I will now set the record straight because credit is what I do for a living, biznatch (I own a mortgage company)! =)
Here's the deal:
Of your credit rating, 30% of the score is a direct result of the amount of revolving debt you have, relative to the amount of revolving credit you have AVAILABLE.
Here's how it breaks down....let's say you have the following:
Visa $10,000 limit, $10,000 balance (maxed out, right?)
M/C $10,000 limit, $0 balance
Visa $20,000 limit, $5000 balance
Discover $10,000 limit, $0 balance
So the totals are $50,000 in aggregate limits, and $15,000 in aggregate revolving balances. The bureaus take the balance divided by the limit and figure out what your usage percentage is. If that percentage is lower than 30%, they don't hit your score. Then, if it's above 30% there is a tiered setup where they take off points as the percentage goes up. They will not release how many points they take off to the public, but they have let us know these generic things.
In this case, the usage percentage is $15,000/$50,000 = 30%, so this person is right on the line as to whether they're getting dinged for points or not.
Of your credit score, this is approximately how it breaks down:
30% payment history
30% public records such as bankruptcy, foreclosure, short sale, lien, judgment, etc.
30% revolving usage
10% other such as age of accounts, inquiries, and so forth.
Bottom line? Credit scoring is a game, and you have to know the rules. The way to beat the system is to have the highest aggregate revolving credit limits you can, and stay out of revolving debt. Keep your balances under 30% of the total limits on all your cards. The strategy we use is that we have 4 cards. They all have massive limits, but we only use one. If we happen to carry a balance on it, even if it's maxed out, it can't impact our scores because of what we have available elsewhere. The fact that it's weighted just as heavily as a bankruptcy should tell you how important this is.
Capital One are actually a depository bank, just not in GA. They have branches in other parts of the country though. They have very aggressive deals on credit cards & car loans for highly qualified people.
We have a client right this minute that only has a 673 score, which is average. However, his credit is perfect. His problem is that he has 3 store accounts that are at about 80% usage (the irony is that they're all at 0% interest) and he closed all his other accounts. Smart thinking, right? Beat the banks by using OPM at 0%, and keep your other accounts closed, so you don't get tempted, right? **WRONG**
This is costing him 50+ points on his score, and it's costing him about .5% on his mortgage rate because of all of the hits that Fannie & Freddie instituted this year to try to stay solvent.
It's a joke, the whole system is set up to enrich banks at the end of the day. You owe a lot of money on your card? Guess what? Your credit score is going to be weighed down, which means it's more expensive to get another loan, which further profits the banks. You close your cards so you don't get in that boat? Same deal, scores get lowered, you get hosed. Credit scoring is the most unfair thing for the average American consumer - because the lenders don't care about anything but your score. The scoring mechanism doesn't care about anything but the raw data. The bureaus won't release the workings of the scoring mechanism, because it's a "trade secret", so consumers have to manage their money without any data upon which to base decisions, which ends up costing them money. Guess who the bureaus' biggest clients are? You guessed it, the banks. This is a great example of the "good-ol-boy" network but on a grand scale, innit?
So you have successfully become a number or a cog in the system.
Rant being over....on credit cards, I would look for one with no annual fee, and a good rate under 10% fixed. Or you could get one right now that is linked to Prime Rate, with a decent margin - say 4 or 5% - because Prime just went down to 3.25% after today's Fed rate cut. Be wary though, read the fine print on them periodically after you get the account, because they can summarily change the terms and not really notify you of such.....
I have personally had good luck with Advanta, Chase, and Capital One. I have a Capital One at 7.99% fixed forever. Wachovia....no thanks. They're douches, and I bank there unfortunately. Bank Of America/Suntrust/other big banks I can't recall....they sell their cards to FIA, and those guys are bad news too. Discover sucks donkey, their rates are always the highest and they one of the most aggressive at raising rates, fees, etc. Useless. AMEX is great if you pay it off monthly and use the travel services, but otherwise I would steer clear because they usually have a big annual fee.
