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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.
@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.
@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.
#5. I never heard this before, can you tell us where you got this?. Does this $50K magic number include all credit, or just revolving, LOCs?
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.
@Wolf3 wrote:
@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 #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.
Love the feedback so far.
#5. I never heard this before, can you tell us where you got this?. Does this $50K magic number include all credit, or just revolving, LOCs?
I haven't heard such a thing either. The only thing I've ever heard about 50k being a "magic number" is that if you have a CC with a CL of >50k, FICO no longer considers it for utilization. So you can charge up as much as you want and it won't affect your score.
@KingAdrock wrote:
@Wolf3 wrote:
@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 #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.
Love the feedback so far.
#5. I never heard this before, can you tell us where you got this?. Does this $50K magic number include all credit, or just revolving, LOCs?
I haven't heard such a thing either. The only thing I've ever heard about 50k being a "magic number" is that if you have a CC with a CL of >50k, FICO no longer considers it for utilization. So you can charge up as much as you want and it won't affect your score.
Can you back this up or should we consider it another unfounded rumor?
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!!