Tuesday, January 16, 2007

Online credit increases -- instant gratification

All this credit-report research this week got me in the mood to go check my own reports. I'm pulling them through annualcreditreport.com, the official, free, government sanctioned way to get your reports. You get one free report each year from each of the three credit-reporting agencies. You can pull all three at once or space them out, as you like. Forcing the creation of this site, and requiring the credit-reporting agencies to release one free annual report, was an excellent move on Congress's part. It's one of the most consumer-friendly pieces of legislation in years. Go politicians!

Seriously, if you're in the demographic I imagine most Birds & Bills readers are (your twenties, with all the student-debt and entry-level-salary joys that come with the age), if you do nothing else to organize your financials for the entire decade, do these two things:

-Start a 401(k), and put in whatever your employer will match. It doesn't matter if you have piles of other debt. A 401(k) match is free money, and because it comes out of your paycheck pre-tax, the bite is smaller than you'd expect. You will be intensely glad later if you do this.

-Pull your credit reports every so often and get a feel for what's on them. Ideally, pull them once a year, but doing it annually is less important than simply doing it.

I'll do a longer post later on my findings from my credit-report-pulling adventures, but one immediate one was that my FICO score is getting dinged for having overly high balances on my revolving accounts. My first reaction: er, what? I have one credit card, my Amex, that I try to concentrate my credit-card spending on. It has piles of spare credit. So why is my score getting dinged?

Then I went and checked my Amex, and realised that my utilization had crept higher than I thought. Various large items are sitting on the Amex temporarily (it's spring semester payment time, whee), and my balance had crept up to almost half my available credit. Arugh. While I still have what seems to me a pretty large amount available before hitting my credit limit, the pattern was obviously Displeasing To The FICO Gods.

Well, I thought, I can solve this problem in one of two ways ...

The balance isn't going to be fully paid down for a bit longer. Various machinations have to process behind the scenes. So, the other way to decrease my utilization percentage ...

Amex lets you request increases online. I did a back-of-the-envelope calculation of what I think is the highest balance I could ever need to carry on the card, if I'm carrying, say, big travel expenses or some such. Then I calculated the credit limit I'd need for that amount to be 1/3 my available credit limit. (Utilization below 1/3 is apparently the percentage that appeases The FICO Gods.)

That amount was about a $7,000 jump over my existing credit limit. Ow.

What the hell, I thought. Might as well go for broke ...

It went through. Instantly.


I now have a credit limit that strikes me as borderline insane, but at least utilization percentage problems should be a thing of the past.