Establishing credit...

Discussion in 'Et Cetera, Et Cetera' started by Catharsis, Oct 16, 2011.

  1. Catharsis

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    I got a credit card over the summer and I'm hoping to start establishing good credit for the future. At the moment, all I really ever use money on is gas, so that's all I've been using it for, so far. It's enough to create a balance that I can pay off monthly - but does it matter how much I pay off my credit card at a time, as long as I pay off at least the minimum balance?

    Or, more specifically... Does it make a difference if I pay off the entire balance at one time, as opposed to continue making the minimum monthly payments?

    Does this make sense at all? I apologize if it doesn't, I'm not exactly used to the lingo quite yet. I just want to know what is the best way (in your opinion) to pay off a credit card bill.
     
  2. Incocknito

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    It's better for you if you pay the full amount each month. But in terms of your credit rating it's probably better to pay small amounts over a longer period because that demonstrates your long term credibility :p

    Or credit-ability, if you will...
     
  3. B_jeepguy2

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    PAY IT OFF EVERY MONTH!!!

    Of course the credit card company hopes you will never pay it off so they can collect interest from you at some sky high rate...which will keep their investors Like Warren Buffet (who owns American Express and is buying Bank of America) very rich and you BROKE! :wink:
     
  4. vince

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    Paying on time every month and not one day late is the most important thing to demonstrate financial responsibility.

    Pay off the full balance every month.

    Never buy something on credit if you cannot pay it off that month.

    Interest rates will be going up so you don't want to be caught carry a large balance.

    Keep your limit low and do not let the bank raise it automatically.

    You only need one credit card. Having more than one will not do anything for your credit history and you'll just pay more in fees.
     
  5. beretta216

    beretta216 Active Member

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    The best way to do it, in my humble opinion - and this is a guy who's got pretty damn good credit...

    - Use NO MORE than 50% of your available limit. It shows fiscal repsonsiblity, something that's calculated into your scores.

    - Pay at LEAST the minimums. It's a good way to keep cash in your pocket, while still establishing credit worthiness. Sure, you pay more interest, but again - credit is established by making REGULAR payments, not nessicarily running up a balance and paying it off.

    - Make any post secondary education noted on credit applications. College education IS a calculated factor, believe it or not. (total horseshit, I agree, but, again, goes toward fiscal responsiblity)

    - Get a couple little credit cards for bullshit stuff. I have a $1000 card I use for JUST gas, which I keep about a $300-ish balance on, and make the minimum payments on, plus a little. Again, goes towards establishing a regular payment history without breaking the bank.

    - If you don't use it, you lose it. Unlike Virginity, credit goes away if you don't use it. So keep regular payments going. Closing credit lines helps your credit for a LITTLE while, but then, it starts to dwindle away. Again, credit is based on REGULAR payments -- if you don't have any payments made, even if you have no active cards/loans open, after awhile, it goes away.

    My best friend is a banker -- and his advice has set me up with kickass credit.
     
  6. beretta216

    beretta216 Active Member

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    Also, some advice:

    - Stay away from sites like "FreeCreditReport.com" -- they take advantage of your right to recieve something you're already legally entitled to, by law, for free. You can get it by either writing each of the credit bureaus. Any pull, from anyone else OTHER than directly from the credit bureau itself either a) costs money in some way, or b) dings your credit. Just a simple fact.

    - Stay away from shit like LifeLock. Again, something that takes advantage of something you're already legally entitled to, by law... for FREE.

    Just sayin'...
     
  7. joyboytoy79

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    The amount of the payment doesn't matter, as far as your credit rating is concerned (so long as you pay at least the minimum). For that reason, I suggest you pay off the entire amount, and avoid paying interest.

    One of the most important things in establishing credit history is the age of the line of credit. If you keep an account with a certain credit card for a long time, it will weigh much heavier on your report than if you keep opening and closing accounts.
     
  8. Catharsis

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    I don't want to give too much information, but I have a pretty good credit card. And I'm still in college, but I do believe that it does help with credit.

    I'm not exactly the type to spend what he doesn't have, so don't worry about me building up debt... lol. I already have debt for college loans - I don't need anything on my credit card!

    I see what I have in my checking account (not my savings) and I would spend money based on THAT. But, like I said, I don't really pay for anything but gas, so it's not too hard to spend beyond my means, haha. But I pay for gas probably 2-3 times a month, is that using it often enough?

    I'll be sure to make regular payments from now on, then. I don't want to pay as little as possible, though - I do want to make sure that (like I said) I don't build up too much debt for myself.


    Also (and I'm sorry that this had to be an edit to my post :redface:), thank you everyone for your kind advice! Trust me, I really do appreciate it.
     
    #8 Catharsis, Oct 16, 2011
    Last edited: Oct 16, 2011
  9. beretta216

    beretta216 Active Member

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    Yeah, you've got a great plan so far, particularly while still being in college.

    While the 50% debt-to-balance rule is a pretty damn good one to follow... Always bear in mind your job/income security. If your entire credit card balance isn't something you could eliminate quickly (within a month or two on regular income) you may be carrying too much. This is good for when you wind up up without money/without a job without much notice...

    Keep small balances rolling, but something you can easily pay off if you know that some shit is gonna go down. That way, you get the best of both worlds... (rolling balances you pay off on time, but still able to pay off if you need to)...

    Again, these are just my opinions, and what works for me. Income is the big thing here.
     
  10. beretta216

    beretta216 Active Member

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    But NEVER let more than 50% roll on a month's balance -- while it doesnt HURT you per se, your credit doesn't work as hard for you as it could, if you will.

    And maxing out a card is a bad thing to do. Even if you make all your payments, a) maxing our your card shows financial recklessness and b) it's VERY easy to EXCEED your credit limit when your monthly finance charge or interest hits, which puts you over your limit, which not only dings your credit, but also makes your bank want to extend or constrict your limit, either of which you DON'T want... particularly the latter.
     
  11. cdunstan1

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    1) Hats off to you sir for being perceptive enough to be aware of the importance of credit scores at your age!

    I do happen to be a banker (I’m pretty sure Beretta and I are not best friends) and I do agree with most of what he says. I’d throw in the following.

    2) Pay at least your min on time. A week early wouldn’t hurt. This should really be rule #1.

    3) I’d knock down the 50% usage to 30%.

    4) I have to disagree w/ Vince. Opening lots of lines of credit is considered bad when you are established, not so much when you are starting out. As long as you think you are mature enough not to use it get as much of a credit limit as you can. And you should never pay a fee for a card unless it offers a shitload of benefits. Which you don’t need right now.

    5) If you do get another card, the 30% rule applies to each card as well.

    6) Being in the banking industry doesn’t give me any more knowledge of the vagaries of credit scoring than anyone else. I never run a balance. If I can’t afford something I wait until I can afford it to buy it. But current thinking is that scoring agencies like to see people run small balances and pay them off. This also means you’ll be paying interest on new purchases, which sucks. If you do get a 2nd card, I’d use CC1 for your charges first month and pay of 75% of the balance. Then use CC2 in month 2. Pay off all of CC1 by EOM and 75% of CC2. This means your new charges on CC1 will be interest free. Keep doing that for 5 or 6 months.

    7) Not to be all *Suze Orman* but you’ll start using your cards for more than gas eventually. Remember, if you sock away $100 in a Roth IRA today, at 6% interest that $100 will grow to $1028. Doesn’t sound that impressive but that means that $1000 will grow into $10,280. And $1000/year for 10 years will swell out to over 100K.

    8) Finally, in the spirit of the site…Great cock, love the curve! :smile:
     
  12. midlifebear

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    And did you know that if you don't use your credit card (or one of the many you will be sent in the next few years) your credit rating is negatively affected? Because I travel a great deal I tend to use AmEx exclusively. Chase Manhattan sent a credit card to my US address and I wasn't aware of it for seven months. Suddenly my 850+ ratings with all three credit agencies dropped to 790 to 830 on my last credit report. Turns out that years ago (as in 1995) I wrote Wachovia a letter requesting they cancel my Wachovia credit card. They did. I didn't pay much attention at the time, except to be sure the credit card was cancelled. That affected my credit rating, dropping it about 100 points among the
    "mighty three" credit agencies. But it soon returned to normal after a year. However, when Wachovia was parceled up among Wells Fargo and pieces went to Chase, Chase Manhattan dredged up my old credit records from Wachovia and on that alone issued me a credit card which, according to them, I did not need to sign to activate. Then I began receiving credit reports which wouldn't prevent me from getting any loan I might have wanted, but were lower than before all because of "lack of revolving credit use."

    It's a nasty little game over which we have very little control, except to pay off our credit card bills regularly. And if you always pay off the balance each month that is great with the credit card company, but not the credit reporting agencies.

    Still, my advice is to say "Fuck 'em", and always pay cash. After all, in this economy there is no car dealership, Realtor, or any other high ticket item retailer who won't accept cash or at the very least a registered check for the full amount of anything.
     
  13. Smaccoms

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    I have family who work in the financial business and I've recently entered dealing with my finances as well so I know your position.
    Overall, it is a good strategy to completely pay off the bill each month. The best way to build credit, however, is it to leave a little bit (not much) unpaid every now and then. Pay that extra bit off over time.
    Paying the minimum each and every time will make it look as if you don't have enough money for this credit card. Paying everything off all the time will annoy the company because they're not getting anything out of it. The best way to deal with both of these situations is to avoid them; try to find a comfortable middle ground. Optimally, stay closer to paying everything off, so you don't lose too much money.

    This is what I've been told anyway. Make sure to check out myfreecreditreport.com and myfreecreditscore.com (or whatever the addresses are). FREE SCORE gives you what your score is; FREE REPORT tells you why your score is what is is and how to make it better. You can use them both for free once a year I believe. Just make sure to cancel your "free prescription" before they start chargin you after the free period.
     
  14. Smaccoms

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    you can use the freecrepditreport.com and the other one once a year for free, as long as you cancel your subscription after using it.
     
  15. SoloAqui

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    Cash is king.....
    There are so many ways to build your credit score, fico score etc. Credit cards, Store cards, & Gas cards are a good way to start but BEWARE without some self control you will get sucked in and the debt will mount and become a problem. So control it or shred it. If it becomes a problem because your over using it, shred it.
    Great advice on here.
    Best advice I can offer:

    * GET A BUDGET.... Google it you can get Ideas and create your own.
    * STICK TO THE BUDGET.
    * DO NOT SPEND MORE THAN YOU MAKE.

    Here is a link to Dave Ramsey - daveramsey.com, he helps people with money issues. Great books can give you great advice, many sources that will be of great help in general...
     
  16. D_Sal_Manilla

    D_Sal_Manilla Account Disabled

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    Pay off the full amount every month. That alone will give you great credit. I don't have any credit yet but I do know that my mom has amazing credit. she could get a loan for a sailboat if she wanted to but anyways she always told me that making the minimum payment is the fastest way to get into debt.
     
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