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Balance increase or 2nd card?

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Anonymous
Not applicable

Balance increase or 2nd card?

Hey everyone, I'm about to start my first year of medical school and I just took out about $20K in federal loans.  I have had a Citi Forward card since August of 2010, and have paid it off on time every month.  My current limit is $2,500.  I've heard that it is best to keep your utilization under 40-50%, which I usually go over a little.  This is my only credit card and I do not have any credit lines besides this one (and my loans if that counts) - no mortgage or auto loans.

 

Since I'm going to live on loans and some trust funds, my funds for the next year are already accessible right now and I thus have the ability to charge pretty much everything to my credit card and pay it off immediately.  This way I can maximize my potential for reward miles/points.  But I don't want to hurt my credit score by doing this so I need to either request a balance increase or get a second card.

 

What do you recommend? If you suggest a second card, what are some good rewards cards I could realistically qualify for?  I usually fly Delta, and shop on Amazon a fair amount.

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6 REPLIES 6
Crashem
Valued Contributor

Re: Balance increase or 2nd card?

In your case, I would get a couple more cards.  You didn't state your score, but you need to optimize your score one month.  Remember utilization is calculated on REPORTED balance.  Payoutstanding balance so that it hits right before statement date to under 10% of cl.  Once itreports to cras then app away.  Delta card from Amex is great for delta and Amex is great to start relationship asearly as possible.  Chase amazon card is good too.

               LIMITS IN CARD DESCRIPTIONS
Message 2 of 7
FrugalRican
Blogger

Re: Balance increase or 2nd card?

Get a credit limit increase AND get more cards.

 

And by the way, unsubscribe to the notion that 40-50% is optimal. It's not. Yes, you can USE that amount on your card, but you don't want to show anything more than 9% come statement date.

Follow my financial journey: http://www.frugalrican.com


EQ FICO (01/16/2012): 656 - EQ FICO (02/16/2012): 743 - EQ (02/24/2012): 760 - EX (04/28/2012): 739 - GOAL 2013: 800+

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Message 3 of 7
Anonymous
Not applicable

Re: Balance increase or 2nd card?

So when you say 9%, are you talking about a carried balance or a total balance that's paid off at the end of the period? I don't carry anything from month to month.
Message 4 of 7
Crashem
Valued Contributor

Re: Balance increase or 2nd card?

Op, do sees arch for optimalutilization.  Lots have talked about it.  My last post even talked about it.

               LIMITS IN CARD DESCRIPTIONS
Message 5 of 7
Anonymous
Not applicable

Re: Balance increase or 2nd card?

I would suggest asking for a credit limit increase and applying for one or two more cards.  Just make sure that the last statement that cuts on your Forwards has a utilization of 9% or less before you apply for another card.  

Message 6 of 7
MarineVietVet
Moderator Emeritus

Re: Balance increase or 2nd card?


@Anonymous wrote:
So when you say 9%, are you talking about a carried balance or a total balance that's paid off at the end of the period? I don't carry anything from month to month.

Hello and welcome.

 

Everyone's situation is different and there is no one size fits all approach to this and therefore no "ideal" number but what seems to work well for most people is to have only one of their cards report a small (<9% of it's credit limit) balance each month and then pay in full before the due date. You can use it as much as you want during the month but what's important is the reported balance because for most cards whatever is reported on the monthly statement is what is used to calculate utilization for the month.

You might have to play around with the percentages for a few months to see what works best for you. Some people say that 1-3% utilization helps the most. For others it might be 5-9%. As I said it's not one size fits all.

On any other cards always try and have them report a zero balance each month. That doesn't mean you can't use them just make sure that the desired zero balance on these accounts is achieved several days before their statements post.

Along with individual and overall utilization, FICO also scores the number of all types of accounts reporting a balance.at any one time Making sure less than half of all your accounts report a balance helps most people.

Now this approach really isn't necessary if you're not looking to apply for any credit in the near future or unless you are trying to tweak your score for maximum effect but some folks do this as a hobby just to see how high they can get their score.



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