@annalog wrote:Thanks everyone for chiming in. Lot's of good suggestions out there.
Some posts challenged my rules so I would like to further explain.
Rule #1. If you want to pay an annual fee for a credit card, by all means do so. For the credit impared (as I was once), it can make sense to pay for one card to rebuild your credit. But just only pay for one. Actually, applying for and receiving an installment loan would help your credit alot more than carrying revolving debt.
Rule #2. If you charge more than 10% of your credit line, your score will drop! So if you have a card with a $5000 limit, you can only carry a balance of $500 before it affects your utilization ratio and will ding your score. Having a zero balance is ALWAYS better than carrying a balance, as long as the account is open and current. You still get credit for PAID AS AGREED over time. The balance can only hurt you.
Rule #3. This is only a goal you should keep in mind and only apply for credit when you absolutely need it.
Rule #4: Most everyone on here knows that closing your accounts with a balance dings your utilization score.
Rule #5: 50k in revolving credit is the "magic number". You get a higher score if you have over $50k in available credit.
High available revolving credit (without balances) demonstrates responsibility.
Most importantly, see rule #2. With $50k in credit lines, it allows you to charge $5000 in an emergency (10%), and even carry it over if you have to and it won't affect score and utilization.
Ironically, nobody has challenged rule #6! lolol
Love the feedback so far.
- Rule #1: What does an AF, by default, have to do with revolving debt? What about annual fees on non-builder/non-subprime products that are offset by rewards?
- Rule #2: YMWGV (your mileage will greatly vary) with regard to utilization, and individual credit profiles. Having statement balances at or greater than 10% of your total credit line may affect your credit score, but that doesn't mean that a balance is being carried, and that interest is being paid. Also, unless new credit is being sought, or the card user is making existing creditors jumpy with their usage, utilization, and payment patterns, there's not a whole lot of value in worrying about how utilization is affecting the score.
- Rule #3: Why 2 years? Why not 1, or 3, or 5? What do you think of the ideas of only applying for credit that enhances consumer buying experience, and not having a "need" for credit? It can be said, that the worst time to apply for credit is when you *need* it. It seems lenders are far less stingy, and more forgiving, when you don't need them.
- Rule #4: Having an account closed with a balance doesn't, by default, have a negative impact on your utilization. It greatly matters how the tradeline is reported, as to whether or not the tradeline counts at all in utilization calculations, and how it may be calculated. Here's a great resource on this matter: Closed Credit Cards with Balances.
- Rule #5: Are you talking about FICO scores, or some other credit scoring models (FAKOs)? FICO doesn't give you a score boost for reaching a "magic number threshold for credit lines. And, whether you have a total credit line of $500, or $50,000, FICO calculates utilization the exact same way. Here's a resource to will give more insight into FICO reason codes. Although, I have seen "high existing credit limits" as a factor in my FAKO scores that aren't used by any of my lenders, but I've never actually seen a threshold defined even for them.
- Reason #6: Okay, I'll bite!
I get the not living "above" your means, but what does it mean, exactly, to live "beneath" ones means, vs. "within your means"? Is living beneath your means even possible? If not "above your means" aren't you always "within" your means, with varying amounts (depending on the consumer) of consumption and savings?
My rules are a bit different. They vary depending on life stage. Basically, there are four periods of life one uses credit in. The initial stage where one is a student preparing for a career, The rapid growth stage characterized by low, but rapidly ramping income. This is typically from the early 20s to the mid 30's. The next is the solid earner stage from the mid 30s to the early 60s. The last is retirement. In each stage credit is important but should play markedly different roles.
1. As a student acquiring credit history is critical as it sets the stage for getting the best economic deals later. Estblishing a few low limit credit cards is really wise. A secured card initially can easily be had.
2. In the next phase one's expenses can be sporadically high due to unexpected expenses. It's ok to use CC debt to carry these but it should be temporary. Since one's income is typically ramping pretty strongly in this phase carrying a balance is usually less risky than at any other time. This is when borrowing for a car, or even taking out a mortgage can be done, but prudence should be exercised. Credit and debt exposure should be balanced against expectations for job stability and prospects.
3. In the solid earner phase, expect high limits and lots of pressure to use credit but one should be transitioning to putting an increasing portion of one's income into savings, 401k, paying down a mortgage early, etc. CC usage here should typically be a PIF one.
4. In the retirement phase CC usage should always be PIF with careful consideration of the impact of current spending on one's assets and long term retirement planning. With any luck one might need some estate planning for heirs.
Of course this is an ideal and reality often adds a bit of chaos at times but this is a starting point.
WOW I love these rules they will be very beneficial to my credit growth
I am good with #1 --Question does the $3 monthly maintenance fee with captal one count I think one of my cards have that???? (same thing isnt it) 
its my oldest and highest credit limit)
2. much needed work on this one
3. I really need to do this I may just start this summer--after we decide on the soon to be car purchase--
4. check
5. I am trying almost half way there 
not having a good chance of high CLs but surely got enough cards gonna hope I get it with the cards I have and dnt have to apply for anymore I truly have more than enough cards ;(
6.work in progress
GET THE POSITIVE & HELPFUL TIPS COMING!!