Starting To Build Credit?

[BASSclary]

Hey guys,

 

I applied for my first credit card the other day so I can start building credit for the future, and for emergencies. I got approved for $700! Woo!

 

Now I've read just about every online thing about building credit and they all seem to say the the same thing; make a couple small purchases every month and pay them off right away.

 

But someone told me something else, is that to make a medium sized purchase, and pay it off over a couple months, because then you would actually have a debt that you are paying off, and that would build your credit faster/better? Is that just full of ****, or is that viable?

 

Does anybody else have any good suggestions for building up my credit besides the obvious?

[clayton86]

I can tell you how to ruin your credit or better yet have some one else ruin it for you lol

[CJV]

I think the most important thing would be to make sure whatever you borrow you can pay back on time.

[tipptruck1]

I know a few friends got loans. They then would take the loan money. To pay back the loan. All they would lose every month is the interest.

[aavery2]

To build credit you should do a couple of things, make a purchase that is about 1/2 of your balance, and pay it back over a period of time.  This does two things, shows that you have the discipline to manage your available credit, and establishes a history of making your payments on time.  Making a purchase and paying it off immediately is good to save on finance charges but does not build credit in terms of score as effectively.

[flyfisher]

Carrying a balance does nothing to improve your credit score, it only impacts your available credit which does impact your score.  you want to keep that as low as possible, usually under 15%-20%.  

 

The major influences on your credit score are your payment history, available credit percentage and derogatory marks aka collections etc..and credit inquiries play a part as well..  If you have a card just use it like your debit card and pay the bill completely each month.  Also keep in mind that any type of loan will build credit.  I know people who would take out a personal loan that they didn't need just to pay it back month after month to build credit.  Not something i would recommend unless you can get a really low interest rate but it is an option to show that you are able to pay back your loans.

[flyfisher]

To build credit you should do a couple of things, make a purchase that is about 1/2 of your balance, and pay it back over a period of time.  This does two things, shows that you have the discipline to manage your available credit, and establishes a history of making your payments on time.  Making a purchase and paying it off immediately is good to save on finance charges but does not build credit in terms of score as effectively.

sorry but this is completely false.  Carrying a balance over month to month does not show your ability to pay off over time it just shows you have a lower credit available.  I use my rewards credit card for everything pretty much and will make multiple payments during the month if needed just so that when they report to the agencies it doesn't show a high balance.  

 

No late payments is key, not a balance.  

[aavery2]

sorry but this is completely false.  Carrying a balance over month to month does not show your ability to pay off over time it just shows you have a lower credit available.  I use my rewards credit card for everything pretty much and will make multiple payments during the month if needed just so that when they report to the agencies it doesn't show a high balance.  

 

No late payments is key, not a balance.  

having a credit card and not using it does nothing to increase your credit score.   Credit history is something they use to determine score, often times bigger loans are disapproved for having insufficient credit history,  I have seen this many times in the Auto business.   We will have to agree to disagree on this.  Also having high available credit can be detrimental to receiving an additional loan, and credit scores are typically figured on debt to income ratio, not how much credit you have available on one card.    Keep in mind this is someone just starting to establish credit, not someone with 10 cards a house and a history of paying off vehicles.

 

I do agree with your statement that carrying a balance does not show your ability to pay off over time,  but making monthly payments over the course of a year does, and you can not do that with a 0 balance.

[flyfisher]

I never said not to use the card, i just said not to carry a balance.  Your history will still show on time payments with a low credit utilization both of which have a high impact on your credit score.

[aavery2]

I never said not to use the card, i just said not to carry a balance.  Your history will still show on time payments with a low credit utilization both of which have a high impact on your credit score.

I am not a credit expert by any means but I do not what I have been told to tell many young customers by numerous lending instituions, if I have been told incorrectly, then so be it,   but I can't see why that would be the case.

[flyfisher]

I can see that line of thinking with regard to credit building but the way scores are calculated it does not impact the score.  Now what lending institutions use to extend credit is much more than just the credit score so that is probably where the difference lies.  A high score does not automatically mean you get a loan and it is the same reason income is required when getting a loan/credit card but it is not a factor in your credit score.

[Raider Nation Fisher]

having a credit card and not using it does nothing to increase your credit score. Credit history is something they use to determine score, often times bigger loans are disapproved for having insufficient credit history, I have seen this many times in the Auto business. We will have to agree to disagree on this. Also having high available credit can be detrimental to receiving an additional loan, and credit scores are typically figured on debt to income ratio, not how much credit you have available on one card. Keep in mind this is someone just starting to establish credit, not someone with 10 cards a house and a history of paying off vehicles.

I do agree with your statement that carrying a balance does not show your ability to pay off over time, but making monthly payments over the course of a year does, and you can not do that with a 0 balance.

At 25 I had three cards with limits of 25000, 46000, and a paltry 13000 dollars. Of those I still have the one for 25000 at least I think its still open. I stopped using credit cards 3 years ago.I have never had a problem getting a loan for a car or anything else until this past year. Namely cause my 810 credit score tanked with the economy a few years back. That and filing a deed in lieu of foreclosure didn't help either. However, I'm back to a respectable 620 from a 540 a year ago. Surprisingly enough the deed in lieu dropped my credit 16 whole points. I guess the joke was on thwm. Hard to break something that's already broke.

Bank loans is the way to go as far as building part of your credit. Get them and pay them back.

Or you could always just do what I'm doing now. Pay cash for every thing.

[Raider Nation Fisher]

I can see that line of thinking with regard to credit building but the way scores are calculated it does not impact the score.  Now what lending institutions use to extend credit is much more than just the credit score so that is probably where the difference lies.  A high score does not automatically mean you get a loan and it is the same reason income is required when getting a loan/credit card but it is not a factor in your credit score.

Then explain the asanine amount of credit that was given to me. That was more than my yearly income at that time.

[flyfisher]

How long ago were you 25?  Lots of banking and credit regulations have changed in the past 10 years.  When i was in college i had a CC that had a 25k limit too....those types of limits nowadays are extremely rare.  Most places will lower your credit limit if you are not a profitable customer to them too.

[aavery2]

I can see that line of thinking with regard to credit building but the way scores are calculated it does not impact the score.  Now what lending institutions use to extend credit is much more than just the credit score so that is probably where the difference lies.  A high score does not automatically mean you get a loan and it is the same reason income is required when getting a loan/credit card but it is not a factor in your credit score.

I see your point, there is a  difference in the two situations.  Thanks for the insight.

[aavery2]

Back in the late 90's I was a partner in a small business, the 1st year we had a difficult time finding wholesalers that would extend us credit in the amount that we would have liked.  After the first year and an established credit history, along with the ability of prove our potential earnings, we were extended sickening amounts of credit by multiple lenders,  I am very thankful for responsible partners or we could have easily ruined ourselves.

[Nice_Bass]

I am a large dollar lender/banker and sit down with folks to review credit several times a day. Pm me if you want info on how to build, repair, maintain or increase scores by utilizing credit various ways and how it may be weighted in the algorithms.

[aavery2]

I am a large dollar lender/banker and sit down with folks to review credit several times a day. Pm me if you want info on how to build, repair, maintain or increase scores by utilizing credit various ways and how it may be weighted in the algorithms.

Good looking out...

[crankcaster100]

I say max that baby out on fishing gear and make the minimum payments each month

(I thought this was a how do I use my new credit card post)

[Lund Explorer]

I am a large dollar lender/banker and sit down with folks to review credit several times a day. Pm me if you want info on how to build, repair, maintain or increase scores by utilizing credit various ways and how it may be weighted in the algorithms.

 

I'm not sure if it is amazing or just plain sad that a credit score seems harder to figure out than a tax return!

[flyfisher]

I'm not sure if it is amazing or just plain sad that a credit score seems harder to figure out than a tax return!

Agree on that one entirely.  There are also some pretty good free credit reporting sites out there that will give you a score that is usually in the ballpark but then you throw in the FICO score which is even different than the three big credit bureaus.  Creditsesame and credit karma are both decent sites.  One reports from trans union and one is from Experian I believe.

 

I know when i bought my Jeep last year the score they showed me on Credit Karma was within about 10 points or so of what the bank showed me when they calculated the report.

[Raider Nation Fisher]

How long ago were you 25? Lots of banking and credit regulations have changed in the past 10 years. When i was in college i had a CC that had a 25k limit too....those types of limits nowadays are extremely rare. Most places will lower your credit limit if you are not a profitable customer to them too.

5 years ago. At that time I had also gone through and paid off, close to 40000 in credit card debts and loans.

I was always very profitable for the credit card companies.

[clayton86]

Listen get married give her power of attorney go on a deployment and leave your credit cards state side with her. You will have AMAZING credit when you get back........

[MCS]

Hey guys,

 

I applied for my first credit card the other day so I can start building credit for the future, and for emergencies. I got approved for $700! Woo!

 

Now I've read just about every online thing about building credit and they all seem to say the the same thing; make a couple small purchases every month and pay them off right away.

 

But someone told me something else, is that to make a medium sized purchase, and pay it off over a couple months, because then you would actually have a debt that you are paying off, and that would build your credit faster/better? Is that just full of ****, or is that viable?

 

Does anybody else have any good suggestions for building up my credit besides the obvious?

 

I would agree with the larger purchase and pay off over 2 or 3 months, but make sure you have the entire payment in the bank before you purchase that way 3 months doesn't turn into 3 yrs. Self control is the key and it is really hard. Good luck. Trust me from experience debt can run up quick, and stay for a while. Once they see you can pay stuff off they will start increasing the limits.

[Lund Explorer]

Agree on that one entirely.  There are also some pretty good free credit reporting sites out there that will give you a score that is usually in the ballpark but then you throw in the FICO score which is even different than the three big credit bureaus.  Creditsesame and credit karma are both decent sites.  One reports from trans union and one is from Experian I believe.

 

I know when i bought my Jeep last year the score they showed me on Credit Karma was within about 10 points or so of what the bank showed me when they calculated the report.

 

Agree on that one entirely.  There are also some pretty good free credit reporting sites out there that will give you a score that is usually in the ballpark but then you throw in the FICO score which is even different than the three big credit bureaus.  Creditsesame and credit karma are both decent sites.  One reports from trans union and one is from Experian I believe.

 

I know when i bought my Jeep last year the score they showed me on Credit Karma was within about 10 points or so of what the bank showed me when they calculated the report.

 

The little woman is in charge of credit checks.  I'm just in charge of paying cash for whatever we've bought in the last ten years.

 

Talk about a kick in the FICO!