Keeping a good credit rating: how often should you use credit?

 

Hi;

I have no debts and haven't used credit for years.   I have a good
rating, but I am told it would be better if I used some credit ( and
paid it back in a timely way ).

I was thinking of getting a credit card and using it as a debit card
for a small number of circumstances to do just that.

How often and how much is the *minimum* I would need to borrow to
boost and then maintain my credit rating?

 

Steve wrote:


There's no single or simple answer.  A higher credit limit will reduce
your score, but paying back borrowed money will increase it.  MAYBE
some Fair-Isaac analyst wh knows the secret formula could give you an
answer if you gave him every detail of your financial situation...

The cheapest ways are to get a no-fee credit card and pay it off every
month, so it costs you nothing; and a no-closing-cost Home Equity Line
of Credit that you can "borrow" from (e.g., for a home renovation) and
repay immediately.

 



Getting a lender to approve a credit card or not closing it for insufficient
usage will be his bigger problem right now.

In this envrionment, lenders are cherry-picking the most profitable
customers. They're not in the business of giving cards to those who use only
a "minimum" amount of credit for the sake of "maintaining" a credit score.

 

Clincher wrote:


If he already has a good credit rating, there should be no reason for a
lender to refuse him a credit card, especially if that lender is the
bank or credit union where he already has accounts.  The lender will
not be able to discern his future use of the card...

 


'Course there is. Namely, the opportunity cost of not allocating that credit
line to someone who'll use the card for its own sake and pay interest as
well. There's been so much hype about "credit scores" that consumers focus
all their attention on their that and forget all about their profitability
ratings.

Lenders aren't even being coy about that anymore: you're seeing actual
reasons for denial such as "account maintenance expenses expected to exceed
projected revenue." and "low balances combined with high existing limits."




They don't need to - they use past data to make a prediction and act on it.
Same as for predicting risk of default.