Credit question: Bad credit but paid off or Good credit but in debt

[not_osirus_jenkins]

I once worked as an underwriter for a large bank, and I can honestly tell you that good credit but in debt is ≤ bad credit with no debt. By having debt, even though you have good credit such can cause a bank to fear giving you a loan or credit card or whatever, due to you being a risk, and if credit is extended to you the interest rate will be higher. If you have good credit, but are in debt you are more likely on the road to bad credit due to defaulting on your debt.

Most banks will not extend credit to those who are in debt no matter how good your credit is. If your credit cards are maxed out, we will look at you in the same way we look at those with bad credit. Your credit cards should never be over 30%. And most banks won't even extend home loans to those who have a high amount of student loan debt etc, unless its in deferment for a year.

Banks like Chase which offer prime credit cards are known to close individual credit cards when they do their annual soft pulls and notice a card member is in debt, they fear you will run up their credit card and not be able to pay them due to your other debts. American Express is also now known to randomly select members, and suspend their cards until they submit w2 forms for proof of income.

The goal is not to be in debt. But bad credit puts you at risk of judgements and lawsuits ect, especially if you own prime banks.

insightful....

does anybody know if it is possible to raise your credit score without going into a crazy amount of debt?

for an example....

will playing the credit card game of making a purchase and paying it off in full every month for 36 months give me the same result of getting a car loan for 36 months and making the payments on time for the duration of the loan??

im trynna rebuild my shit without jumping out the window on a car loan...id rather avoid the car loan and play this crediat card game until my credit score is high enough for a home loan...

Trade lines. 100% legal as well. Pretty much you're piggy backing off someone with A1 credit.

 

[Miss.BlackAmerica]

I once worked as an underwriter for a large bank, and I can honestly tell you that good credit but in debt is ≤ bad credit with no debt. By having debt, even though you have good credit such can cause a bank to fear giving you a loan or credit card or whatever, due to you being a risk, and if credit is extended to you the interest rate will be higher. If you have good credit, but are in debt you are more likely on the road to bad credit due to defaulting on your debt.

Most banks will not extend credit to those who are in debt no matter how good your credit is. If your credit cards are maxed out, we will look at you in the same way we look at those with bad credit. Your credit cards should never be over 30%. And most banks won't even extend home loans to those who have a high amount of student loan debt etc, unless its in deferment for a year.

Banks like Chase which offer prime credit cards are known to close individual credit cards when they do their annual soft pulls and notice a card member is in debt, they fear you will run up their credit card and not be able to pay them due to your other debts. American Express is also now known to randomly select members, and suspend their cards until they submit w2 forms for proof of income.

The goal is not to be in debt. But bad credit puts you at risk of judgements and lawsuits ect, especially if you own prime banks.

insightful....

does anybody know if it is possible to raise your credit score without going into a crazy amount of debt?

for an example....

will playing the credit card game of making a purchase and paying it off in full every month for 36 months give me the same result of getting a car loan for 36 months and making the payments on time for the duration of the loan??

im trynna rebuild my shit without jumping out the window on a car loan...id rather avoid the car loan and play this crediat card game until my credit score is high enough for a home loan...

Trade lines. 100% legal as well. Pretty much you're piggy backing off someone with A1 credit.

This is referred to as "authorized user" accounts! If you know someone who lets say have a Chase, Discover, or American Express account (any credit card really) since x amount of years, they can add you to their account, and the account will report on your credit report for all the years they had the account. This is one of the best ways to get a good tradeline. However, it can become risky if they don't pay their bills after the fact though, because if the account goes negative such would report on your credit file for up to 7 years like all bad credit stuff.

 

[blakfyahking]

Bad credit but paid off, a lot of people - especially people in this time and era with massive student debts don't take into consideration how much debt eats into their net income and their ability to save and create wealth over the long-term. It's very very hard to get wealthy when you're consistently obligated to pay someone a portion of your income b/c you owe them. Most people pay the minimum payment too with high interest rates so just imagine. Imagine what you could do if your mortgage was paid off or if you had no student loans or credit card debt ? Credit allows you to borrow money that you have to eventually pay. It's far better in the long-term to have bad credit and no debt, than good credit but in debt up to your neck.

It's funny to me how disciplined people get when they have to pay bills but when it comes time to save money or cut costs so they can keep more of their money they get in flux. That needs to change... It is not a good cycle to be in.

I'm surprised at ur answer cuz u work in the financial industry

cause t/s didn't specify what type of debt tho

good credit is always better than bad........because u don't get good credit by accident

and it's funny how nobody mentioned how commercials loans are considered credit which is where many businesses get their 1st initial cash injection from

it's plenty of niggaz with millions in cash and bad credit who end up struggling regardless of how much disposable income they have

good credit shows u can manage the money u have at ur level

 

[dalyricalbandit]

Cash money no birdman

 

[Koltrain]

I would prefer to be out of debt with plenty cash simply because of the freedom it provides. The borrower is slave to the lender and being in debt up to ya neck aint no way to live...

 

[leftcoastkev]

There are 2 different contexts in this thread which can have opposing viewpoints ( pluses and minuses )

1. Personal credit

2. Business credit

Since it wasn't originally specified, I believe most people went on the assumption of personal credit. In the case of personal credit as stated in the context of this thread having late payment history will sink your scores, but not as bad as having bankruptcies and collections which was not stated in the OP. Iif you are debt free and you have some shitty score like 580, if you open some secure credit cards with 1-5k limits on that alone, you just pulled your score up dramatically by giving yourself a positive credit to debt ratio. Give it a year of paying on time and it's likely those can be flipped to unsecured. Give it a year and you're be offered more credit. You have to play it smart and KNOW you are in the process of rebuilding your credit and not worry about using sizable amounts of credit even when offered. Just let it sit (e.g., only use 10% of credit cards, forget about financing ANYTHING because interest rates will bury you and you are relying on that credit to debt ratio -if you screw that up your score WILL fall).

Give it 2 years of sensible behavior and your score will likely be around 680 which is on view in the Good range per FICO. Now you're debt free with good credit. I say this because I did it this way and it worked for me. This is a lot easier plan to take than paying on hundreds of thousands in the red for personal credit unless your credit lines are astronomical. I have a friend who buried himself in credit debt after buying a house and all new everything on credit and now is resorting renting out a room in his house in order to pay off the debt...and he has a family. F that.

Business credit is different as @not_osiris_jenkins pointed out and the debt itself can carry a different set of benefits.