credit card question

[kaos]

Is it really necessary to get rid of all credit cards be4 entering med school? That's kind of what the fin aid people @ U of MD said @ my interview.

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[docuw]

This would be done only to better your credit (FICO score) rating. Having more than 1, or 2 (max) credit cards is not a good idea (this includes all those department store cards that you signed up for to save the extra 10% at checkout). Not only that, but you do not want to have high debt on any card, nor should you have high maximums. Low number of cards, with low balance, and low maximums is important. Improving your credit rating will help your eligibility for private loans and possibly school financial aid. It has no impact on Federal Stafford Loans. Just being a medstudent with a school calculated budget showing need makes you eligible for Federal Loans.

 

[handygirl]

Another thing to consider--medical students tend to rack up credit card debt when credit cards are readily available to them. Med students have to borrow such enormous amounts of money, that it no longer seems like "real money" to them, and this tends to translate into more credit card spending. You might want to just get rid of the temptation of credit cards altogether.

 

[shindog]

I made it a point to pay off all my credits cards and then cancel all but one of them. That way I still have one for emergencies, internet purchases, etc. I also set the maximum limit pretty low to avoid temptation. In med school it's all about sacrifice - financially, emotionally, etc. Definitely not an easy road, but should be well worth it in the end.

 

[tedstriker]

Whoa! I'd better get on top of this soon...I have 4 credit cards! I only really use my AMEX, but I'd hate to cancel my beloved Boston Red Sox MBNA mastercard

 

[smackdaddy]

if you can control your spending, then you can keep your credit cards. if you can't control them, then you might consider getting rid of them. in no way, do you HAVE to get rid of them.

I like purchasing things with credit cards because i like the freebies and the added insurance. i like being able to return things without hassle, and to purchase things over the internet. when you are in school, expenses tend to come in bunches-tuition, rent + deposit, books, lab fees, etc. for that a credit card is nice to have for convenience, in case your loan check is delayed for some reason.

ymmv

 

[luckystar]

Is it true that closing a credit card account will remove that account from your credit report? If so, then if you've had a really good, long history with one credit card, you should not close that account. Just don't use the card if you want to control your spending. I read this somewhere in a financial advice book, I think. For example, I have my own visa, and an amex I share with my dad. If I were to close my visa account, would that part of my credit history be lost?

 

[LoanGrl]

No, your credit card activity will remain on your credit report for either 7 or 10 years, I can't remember which. It's smart to cancel any credit cards you aren't using and to only keep one with a low balance; that removes the temptation entirely! Schools don't take consumer debt into account when giving students their budget! Before you know it, you're in a vicious cycle of using your credit card, making payments, then using your card again because the payment made you short of cash, and so on.
It's a good idea to get a copy of your credit report to make sure it's accurate and clean up any mistakes, etc., especially if you're going to be taking out alternative loans. By the way, it's the law that ALL student loans be reported to the credit bureau's within 30 days of loan disbursement.

 

[Nefertari]

Right now, I have balances spread out over 5 different accounts to take advantage of low interest rates, and the accounts are not maxed out. However, I'm also trying to improve my credit score before app for financial aid.

Would it be better to keep the accounts as they are or to combine them into 2-3 accounts and cancel the other ones. If i combine them, then they'll be maxed out.

I've heard conflicting advice RE improving credit by having few accounts OR by having a higher amount of available/revolving credit.

I originally thought it was better to have a history of having several accounts that are not maxed out since it shows that you can manage credit. Of course, the best thing is to not have debt; however, that hasn't been an option for me. I would really appreciate input from anyone w/ a similar situation.

 

[DW]

to kill any confusion, just go ahead a get a credit report. The one I got through privacyguard gave me in painstaking detail what I would need to do to fix any problems.

I just want to mention one hard number I've heard on the interview trail for credit adequacy. While at NYMC interview day, the financial aid officer told us during his session that to qualify for decent rates on alternative loans, a credit score of at least 630 on a 850 scale is desirable.

 

[CRAZYTERP]

Do you all know if it each school demands a credit report. I recently pulled mine throug equifax and found out I had over 10 cards and since it was news to me bc I only use 1 of them ,I quickly canceled the others that I didn't even know I had. I wonder if the schools pull the reportas themselves or are we supposed to send them ourselves. Especially if the report they pull shows that I have 10 cards when they have really been cancelled but do not show up on my report bc it takes one full month for it to be renewed.

 

[DW]

only one school out of 15 or so i went to, Georgetown, asked for a copy of your credit report.

 

[LoanGrl]

Even though you may have several cards and all of them low balances, creditors consider it as if you HAD all of them maxed out, since that's the amount of credit you have available to you. Your credit score takes into account how much credit you have available, the amount of cards/accounts you have, etc. The more accounts you have, the lower your score. That's why you should CLOSE any open accounts (check your credit report to check for mistakes and old open accounts). You are also better off if you pay as much of your card off as you can BEFORE medical school. I had accounts that still showed as being open even though the bank didn't exist anymore and I hadn't used the card in over ten years!
Getting a private loan depends on good credit or a co-borrower with good credit. And while most schools don't check your credit report, I wouldn't be surprised if more didn't move toward it in the future. It creates a huge mess for the student who uproots their own life and/or that of their family's to start medical school only to find they can't qualify for private loans, can't find a co-borrower to sign, and are not eligible for scholarships. Suddenly you're halfway through medical school, can't qualify for additional funds...what a nightmare! Granted, these cases are the minority, but IT DOES HAPPEN!
You'll just be in a better position for your future if you clean up your credit report now. For more info about credit, saving money, etc. go to cheapskatemonth.com. I've learned a lot from there.
Good luck!

 

[Nefertari]

Thanks, loangrl! That makes a lot more sense now. Thanks also for the resource--i'll check it out.

 

[joshua_msu]

I have really great credit. I was wondering if having a car loan will be counted with just as much weight as having a credit card when applying for financial aid. I prolly will have to borrow from private lenders, and I was wondering if I will not be able to get some of the best rates since I have a car loan with about 5K left to pay. Thanks.

 

[LoanGrl]

By the way, I was reading my earlier post, and I meant to say cheapskatemonthly.com. Oops! I left off the "ly"...my apologies!
I am not sure how credit companies view car loans; what's more important is your credit SCORE. If you order a credit report, you can see for yourself what your credit score is. The three major credit companies are experian.com, transunion.com, and equifax.com. It costs you less than $10 to see what's on there, and sometimes it's surprising. The higher your credit score, the better! If you have a lot of credit cards AND a car loan, that might reflect negatively on your score, since you have too much credit available. Keep in mind that on a student's budget, the car payments might also make your finances be tight. Many schools don't take transportation into account when figuring your budget!
If you know you're going to need private loans, now is a good time to get out that credit report, close those accounts, and clean up what you can; that places you in the best position for a private loan.
Another thought occurred to me: watch how many "freebies" you apply for (you know, you apply for the card to get the freebie then cancel) so you don't have numerous credit inquiries. Too many credit inquiries looks bad, too. My hubby got a LIFE INSURANCE policy, and they checked our credit report!
Hope this helps you!

 

[joshua_msu]

Well actually, my parents cosigned the loan for me and are making the payments so I should be allright. They did this so they could establish credit in my name by putting the loan in my name and just making the payments. Very nice of them, but I just hope it doesntbackfire when I go to aplly for private loans.

 

[Hobbes01]

I'm still a little confused. So if I have a credit card which has a high credit limit, that's bad and I should close that account? I always pay my bills in full. (don't know if that info matters)

 

[DW]

Originally posted by Hobbes01
I'm still a little confused. So if I have a credit card which has a high credit limit, that's bad and I should close that account? I always pay my bills in full. (don't know if that info matters)

not necessarily close it, but if you can stand it, lower your credit limit. It will increase your rating and reduce your dependance on cards during med skool

 

[LoanGrl]

DW is the man! Good advice. Lowering your credit limit will not only help your credit score, but also REDUCE TEMPTATION while you're in school. As painful as it might be at the time, you'll appreciate it later. Trust me on that. And I'm sure that's the first thing a former med student who's entered repayment will tell you. We've heard time and time again from students and former students who say the budget or the payments weren't so bad if it weren't for all the credit card debt they had.

 

[badgergirl]

how do you lower your limit? i thought they set that for you and you couldn't change it.

 

[DW]

Originally posted by badgergirl
how do you lower your limit? i thought they set that for you and you couldn't change it.

nope, you can request credit increases and decreases whenever with every type of credit card i've heard of. just call and tell them you want a decrease. The phone rep might try to convince you otherwise but you are allowed to decrease your limit whenever you want (of course, you dont want to set it below your current balance).

 

[Hobbes01]

I got my credit report and my score is pretty high. Should I still lower the credit limit on my credit cards? How will I know if it will make a significant difference to my credit score?

 

[yosemitesam]

I'm still a little confused. So if I have a credit card which has a high credit limit, that's bad and I should close that account? I always pay my bills in full. (don't know if that info matters)

Yes. Emphatically yes! I ordered a credit report a few months ago and found that I had a kinda low score. This surprised me because I 've never been late, always pay my balance in full, and have had two car loans which were payed off early. It turns out that Discover had issued me a card with a $25,000 credit limit!!!
And even more shocking, the date of issue on the card was at a time when I was delivering pizza for Domino's and made less than $15,000 a year. What were they thinking?!!!!

 

[TroutBum]

So is the threshold mentioned by an earlier poster of a score of 650 universally accepted as a good score, or does it depend from lender to lender what counts as a good score?

Also, is it just the final credit score that counts? For example, I have an excellent credit score, but the balance on my consumer debts will probably still be higher than what I'd like when I start this fall--will lenders be willing to overlook that based on my score?

I get a headache just thinking about this stuff.

 

[GeneralTso]

Your FICO goes down if you cancel old accounts so you should cancel starting from new to old.

Department store credit lines should be the first to get chopped.

 

[GeneralTso]

Originally posted by TroutBum
So is the threshold mentioned by an earlier poster of a score of 650 universally accepted as a good score, or does it depend from lender to lender what counts as a good score?

Also, is it just the final credit score that counts? For example, I have an excellent credit score, but the balance on my consumer debts will probably still be higher than what I'd like when I start this fall--will lenders be willing to overlook that based on my score?

I get a headache just thinking about this stuff.

A 650 is good enough to land you a decent mortagage but not at the best prevailing rates. Basically, it comes down to showing that youre not a deadbeat (as shown by your FICO) and ability to pay (your income). For docs, they weigh the later more than the former as far as mortgages are concerned.