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New Member
Posts: 4
Registered: ‎10-27-2009
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First Ever Credit Card

Hi,

 

So I have finally managed to get my first ever credit card.  I moved here from the UK this year and now have a secured Bank of America VISA card.  I have put $500 on the card as my credit limit.

 

I have nothing on my credit report so far, so my question is what is the best way to build my credit score as a total beginner.  I've heard/read various conflicting suggestions.  My plan is to pay back the total balance on my card as soon as each statement (e-Bill) arrives.  but somewhere I read I should only use around 10% of the $500 limit?  But then someone else said I should be using the whole $500 to show I'm not afraid of using the credit and paying it back.  Please enlighten me on my best strategy going forward.  As I said, currently no credit score, nothing on my credit report other than a few non-secured applications which were declined.

 

Many thanks,

 

Tom 

Super Contributor
Posts: 5,759
Registered: ‎01-28-2008
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Re: First Ever Credit Card

[ Edited ]

tomw wrote:

Hi,

 

So I have finally managed to get my first ever credit card.  I moved here from the UK this year and now have a secured Bank of America VISA card.  I have put $500 on the card as my credit limit.

 

I have nothing on my credit report so far, so my question is what is the best way to build my credit score as a total beginner.  I've heard/read various conflicting suggestions.  My plan is to pay back the total balance on my card as soon as each statement (e-Bill) arrives.  but somewhere I read I should only use around 10% of the $500 limit?  But then someone else said I should be using the whole $500 to show I'm not afraid of using the credit and paying it back.  Please enlighten me on my best strategy going forward.  As I said, currently no credit score, nothing on my credit report other than a few non-secured applications which were declined.

 

Many thanks,

 

Tom 


Congrats. FYI-  Applications are not reported to the CRA's.  Only the inquiries associated with the  applications are.  Normally, I would say you shouldn't let no more than 1% of your total credit limit report, but that would only be $5.00.  In your case you shouldn't let no more than $50 report.  That would give you a 10% utilization. After you let a $50 report the first month, you want to continue to PIF each month.   You want to let your first statement generate before paying in full whenever that occurs.  You will need to let a $50 balance report.  It will take 6 months for a FICO score to generate.  With that said, you still will need a mixture of credit(installment and revolving) to acheive high FICO scores over time.  

Message Edited by DI on 12-15-2009 08:55 AM
Regular Contributor
Posts: 121
Registered: ‎07-14-2009
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Re: First Ever Credit Card

Regarding the 10% usage, the general consensus is that if you choose to carry a balance you should carry a balance (let a balance report to the CRAs) of <10% of your total combined credit lines and <10% on any individual card.  FICO seems to begin to penalize your score somewhere around the 10% range.

 

FICO only sees what the card issuer reports each month, so you can use the up to the full credit line each month.  Ideally, though, you would pay your balance before the issuer reports to the CRA.  Card usage, amounts charged, etc. are interpreted differently by each issuer - AMEX and some others have been reported to analyze where you shop and what you buy and may execute AA accordingly.

 

Just keep using and paying your new CL on time and applying the tips you find here on the forums and your history will grow.


FEB 2014 EQ: 798 EX: 780 TU: 798
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Posts: 2,682
Registered: ‎07-29-2009
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Re: First Ever Credit Card


DI wrote:

 

Congrats. FYI-  Applications are not reported to the CRA's.  Only the inquiries associated with the  applications are.  Normally, I would say you shouldn't let no more than 1% of your total credit limit report, but that would only be $5.00.  In your case you shouldn't let no more than $50 report.  That would give you a 10% utilization. After you let a $50 report the first month, you want to continue to PIF each month.   You want to let your first statement generate before paying in full whenever that occurs.  You will need to let a $50 balance report.  It will take 6 months for a FICO score to generate.  With that said, you still will need a mixture of credit(installment and revolving) to acheive high FICO scores over time.  


Hi DI...just trying to clarify...

 

Why do you want your first statement to generate before paying in full?

Super Contributor
Posts: 5,759
Registered: ‎01-28-2008
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Re: First Ever Credit Card

[ Edited ]

LynetteM wrote:

DI wrote:

 

Congrats. FYI-  Applications are not reported to the CRA's.  Only the inquiries associated with the  applications are.  Normally, I would say you shouldn't let no more than 1% of your total credit limit report, but that would only be $5.00.  In your case you shouldn't let no more than $50 report.  That would give you a 10% utilization. After you let a $50 report the first month, you want to continue to PIF each month.   You want to let your first statement generate before paying in full whenever that occurs.  You will need to let a $50 balance report.  It will take 6 months for a FICO score to generate.  With that said, you still will need a mixture of credit(installment and revolving) to acheive high FICO scores over time.  


Hi DI...just trying to clarify...

 

Why do you want your first statement to generate before paying in full?


Because the OP may pay the balance in full before the statement generates.  If the OP do that, a zero balance will repor rather than a small balance. 

Message Edited by DI on 12-15-2009 01:40 PM
New Member
Posts: 4
Registered: ‎10-27-2009
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Re: First Ever Credit Card

Thanks for your advice!  I have set up auto-pay online so I can be sure of avoiding any late payments etc.  I selected the option something along the lines of "automatically pay balance in full at first available date after e-Bill is issued".  Will this have the desired effect, or should I withold payment until the due date?  I went for the first option as I didn't want to be dinged if for some reason the payment took a few days to go through and then missed the due date ...

 

With regard to utilization am I right in saying it's fine to use the whole credit limit (all $500) as long as I reduced the amount to $50 by the time the statement is created?  Or does the fact I used up to $500 at some point during the month also get reported? 

 

Thanks,

 

Tom 

Super Contributor
Posts: 5,759
Registered: ‎01-28-2008
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Re: First Ever Credit Card


tomw wrote:

Thanks for your advice!  I have set up auto-pay online so I can be sure of avoiding any late payments etc.  I selected the option something along the lines of "automatically pay balance in full at first available date after e-Bill is issued".  Will this have the desired effect, or should I withold payment until the due date?  I went for the first option as I didn't want to be dinged if for some reason the payment took a few days to go through and then missed the due date ...

 

With regard to utilization am I right in saying it's fine to use the whole credit limit (all $500) as long as I reduced the amount to $50 by the time the statement is created?  Or does the fact I used up to $500 at some point during the month also get reported? 

 

Thanks,

 

Tom 


It's fine to use up to $500 of your credit limit during the month.  But before the due date, you want to pay it down to $50.  That way, only $50 will report to the CRA's.  If this is the only card that you're managing, I wouldn't set-up auto pay for it.  You can manage that one card yourself and not forget to pay the bill.  

Frequent Contributor
Posts: 488
Registered: ‎04-09-2008
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Re: First Ever Credit Card

[ Edited ]
This 1% / 10% talk is silly- this is the guys first card, it's not like he needs to tweak the reporting balance to qualify for a mortgage. Use the card, pay it off, use the card pay it off- avoid finance charges and build history. Congrats on getting the card, and being aware enough to take credit seriously. You will be fine- Time and on time payments and few inquiries is what you need to concentrate on. He needs history, not OCD!
Message Edited by moondog7324 on 12-15-2009 10:20 AM
Established Contributor
Posts: 517
Registered: ‎04-13-2009
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Re: First Ever Credit Card


moondog7324 wrote:
This 1% / 10% talk is silly- this is the guys first card, it's not like he needs to tweak the reporting balance to qualify for a mortgage. Use the card, pay it off, use the card pay it off- avoid finance charges and build history. Congrats on getting the card, and being aware enough to take credit seriously. You will be fine- Time and on time payments and few inquiries is what you need to concentrate on.

 

+1

 

With this guy trying ti establish credit I say use the card for everything you can and PIF. Run as much money as you can through the card BUT DONT GO OVER THE LIMIT AND PAY IN FULL BY DUE DATE. The issuer will like the usage as long as you are paying. This would show them you can manage that amount easily and responsibly setting you up for credit limit increases in the future. Dont worry about reporting UNTIL you get ready to apply for new credit. If you are going to try to apply for new credit that is when you want the card to report a 5% or so balance then once that reports your score will be better than if it was maxed out. Then apply for your new credit and rinse lather and repeat. I have been told by multiple people that the more you use the card the more likely you are to get CLI's because that shows them you can handle it. If you arent looking for new credit or in OP's case dont even have a score yet because you havent had credit for six months then who care about tweaking a few points?

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2011 Credit Goals
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Frequent Contributor
Posts: 401
Registered: ‎02-23-2009
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Re: First Ever Credit Card

TomW:

You should never set up auto-pay, it best to be done by you so that you remember what you did, what you pay and when you pay it. You should never trust auto-pay, for instance if there is a computer glitch or system errors (YOU NEVER KNOW), your payment will be missed and you will be screwed with late payments fees, APR increase and of course your credit history..

 

 

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