24 Looking to build Credit... What are some good tips on your first Credit Card

[antidope]

 

 

 

 
I keep hearing differing opinions on this so I figured I would ask. Pulled my credit report and saw that my credit card utilization was a 0 (which is always is being that I pay it off in full every month) and that somehow amounts to a C for that aspect of it, and that ideal credit card utilization is a 1-20% of balance utilized? Is that really the case? Should I just be keeping a 5$ balance on it month by month and just paying off whatever I charge to it? I've been paying it off in full every month since I've had the card.

Before I had student loans or a mortgage, i always paid mine off each month and still got over a 700 credit score. I still pay it off in full each month several days before the due date and there is still a balance reported. It could just be the way your card issuer reports it?

I would stay away from store cards like the plague! Those things are nothing but trouble. Used to have an Old Navy card and had nothing but problems too. IMO, with all the man-in-the-middle store security breaches, I would close any store cards I had, but that's just me.

You know my struggle, mine is from The Gap

. I would hope my score doesnt take a huge hit from it, but I will be looking into closing it now that I know its not just me.

 

[nikeairforce1]

 

 
I keep hearing differing opinions on this so I figured I would ask. Pulled my credit report and saw that my credit card utilization was a 0 (which is always is being that I pay it off in full every month) and that somehow amounts to a C for that aspect of it, and that ideal credit card utilization is a 1-20% of balance utilized? Is that really the case? Should I just be keeping a 5$ balance on it month by month and just paying off whatever I charge to it? I've been paying it off in full every month since I've had the card.

Before I had student loans or a mortgage, i always paid mine off each month and still got over a 700 credit score. I still pay it off in full each month several days before the due date and there is still a balance reported. It could just be the way your card issuer reports it?

[thread="521602"]Could be. This is a store credit card and I hate it, I've had nothing but issues with it, but I dont want to close it after only having it for four years or so. Been thinking about getting another one, but just havent gotten around to it.[/thread]

DON'T close the card if it's one of your oldest ones unless there is an annual fee. This will hurt your AAoA or average age of accounts and will lower your credit score.

As for keeping a balance on the card, read my previous posts in this thread. I've answered it thoroughly.

 

[oidreez]

Yea dont close the card. Just dont use it anymore. The only store card I have is a macy's card and I havent used that in a long time

 

[solecity]

If anyone has any specific question, I may be of help. Just PM me and il be glad to answer. I once had a credit score in the range of 560 area and now is in the 700's+ within a year.

 

[guccydang]

the best way to build your credit is to find family members with high limit credit cards with no balance and have them add you on as authorize users.  you will get the cards activity history and it will greatly boost your credit score.  

 

[antidope]

 

 

No, you'll want to pay it all off every month (otherwise paying interest defeats the point of a good credit score). You just don't want to use more than 10% in a given month.

The credit tool that most people overlook here is the overdraft line of credit on your checking account. It'll be reported the exact same as your credit card, but protect you if you overdraft your checking account.

no no, you're misunderstanding what I'm trying to say. If I recall correctly, someone in here said that the credit usage that gets reported is basically right at the end of a period. So what I'm saying is pay almost all of it off before the due date, and then pay the final small amount on the due date. Thus, it would only report it as a small usage %. Maybe I'm not understanding what they were saying if that's not the case.

You're right.

Pay off 70% (ideally 91%-99% if you can) of your credit limit before the statement closes. Your credit card will now report a low balance to the credit bureaus when the statement closes. Once you get the new bill, pay off the whole balance to avoid incurring any interest charges.

 

 

I don't know how much your last statement balance was, but pay at least all of that off by tomorrow.

If you have any new charges in this statement or billing period, those charges will report when your statement closes on the 12th. You only want to be utilizing 30% of your credit limit (ideally 1%-9%, but not too important). So pay off at least 70% of your credit limit before your statement closes on the 12th. When the statement closes, your credit card will report the balance that is reported on the 12th.

okay let's say for this statement I spent $100. I pay off $90 by tomorrow. When should I pay the final $10?

You have it mixed up. It goes like this.

Statement Opens (December 13th for you) --> Statement Closes (January 12th for you) --> Bill Due Date (Amount is the taken from what you charged 12/13-1/12).


What you want to do is pay off ALL of what your last statement balance was that closed on December 12th. If you have any new charges from December 13th - January 12th, those new charges (say $100) will then report on 1/12. Pay off 70%-99% of your CREDIT LIMIT before the 12th. When you get your bill or statement on the 13th, it will only report a credit utilization rate of 1%-30%.

You're paying off 70%-99% of your CREDIT LIMIT, not bill, before the statement closes. After it closes (the 12th for you), you will get a bill and a payment due date for the remaining balance. Pay off the rest before the due date to avoid incurring any interest charges.

Thank you sir. Gonna leave it open and apply for either Discover IT or Chase Freedom, those were the two cards I saw you recommend

 

[crcballer55]

 

 

 

 
I keep hearing differing opinions on this so I figured I would ask. Pulled my credit report and saw that my credit card utilization was a 0 (which is always is being that I pay it off in full every month) and that somehow amounts to a C for that aspect of it, and that ideal credit card utilization is a 1-20% of balance utilized? Is that really the case? Should I just be keeping a 5$ balance on it month by month and just paying off whatever I charge to it? I've been paying it off in full every month since I've had the card.

Before I had student loans or a mortgage, i always paid mine off each month and still got over a 700 credit score. I still pay it off in full each month several days before the due date and there is still a balance reported. It could just be the way your card issuer reports it?

[thread="521602"]24 Looking To Build Credit What Are Some Good Tips On Your First Credit Card/240#post_19677054​[/thread]

DON'T close the card if it's one of your oldest ones unless there is an annual fee. This will hurt your AAoA or average age of accounts and will lower your credit score.

As for keeping a balance on the card, read my previous posts in this thread. I've answered it thoroughly.

According to a Fair Isaac spokesperson, closing accounts with no balance doesn't actually hurt your score (at least not for long) despite popular opinion.

http://finance.yahoo.com/news/ask-stacy-canceling-credit-cards-160022621.html

If the card company cancels your card for lack of use, that alone won’t affect your credit score.

There’s a persistent rumor that when your credit report reflects that a card was closed by the credit grantor, this could negatively affect your score. False. Here’s part of an interview About.com did with a spokesperson from Fair Issac, the creator of the most widely used score, the FICO score:

About.com: When the credit card issuer closes a credit card, there’s often a comment left on the credit report, “Closed by credit grantor.” Is there anything about that comment that hurts one’s FICO score?

Fair Isaac spokesperson: No. It doesn’t matter who closed the card.

 

[friscostylez]

the best way to build your credit is to find family members with high limit credit cards with no balance and have them add you on as authorize users.  you will get the cards activity history and it will greatly boost your credit score.  

I always question this method, wouldn't companies know that you kinda "borrowed" credit and you didn't build it yourself?

 

[guccydang]

I always question this method, wouldn't companies know that you kinda "borrowed" credit and you didn't build it yourself?

the three major credit bureaus know of this. but they still count it in your score.  

as far as i know, only the mortgage industry will not accept authorize buyers as a trade line with some exception.   

 

[friscostylez]

the three major credit bureaus know of this. but they still count it in your score.  

as far as i know, only the mortgage industry will not accept authorize buyers as a trade line with some exception.   

But let's say there's two people, one who built up their credit by themselves and the other who "borrowed" their credit. Can credit card companies and bank see this and maybe hold this against the person who borrowed their credit. My credit is in the mid 700's while my friend has a 811 credit score because of his parents but for some reason my credit limit is higher than his. I wonder if it's because he didn't really build it up himself and the credit card company hold that against him.

 

[guccydang]

But let's say there's two people, one who built up their credit by themselves and the other who "borrowed" their credit. Can credit card companies and bank see this and maybe hold this against the person who borrowed their credit. My credit is in the mid 700's while my friend has a 811 credit score because of his parents but for some reason my credit limit is higher than his. I wonder if it's because he didn't really build it up himself and the credit card company hold that against him.

most of the time when you apply for a credit card, they will take many things into consideration ie, debt ratio, credit length, what types of tradelines.  but mainly they take the score of whichever credit bureau.  Authorize user accounts will never be looked as a negative when you have authorize user accounts on your credit report.  

except for when you apply for a mortgage.  they want to see you having your own tradelines.  

 

[nikeairforce1]

 

 

 

 

I keep hearing differing opinions on this so I figured I would ask. Pulled my credit report and saw that my credit card utilization was a 0 (which is always is being that I pay it off in full every month) and that somehow amounts to a C for that aspect of it, and that ideal credit card utilization is a 1-20% of balance utilized? Is that really the case? Should I just be keeping a 5$ balance on it month by month and just paying off whatever I charge to it? I've been paying it off in full every month since I've had the card.

Before I had student loans or a mortgage, i always paid mine off each month and still got over a 700 credit score. I still pay it off in full each month several days before the due date and there is still a balance reported. It could just be the way your card issuer reports it?

[thread="521602"]​[/thread]

DON'T close the card if it's one of your oldest ones unless there is an annual fee. This will hurt your AAoA or average age of accounts and will lower your credit score.


As for keeping a balance on the card, read my previous posts in this thread. I've answered it thoroughly.

According to a Fair Isaac spokesperson, closing accounts with no balance doesn't actually hurt your score (at least not for long) despite popular opinion.

http://finance.yahoo.com/news/ask-stacy-canceling-credit-cards-160022621.html


 

If the card company cancels your card for lack of use, that alone won’t affect your credit score.
There’s a persistent rumor that when your credit report reflects that a card was closed by the credit grantor, this could negatively affect your score. False. Here’s part of an interview About.com did with a spokesperson from Fair Issac, the creator of the most widely used score, the FICO score:
About.com: When the credit card issuer closes a credit card, there’s often a comment left on the credit report, “Closed by credit grantor.” Is there anything about that comment that hurts one’s FICO score?
Fair Isaac spokesperson: No. It doesn’t matter who closed the card.

did you read the rest of the your article? your hate for CCs is blinding you. what you quoted doesn't even apply to his question...

per your article:

So who closed the account doesn’t matter. But there are two other potential concerns when closing accounts:

If you have balances outstanding on other cards, it could raise your credit utilization ratio, which could hurt your credit scores. For example, say you have two cards, each with a $5,000 limit. One card has a $3,000 balance, and the other, the one you’re canceling, has a zero balance. Since you have $10,000 of credit available and $3,000 outstanding, your credit utilization ratio is 30 percent, which is the maximum most experts recommend. Canceling one card means your total available credit is $5,000, and you’re using $3,000, raising your utilization ratio to 60 percent. That could negatively impact your score.

Part of your credit score is based on the length of your credit history. A longer history is better than a shorter one, so a bunch of old accounts is better than a bunch of new ones. Therefore, closing old accounts could theoretically lower your credit score. What many people don’t understand, however, is the FICO score considers both open and closed accounts, and closed accounts can remain on a credit history for up to 10 years. In short, even closing an old account won’t impact your credit score for a long time.
If Matt closes a card, he should remember to subtract that card’s credit limit from his total available credit, and never charge more than 30 percent of that available credit on his remaining cards.

Because closed accounts don’t immediately impact the length of his credit history, that’s not really a factor in Matt’s decision.

So in Matt’s situation, he’s free to close accounts, and he shouldn’t bat an eye if they’re closed by the creditor. But let’s answer his specific question: “I want to know if I should now consider canceling credit cards that I have not been using?”

Not using an account? Just ignore it.

cliffs bolded.

*edit* I will admit that I thought closing an old credit card had a larger impact on AAoA than it really does.

but yea....keep it open (if there are no fees) so it will help your credit utilization ratio.

 

[nfynite]

Here's my personal experience with credit and idk if this will help anyone out but Im a noob when it comes to this stuff 

I'm 24 and got my first credit card last year around September. I used it to buy gas and fast food ever month just so I could get a balance. I paid that balance off each month without a late payment. This month a got a credit limit increase of 3x what I had and I have been receiving letters about getting loans and stuff. I think as long as you pay off the balance each month the better your credit may get over time.

 

[miniojw]

I've been thinking about getting a discover card for the rewards program and fico scores on statements.

 

[friscostylez]

I've been thinking about getting a discover card for the rewards program and fico scores on statements.

Let me know when so you can be my referral. We both will get $50 each

 

[crcballer55]

 

the three major credit bureaus know of this. but they still count it in your score.  

as far as i know, only the mortgage industry will not accept authorize buyers as a trade line with some exception.   

But let's say there's two people, one who built up their credit by themselves and the other who "borrowed" their credit. Can credit card companies and bank see this and maybe hold this against the person who borrowed their credit. My credit is in the mid 700's while my friend has a 811 credit score because of his parents but for some reason my credit limit is higher than his. I wonder if it's because he didn't really build it up himself and the credit card company hold that against him.

The reasons they're willing to give a higher score to those kinds of people is because there's a co-signer. Think like they do for a second. If you have more people on an account, you're diversifying the risk of default on the account. If the new signer doesn't pay, you just go after the other party who you know will pay you what is owed. The chances of two people defaulting on the same debt, or filing bankruptcy, is fairly slim. Therefore, they're willing to give someone with a cosigner on an account a higher score.

 
Here's my personal experience with credit and idk if this will help anyone out but Im a noob when it comes to this stuff 

I'm 24 and got my first credit card last year around September. I used it to buy gas and fast food ever month just so I could get a balance. I paid that balance off each month without a late payment. This month a got a credit limit increase of 3x what I had and I have been receiving letters about getting loans and stuff. I think as long as you pay off the balance each month the better your credit may get over time.

Unfortunately, that pretty much just means you're breathing. My wife still gets offers for her maiden name at her parents address that she hasn't lived at for 10 years.

 

[nfynite]

 
The reasons they're willing to give a higher score to those kinds of people is because there's a co-signer. Think like they do for a second. If you have more people on an account, you're diversifying the risk of default on the account. If the new signer doesn't pay, you just go after the other party who you know will pay you what is owed. The chances of two people defaulting on the same debt, or filing bankruptcy, is fairly slim. Therefore, they're willing to give someone with a cosigner on an account a higher score.

Unfortunately, that pretty much just means you're breathing. My wife still gets offers for her maiden name at her parents address that she hasn't lived at for 10 years.

 and I thought i had something going to...

 its all good though I still have tons to learn about this credit stuff...

 

[clarkchaz1988]

I've been thinking about getting a discover card for the rewards program and fico scores on statements.

Me too. I have a chase visa and capital one. Both have rewards. I've just been thinking about copping that discover as my every day card and paying the balance off every month. Something about getting my credit score on every statement is 

 

[crcballer55]

*edit* I will admit that I thought closing an old credit card had a larger impact on AAoA than it really does.

but yea....keep it open (if there are no fees) so it will help your credit utilization ratio.

That was basically my point. It won't hurt it for any extended period of time. I've known people who have filed BK and within a year have added 150 points back to their score. I don't "hate" credit cards. I just think we spend way too much time trying to find the best one to boost our credit score so we can borrow more money when all that time and effort can be spent on better ways to earn and gain more money.

 

[crcballer55]

 

 and I thought i had something going to...

 its all good though I still have tons to learn about this credit stuff...

Ya, that's pretty much where they get the young people is getting them to think they're special because they're getting something special when it's something they basically extend to everyone. They make so much off late fees and interest that they can afford to be careless in many cases. That's why most retailers at the mall push young people to open a store card. They make more off the interest from the cards than the actual merchandise.

 

[nfynite]

 
Ya, that's pretty much where they get the young people is getting them to think they're special because they're getting something special when it's something they basically extend to everyone. They make so much off late fees and interest that they can afford to be careless in many cases. That's why most retailers at the mall push young people to open a store card. They make more off the interest from the cards than the actual merchandise.

Ahhh I got ya. Ill stay away from those then..

 

[capital sb]

From stuff I've read: do not spend over 50% of your available balance per month. I would pay my card, in full, every month, but I guess that was still not right. Now I use my card a lot differently.

This is false you want to keep your card utilization under 30%.If aiming for 700+ credit you want to have 1 card reporting under 10% util. all other cards reporting $0. I like to look on myfico.com forums , keeping high credit is like a game to those people?

From http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Credit-Scoring-101-START-HERE/m-p/8169

How is my score calculated? (Author: Pammila)



-35% affects Payment History. Meaning any lates; collections; charge offs; bankruptcies; judgments; liens or the such will hurt the score. All is time based, the older the information the less it is contributing to the scores.


-30% affects Utilization. It is best to have several accounts with low balances distributed then it is to have fewer accounts maxed out. To figure utilization: Balance (divided) by Credit Limit = percentage. Lower than 10% recommended per account, this is one of the fastest means for increasing the over all credit score.


-15% affects Established History. The longer you maintain open accounts with creditors the better. When first starting out of course this is not easy; but this is where getting added as an Authorized User to another persons established credit comes in best. Remember that the contributor must have an account that has long history; clean payment record; high credit limit; and low balance. Also need to check with the creditor to insure that they have a policy to report authorized user accounts to all three major credit reporting agencies.


Note: Authorized user accounts are the best way to go; since you are not legally responsible for the debt rather than Joint or Co-Signer accounts. Also, if this account starts to report negatively; these accounts are usually easier to remove from the credit reports by either contacting the creditor and requesting termination of the relationship; or disputing through the CRAs.

Update: In its original form, FICO 08 would not use AU accounts in scoring. It has been modified: FICO 08 now WILL continue to count legitimate AU accounts. As of the end of 2008, the EX version of FICO 08 is only being used by a few lenders.

10% affects Inquiries. Don't apply for credit unless you know you can get it or that you need to get it; unnecessary credit inquiries are going to hurt the scores - especially if your over all credit file is small to begin with.


Tip: When applying for credit pull your own credit report first (this is a soft hit and won't drop your scores). With credit report in hand go visit your local banks or credit unions. Show them the reports; and don't allow them to pull a credit report of their own unless they can say for sure that you will be approved, this way you save your self unnecessary pulls on your credit report if they decline you. If they say yes, you are approved, then they will need to pull credit report to seal the deal.


Mortgage & Auto industry has special rules for inquiries: all applications for credit resulting in pulled credit reports within a 14 day period of time will only count as one inquiry & will be suppressed from affecting credit scores for 30 days. So if you plan to go shopping for a mortgage or a car, do your research first picking what companies you want to apply with and do this all within a 2 week period of time so that the scores are not affected too much.


-10% affects Mix of Credit. Use different types of credit (revolving; installment; auto; mortgage...) evenly.


Also remember the advice which a lender gives you is productive for getting a loan; but not always good for the credit scores. If they tell you to consolidate and close accounts be careful how you go about this, most people's compliance usually results in dropped credit scores. You are shrinking your overall available credit limit verses your balances... so remember you don't want to hurt the utilization by consolidating and closing accounts behind you.

 

[thug]

^ is there a reason for keeping it below. 30?

If I can pay off all of it in one month, why would it be bad to spend more than x% of it?

 

[capital sb]

^ is there a reason for keeping it below. 30?

If I can pay off all of it in one month, why would it be bad to spend more than x% of it?

From what I have gathered, it is best to keep utilization below 30% because it shows that you are using your credit responsibly.It also best to not carry a balance month to month just so you arent paying interest. If you pay off the credit you have used before you are billed that utilization does not report to the 3 credit bureaus, for example : You have a credit limit of 1k , you spend $500 and pay it off in full before your bill is due, $0 will be reported. If you spend $500 and only pay of $200 you still have a balance of $300 (30% util) which is reported to the credit bureaus.

 

[willie mcfly22]

I'm 30 and rebuilding my credit. Was way too reckless and uneducated in my 20s. High interest rates suuck (18-24%) but I'm dealing wit it. My credit score is creeping back up. I jus have one secured credit card thru Capitol one. Hoping to buy a house in the next 2 years so im being veerrry careful....thinking of opening a another card with a store that I don't shop at often. Heard that helps. Also read that applying for small cash loans (1k-1500$ and then jus put that cash in savings and paying the loan off in a few months helps too. Truth to this? Thanks