Starting To Build Credit?

[A-Jay]

Some great advice here so far - I have a different take on first time credit card users.

I used this on my son to help him learn the self discipline it take to "Use" the card sensibly.

 

As stated, your limit is $700.  So first save up $700 - if you already have it, good.  Now take the Whole $700 and send it to the Credit Card company NOW - Before you ever use the card.

 

Now you are free to use the card.  Remember to stay within the $700 limit and Be sure to make payments each month.  Your statement will say you owe nothing but always make a payment any way - what ever you think is wise and affordable.

 

During this entire evolution, you'll be learning how to do it right but without the penalty of interest; because you'll be using you're own money not the banks.  It's a good learning tool.

 

Essential, you've made your credit card into a debit card.

 

My cash rewards card gets this same treatment.

 

Good Luck

 

A-Jay

[BASSclary]

Good advice here guys, the more knowledge the merrier! 

 

What I think would be a good plan for now, and tell me if its stupid, is to mainly use the card for the purchases I make every day on my debit cards, (Lunch, drinks, smokes, gas, etc) and just pay it off right after, and then maybe like a $100 purchase and pay it off over 2-3 months?

 

The repayment think is not an issue because I make almost $1200 a month, and I dont want to realistically go over 20-30 % of my limit.

 

And A-Jay, that is interesting, I did not know that you can sort of prepay it seems like? So I would essentially put money on my credit line, and then it seems like it turn into a gift card essentially, with my money already on it, and I can make payments to keep my "gift card" up to the balance it was at, if I interpreted you correctly? That seems like a good idea to me!

[A-Jay]

Good advice here guys, the more knowledge the merrier! 

 

What I think would be a good plan for now, and tell me if its stupid, is to mainly use the card for the purchases I make every day on my debit cards, (Lunch, drinks, smokes, gas, etc) and just pay it off right after, and then maybe like a $100 purchase and pay it off over 2-3 months?

 

The repayment think is not an issue because I make almost $1200 a month, and I dont want to realistically go over 20-30 % of my limit.

 

And A-Jay, that is interesting, I did not know that you can sort of prepay it seems like? So I would essentially put money on my credit line, and then it seems like it turn into a gift card essentially, with my money already on it, and I can make payments to keep my "gift card" up to the balance it was at, if I interpreted you correctly? That seems like a good idea to me!

 

 

 You can call it anything you like - but if you do it right, you'll never end up maxing out your credit card and you'll always have "your Credit" for unexpected or emergency purchases.

 

It Just works.

 

A-Jay

[BASSclary]

 You can call it anything you like - but if you do it right, you'll never end up maxing out your credit card and you'll always have "your Credit" for unexpected or emergency purchases.

 

It Just works.

 

A-Jay

 

 

I like it 

 

It makes sense and is a really good idea i've never heard of before!

[flyfisher]

Some great advice here so far - I have a different take on first time credit card users.

I used this on my son to help him learn the self discipline it take to "Use" the card sensibly.

 

As stated, your limit is $700.  So first save up $700 - if you already have it, good.  Now take the Whole $700 and send it to the Credit Card company NOW - Before you ever use the card.

 

Now you are free to use the card.  Remember to stay within the $700 limit and Be sure to make payments each month.  Your statement will say you owe nothing but always make a payment any way - what ever you think is wise and affordable.

 

During this entire evolution, you'll be learning how to do it right but without the penalty of interest; because you'll be using you're own money not the banks.  It's a good learning tool.

 

Essential, you've made your credit card into a debit card.

 

My cash rewards card gets this same treatment.

 

Good Luck

 

A-Jay

Most credit card companies will not allow you to do that anymore.  Most will only allow you to pay 10% more than your current balance.  I have a few different companies cards and none would let me go over 10% of the current balance except my Barclay card which would let me go $500 over the current balance.  Some even have stipulations around how frequently you can pay each month too.

 

The advice of saving your limit is a good one but I will take it a yep further and say put that $700 in a savings account, earn a little interest and pay off your bill in full at the end of the billing cycle.  Then you earn some interest instead of paying it  

[A-Jay]

Most credit card companies will not allow you to do that anymore.  Most will only allow you to pay 10% more than your current balance.  I have a few different companies cards and none would let me go over 10% of the current balance except my Barclay card which would let me go $500 over the current balance.  Some even have stipulations around how frequently you can pay each month too.

 

The advice of saving your limit is a good one but I will take it a yep further and say put that $700 in a savings account, earn a little interest and pay off your bill in full at the end of the billing cycle.  Then you earn some interest instead of paying it

 

I can not say which banks do or do not have restrictions on how much money you can send them.

 

I can tell you that the banks I'm doing business with don't have a problem with me sending them my money, whether I owed it yet or not.

 

A-Jay

[flyfisher]

I can not say which banks do or do not have restrictions on how much money you can send them.

 

I can tell you that the banks I'm doing business with don't have a problem with me sending them my money, whether I owed it yet or not.

 

A-Jay

Curious which banks?  Credit Union?

 

I checked Citi, Capital One and Barclay myself.  

[Root beer]

I'm 24 years old and I don't even own a credit card. I probably should get one but I'm a gold meldaist at procrastination.

[flyfisher]

I'm 24 years old and I don't even own a credit card. I probably should get one but I'm a gold meldaist at procrastination.

You don't have to get one unless you plan on using credit a some point.  I like to use mine for the cash back myself.  Over the course of he year I can get enough rewards to pay for a good chunk of my Christmas shopping.

[Root beer]

Crazy how I spelled medalist wrong. Eh, well.

[Lund Explorer]

I'm not sure of the rest of the country, but here in the Mitten, your insurance rates are adjusted based on credit ratings.

 

Hard to believe that a person who is debt free is penalized the same as the guy well over his head in debt.  During the latest economic downturn, a number of people were caught burning homes or crashing vehicles they were in danger of losing.  We didn't see a rash of these things happening with those who had homes or cars that were paid for.  But the simple act of not having a credit card or two in your wallet could cost you a substantial amount to insure your belongings. 

[Root beer]

My all time favorite credit card story involved a man I admire. This man is retired in his 80s now, and he had been a business owner and an investor his entire life. Well, he had a boat at one of the marina then he sold the boat. He told the marina he was not going to renew his slip lease. As he sold his boat, the marina was bought out by new owners and underwent new management. We all know how hectic and crazy things can get when a business undergo massive changes. The new management said he had signed another year lease. He responded calmly, "No, I didn't." Then the new management said he did and he would have to pay for remaining of his current lease plus 12 more months. He paused for a minute and said, "Here is what I'm going to do, I'm going pay remaining of my current lease right here. Far as me paying another 12 months, that's your problem take it however way you want. And you're welcome to report me to credit agency, however, it will do no good as I'm retired and I live on pure cash. Have a wonderful day." He walked out and never heard from them again. hahahaha This guy is my friend's grandfather and I've learned so much from him about his business experience and life in general. 

[flyfisher]

I'm not sure of the rest of the country, but here in the Mitten, your insurance rates are adjusted based on credit ratings.

 

Hard to believe that a person who is debt free is penalized the same as the guy well over his head in debt.  During the latest economic downturn, a number of people were caught burning homes or crashing vehicles they were in danger of losing.  We didn't see a rash of these things happening with those who had homes or cars that were paid for.  But the simple act of not having a credit card or two in your wallet could cost you a substantial amount to insure your belongings. 

Insurance does use credit in a different way to determine rates but as important, if not more, is your insurance claim history.  And also not having a credit card doesn't mean you don't have credit, it is just the most common way to have credit.  The best things to build up your score are student loan payments and a mortgage.  Getting a mortgage can actually increase your score.  

 

Everyone is making this a little too complicated though, even thought he calculations are somewhat convoluted, get a card, loan or whatever, and pay your bills on time and you will have a good credit score.  Another thing to remember is to never close old accounts that you no longer use that don't have any type of annual fee.  This helps show any lenders that you have long standing accounts.

[Nice_Bass]

Several ideas stated and they are all close.

Credit cards best utilized at different tiers; cards under 30% of limit best, under 50 good, under 70 meh, over 90%derogatory and over your limit obviously worse. Credit reported to the bureaus the highest limit from previous month so if paying off once a month and running over 90% of limit bad. If you have the credit history like some have here no problem, but if you have no history or limited then it will be weighted more and can hurt you quicker. Variety of credit best such as revolving credit, installment, etc.

There are over 52 algorithms to determine scores and each one differes based on type of credit applied for and if it is a hard pull or soft pull etc. This is just a basic statement from typing from my phone but it is a complicated issue but rhe sooner you lear n the better or it will cost you later. For instance, it is true to not close out cards without fees however use them once a month for 10 bucks and pay it off. A hibernated tradeline will not do much as said tradeline will not pay the bureau's to report unless there is activity.

#not preaching

[Lund Explorer]

Insurance does use credit in a different way to determine rates but as important, if not more, is your insurance claim history.  And also not having a credit card doesn't mean you don't have credit, it is just the most common way to have credit.  The best things to build up your score are student loan payments and a mortgage.  Getting a mortgage can actually increase your score.  

 

Everyone is making this a little too complicated though, even thought he calculations are somewhat convoluted, get a card, loan or whatever, and pay your bills on time and you will have a good credit score.  Another thing to remember is to never close old accounts that you no longer use that don't have any type of annual fee.  This helps show any lenders that you have long standing accounts.

 

 

Several ideas stated and they are all close.

Credit cards best utilized at different tiers; cards under 30% of limit best, under 50 good, under 70 meh, over 90%derogatory and over your limit obviously worse. Credit reported to the bureaus the highest limit from previous month so if paying off once a month and running over 90% of limit bad. If you have the credit history like some have here no problem, but if you have no history or limited then it will be weighted more and can hurt you quicker. Variety of credit best such as revolving credit, installment, etc.

There are over 52 algorithms to determine scores and each one differes based on type of credit applied for and if it is a hard pull or soft pull etc. This is just a basic statement from typing from my phone but it is a complicated issue but rhe sooner you lear n the better or it will cost you later. For instance, it is true to not close out cards without fees however use them once a month for 10 bucks and pay it off. A hibernated tradeline will not do much as said tradeline will not pay the bureau's to report unless there is activity.

#not preaching

 

I hope you guys will accept the apology of some old fart who was raised in a time when getting out of debt was a good thing.  I worked very hard to get to the point where I could buy the things I need without having to borrow for it and I didn't have to pay a radio personality to learn that lesson.  So it's a little hard to imagine why there are times when the new rules make it seem like you are a loser if you don't have a mortgage, a car loan, and a few credit cards.

[flyfisher]

I don't think it is making anyone a loser to be debt free but if I am loaning someone money, just because they are debt free by no means they have the ability to repay the debt. 

[A-Jay]

On a completely separate note - why are companies and banks able to check "my Credit standing" for free ?

 

It's Mine, I'd like to control who see's it, when and why they do.

 

Additionally I'd like to charge at least $10 for anyone & everyone who wants to check it.

 

At least that would cut down on the all the BS mail I get . . . . .

 

A-Jay

[Nice_Bass]

I don't think it is making anyone a loser to be debt free but if I am loaning someone money, just because they are debt free by no means they have the ability to repay the debt.

perfectly stated...ability to repay. I.e. performing loan.

[Lund Explorer]

I don't think it is making anyone a loser to be debt free but if I am loaning someone money, just because they are debt free by no means they have the ability to repay the debt. 

 

Yeah, I've got over thirty five years of helping clients secure commercial mortgages, lines of credit, etc., etc..

 

However, when a person decides to turn their back on the trappings of modern day life by running their plastic through a shredder, they shouldn't be penalized with higher insurance rates.  As a matter of fact, the only reason I can see for having a credit card these days has more to do with not wanting to use a debit card online.

[Lund Explorer]

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'm sorry, but I think I may have hi-jacked your thread.

 

My advice would be to use that card only when you absolutely need to.  I doubt it is a rewards card, so there's little reason to use it for simple purchases.  I would use it for online purchase as long as you know you have the money set aside to pay the bill when the bill comes in within the next thirty days.  As some point I'd look at getting a c/card from one of the big bait retailers that offer special discounts and rewards at different times of the year.  Same rules for repayment apply, but you'll earn some freebies along the way.

 

Do Not use this card for cash advances!  Do Not cash any checks (like right before Christmas) you may get from this credit card company!  You'll start paying interest on that money the minute you pull it out of the ATM. 

[crankcaster100]

I remember asking to refinance my mortgage and they told me I had to be 6 months delinquent before I could get anything.

I was like seriously?