit card rewards game:

Chase Freedom - rotating 5% categories
Citi Forward - approx. 4% on restaurants, Amazon purchases (5 TY points for $1, but point redemption is skewed unfavorably for this card)
Citi Diamond Preferred - rotating 5% categories
American Express Costco - 3% gas
American Express Fidelity - 2% on everything
Discover - rotating 5% categories

I guess the big thing is that I'm suboptimal with gas and travel. I'm sure I can find a 5% card for those. Any suggestions?
It depends what your focus is. If it's just cash back then what you have is pretty good. I would add the PenFed Cash Rewards card if you want a gas only card. You have to pay $5 deposit + $15 to charity to sign up if you're not eligible (armed forces or government employee) but its 5% on gas automatically credited to your statement.

If you have any interest in travel you would probably want a flexible Ultimate Rewards point card like the Sapphire Preferred but you may not like the annual fee from what I can see. Using your UR points from the freedom for cashback is fine but you can get better value by using for travel. For example, 22k points is $220 cashback or a free night in a top level Hyatt, like in Paris, which would retail normally for ~$1k. But without a flex card like the SP or the Ink Bold/Plus, you won't be able to transfer to Hyatt. But as I said, for strict cashback you have a good setup.

Only thing I would mention is to make sure you are using shopping portals as much as possible to get additional %. Always check a site like www.evreward.com for what portal is paying the best wherever you are looking to shop and clickthrough them. There are some very good opportunities at some places through portals. For example, through the Chase UR portal Sears will occasionally go to 10x points. Sears is one of the few retailers that will pay out points for buying a gift card, and for using a gift card. So you go to the portal, buy a $500 gift card, and you will get 10x points (roughly $50). Then you go through the portal again, and buy a washer or whatever it is you need, and use the giftcard to pay, and you will get another 10x points. All of the sudden, you just got 20% off some appliance you wanted to buy anyway.

Quote:
Originally Posted by Tom Ames View Post
The US Bank+ card is a good one. It has no AF and allows you to select two of their 5% and one of their 2% CB categories each quarter, but you can pick the same ones each quarter if you wish. The best thing is that one of the 5% categories is "Bill payment" which does not include all possible bills but does include utilities, cell phones, insurance, etc. You can also pick up a bonus $25 if you redeem $100 at a time. The downside is that if you are denied for the Bank+ card, they will substitute a lower-tier card.
I don't have the Bank+ card because there are too many other valuable opportunities for me at the moment, but a lot of people really like it and are very excited about it. I would wait a few weeks until a couple of ideas are tested. Basically it looks like you can use it for 5%, but with the $25 bonus its actually 6.25%, and potentially even more. This is a card to keep an eye on, especially if your focus is cashback.
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Old 11-13-2012, 07:28 PM   #38
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Re: Credit Primer & Discussion w/ JL

I'm assuming that once you get up above a certain number x, increasing your credit score won't really matter. What is x? Mine was at 777 a year or two ago, haven't tried to look it up since. Have a card, always pay it off in full every month; I've also been on my mother's card since I was 17-18 or so and she has flawless credit. As long as the number stays good, will it matter if I want to buy a house in a few years' time? Or is there anything to be gained from gaming it to go even higher/
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Old 11-13-2012, 08:07 PM   #39
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Re: Credit Primer & Discussion w/ JL

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Originally Posted by Pelican86 View Post
I'm assuming that once you get up above a certain number x, increasing your credit score won't really matter. What is x? Mine was at 777 a year or two ago, haven't tried to look it up since. Have a card, always pay it off in full every month; I've also been on my mother's card since I was 17-18 or so and she has flawless credit. As long as the number stays good, will it matter if I want to buy a house in a few years' time? Or is there anything to be gained from gaming it to go even higher/
Yes, that's pretty much the gist.

Most financial institutions will have their highest credit tier somewhere around 720-760 (talking about FICO scores). Some (USBank is one) have tiers that go all the way into the 800's but the differences between them are basically negligible. Maybe rate differences of .05% or less.
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Old 11-13-2012, 08:16 PM   #40
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Re: Credit Primer & Discussion w/ JL

Which brings me to one more thing to talk about:

Credit scoring. One of the most confusing topics that come up all the time recently and, at least in the US, the government has tried to do things to make it easier to understand, but of course failing.

The most confusing portion of credit scoring is that there are so many types of scores that have algorithms that vary slightly and most importantly have scoring ranges that vary as well.

For example there is FICO, Beacon and Vantage - probably the top 3. Vantage is typically the score you'll receive if you buy a TU credit report from a site like annualcreditreport.com.

Ok so why is that confusing? Well FICO scores typically range from 350-850, whereas Vantage scores range from 500-990. So a 770 on one score model is not the same as a 770 on the other.

To make things even more confusing most of the major scoring models have industry options as well. The most popular example is FICO. The most popularly used credit scoring model is still "FICO 2004 Classic" with the 2008 model likely a close second (talking about TU credit reports).

However there is also "FICO 2004 Auto Industry" score models which range from 253 - 893.

What's the difference? Well the basic idea is that a FICO classic score is supposed to predict the likelihood that a consumer will default on a new credit account within the next 24 months. However the industry options, like auto (there are others - mortgage, revolving account etc etc), are supposed to predict the likelihood that a consumer will default on a new auto loan in the next 24 months.

There is probably more that I should add to this but this is what I've got for now.
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Old 11-13-2012, 08:19 PM   #41
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Re: Credit Primer & Discussion w/ JL

bookmarked. I really need help on the matter, so thanks for sharing your knowledge, OP.
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Old 11-13-2012, 08:23 PM   #42
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Re: Credit Primer & Discussion w/ JL

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Originally Posted by jmakinmecrzy View Post
JL,

Holy ****. Solid OP. best I've seen in years. gtpitch or JL, maybe you can answer this -

I have 11k in hospital debt. That was from 2008, and from what I've read on the sites you recommended, 7 years is all it will affect you for. I have one 300$ limit capital one card which I've been using for this year to build credit. Paid it off every month, checked my scores, and it's ~650. My question is - since I don't really plan on taking out any loans for the next few years (auto would be the only one I can think of) is my best course to continue to ignore the hospital debt, open a few more cards, and continue paying off my balances? seems like I definitely need to open a few more cards at least since my credit limit is so low. I definitely don't have the money to pay off the hospital debt and I have long stopped receiving letters.
650 isn't terrible and you'd get approved for an auto loan with that but probably pay for it with a higher interest rate.

As far as $11k in hospital bills - the only thing I'd worry about is SOL and where they are in the collection process. Have they gotten a judgment against you? Have they done anything with it? Most states the statute will bar them in around 6 years or so. In Ohio they can buy themselves 15 years if they follow certain procedures and obtain judgment in court. So the debt is collectible long after it is gone from a credit bureau.
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Old 11-13-2012, 09:37 PM   #43
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Re: Credit Primer & Discussion w/ JL

Quote:
Originally Posted by skunkworks View Post
Please advise if I have any holes in my credit card rewards game:

Chase Freedom - rotating 5% categories
Citi Forward - approx. 4% on restaurants, Amazon purchases (5 TY points for $1, but point redemption is skewed unfavorably for this card)
Citi Diamond Preferred - rotating 5% categories
American Express Costco - 3% gas
American Express Fidelity - 2% on everything
Discover - rotating 5% categories

I guess the big thing is that I'm suboptimal with gas and travel. I'm sure I can find a 5% card for those. Any suggestions?
In addition to what I already said, make sure you activate your 2 amex's for small business saturday, to get $50 free. Also, I'd make a fake facebook & twitter (with your real name though) and sync them with the cards to activate the Amex sync bonuses / statement credits. And if you have an xbox, sync the amex there too.
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Old 11-14-2012, 03:46 AM   #44
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Re: Credit Primer & Discussion w/ JL

Quote:
Originally Posted by Jim14Qc View Post
Second, my score in Canada is 703 (good). It seems the scale is the same and the credit agency is the same (Equifax or TransUnion). However, they also show the Canada Population spread and it goes like this:

4% Poor (300-559)
10 Fair (560-659)
15% Good (660-724)
14% V. good (725-759)
57% Excellent (760+)

Is it Canadians being badass since our housing market is going up up up or is it similar in the US? I was somewhat surprised to be this low in the quintiles (didn't expect to be great since I'm young, but still, only at 23% percentile sucks...).
I think the way equifax writes it is a bit weird. I saw that same distribution, but I also saw this distribution:

How lenders see you:
Up to 499: 55%
500-549: 33%
550-599: 21%
600-649: 11%
650-699: 5%
700-749: 2%
750-799: 1%
800-900: 1%

I know this adds up to more than 100% but thats what it says; chart is titled "Delinquency rates: Delinquency Rate is defined as the percentage of borrowers who reach 90 days past due or worse(such as bankruptcy or account charge-off) on any credit account over a two year period."
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Old 11-14-2012, 04:15 AM   #45
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Re: Credit Primer & Discussion w/ JL

One is a distribution of the total population, the other is a list of odds for independent groups. The latter doesn't need to equal 100%.
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Old 11-14-2012, 04:24 AM   #46
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Re: Credit Primer & Discussion w/ JL

JL514, thx for the heads up on the Amex offers. Clutch as hell.
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Old 11-14-2012, 04:27 AM   #47
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Re: Credit Primer & Discussion w/ JL

is there an explanation for why uk cashback offers are so meagre compared to american ones?
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Old 11-14-2012, 10:11 AM   #48
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Re: Credit Primer & Discussion w/ JL

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is there an explanation for why uk cashback offers are so meagre compared to american ones?
Yes. In the US the interchange fees charged by the banks are much higher. According to that wiki, they (Visa & Mastercard) make over 30B a year in interchange fees.

If you don't want to click over, the interchange fee is the fee the card issuer charges the merchant for processing the CC transaction. Typically it's a fixed amount plus a % of the sale including tax. A lot like what you pay to use paypal.

If the card issuer makes the bulk of their money from the interchange fees, and these fees are controlled and kept low, they can't offer great rewards. The customer they would offer great rewards to would be the customer who is not going to make them money in late fees and interest payments anyway so they don't have a good way of offsetting the costs of a rewards program.
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Old 11-14-2012, 12:01 PM   #49
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Re: Credit Primer & Discussion w/ JL

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Originally Posted by Punker View Post
I think the way equifax writes it is a bit weird. I saw that same distribution, but I also saw this distribution:

How lenders see you:
Up to 499: 55%
500-549: 33%
550-599: 21%
600-649: 11%
650-699: 5%
700-749: 2%
750-799: 1%
800-900: 1%

I know this adds up to more than 100% but thats what it says; chart is titled "Delinquency rates: Delinquency Rate is defined as the percentage of borrowers who reach 90 days past due or worse(such as bankruptcy or account charge-off) on any credit account over a two year period."
This has nothing to do with the distribution of credit scores which is what Jim15Qc is talking about.

The chart you are quoting is the percentage chance someone with a given credit score will default. That is why it adds up to more than 100%. You are not supposed to add those numbers.

What Jim15Qc is talking about is the fact that Equifax Canada claims that 57% of Canadians have Excellent Credit which they define as a Beacon score between 760-900. They also claim that only 4% have Poor Credit and only 10% Fair Credit. I agree with Jim15Qc that this seems very strange to me. I assumed more people would have bad credit. I figured at a minimum 20% of the population.
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Old 11-14-2012, 12:04 PM   #50
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Re: Credit Primer & Discussion w/ JL

Quote:
Originally Posted by Yeti View Post
is there an explanation for why uk cashback offers are so meagre compared to american ones?
They are pretty bad in Canada as well. I think the US is the abnormality with more generous rewards.
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