New Credit Card

[Anonymous]

Hi All,

Thank you in advance for any help to my question. In 2009 I had to default on my credit cards due to the recession and not some very wise choices. Lesson learned. I have them all on payment plans and only one is reporting the repayment plan on my fico. Anyways, since October of 2014 all bills are current and on time. I am wanting to replace my 2003 car and my scores were not going up very much. All the derogatory marks will be falling off my report starting this fall and into spring of next year. I had contacted a credit union to see where my rates would be on a car and was not a very good rate. I swore to never have a credit card again due to the anguish it caused. Well, she informed me that the best way to get my scores up is to get a credit card. So, I have been getting pre-qualifying cards in the mail from capitol one platinum. Bit the bullet and applied and got approved for 3k. So, now how do I  go about getting started on using this to my advantage to get my scores moving up the scoring ladder. Would you make purchases and pay off full balance at statement? b4 statement? or carry a small balance each month? Thanks again

[LuckyBird]

Show light, regular use, and let a small balance report most months.  Ideally less than 10%.  Pay in full after the statement cuts and gets reported to the credit bureaus.  After a few months ( ~ 6? ) your score should improve appreciably.

Don't look at a credit card as a way to afford things you really can't.  Look at it as a financial tool to help you accomplish larger goals.  (Like being able to buy a car at a reasonable rate.  Or get an affordable rate on a mortgage somewhere down the line.)

Good luck with your rebuilding.  : )

[Anonymous]

Thank you!

[Anonymous]

Keep utilization low, most experts say under 30% but lower is better. Last month my reported utilization on one particular card went from about 5% to 31% and my credit score dropped 17 points even though my utilization across all cards only increased by 2% to an overall 4%! Since your utilization is usually reported when your billing cycle ends, you can keep your reported utilization low by making more frequent payments. 

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@Anonymous wrote:

Hi All,

Thank you in advance for any help to my question. In 2009 I had to default on my credit cards due to the recession and not some very wise choices. Lesson learned. I have them all on payment plans and only one is reporting the repayment plan on my fico. Anyways, since October of 2014 all bills are current and on time. I am wanting to replace my 2003 car and my scores were not going up very much. All the derogatory marks will be falling off my report starting this fall and into spring of next year. I had contacted a credit union to see where my rates would be on a car and was not a very good rate. I swore to never have a credit card again due to the anguish it caused. Well, she informed me that the best way to get my scores up is to get a credit card. So, I have been getting pre-qualifying cards in the mail from capitol one platinum. Bit the bullet and applied and got approved for 3k. So, now how do I  go about getting started on using this to my advantage to get my scores moving up the scoring ladder. Would you make purchases and pay off full balance at statement? b4 statement? or carry a small balance each month? Thanks again

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[takeshi74]

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@Anonymous wrote:

Well, she informed me that the best way to get my scores up is to get a credit card.

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You do want to build positive payment history with credit accounts including credit cards (Types of Credit is a factor as shown in the link below) but keep in mind that you may not see significant progress until your derogs are no longer on your reports (note the size of the slice for Payment History in the link below).  That's why we always recommend addressing derogs first.  Don't just wait for them to fall off.  Hit the Rebuilding subforum and see what you can do to address them.

If you haven't read this then definitely take a look but this is really just a starting point:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

If nothing else you need to do everything you can to avoid derogs in future.  You have to have 100% positive payment history.  If you need to set up automatic payments to cover at least the minimums by the due date then do so.  Aim to pay in full and budget and stick to your budget so you don't fall behind and back into debt.

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@Anonymous wrote:

 Would you make purchases and pay off full balance at statement? b4 statement? or carry a small balance each month?

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You never need to carry a balance for scoring purposes.  Keep the info in the link above in mind as well as the standard advice:

• Do not exceed 30% revolving utilization
• Ideal is closer to 10% or less and to optimize when apping allow only one balance to report
• Both overall and individual revolving utilization matter
• At least 2-3 cards are recommended for scoring purposes

Paying down the balance before the report date (statement date for most but not all cards) is used to reduce the reported balance.  Since it's the data in your reports that is used to generate scores it's the reported balance that matters for determining revolving utilization (falls under Amounts Owed in the link above).  There's an importance difference between having a balance report and carrying a balance.  If you leave a portion of the statement balance to report make sure you pay the remainder of the statement balance by the due date.

[Anonymous]

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@takeshi74 wrote:

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@Anonymous wrote:

Well, she informed me that the best way to get my scores up is to get a credit card.

---

You do want to build positive payment history with credit accounts including credit cards (mix of credit is a factor) but keep in mind that you may not see significant progress until your derogs are no longer on your reports (not the size of the slice for Payment History below).  That's why we always recommend addressing derogs first.  Don't just wait for them to fall off.  Hit the Rebuilding subforum and see what you can do to address them.

If you haven't read this then definitely take a look but this is really just a starting point:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

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@Anonymous wrote:

 Would you make purchases and pay off full balance at statement? b4 statement? or carry a small balance each month?

---

You never need to carry a balance for scoring purposes.  Keep the info in the link above in mind as well as the standard advice:

• Do not exceed 30% revolving utilization
• Ideal is closer to 10% or less and to optimize when apping allow only one balance to report
• Both overall and individual revolving utilization matter
• At least 2-3 cards are recommended for scoring purposes

Paying down the balance before the report date (statement date for most but not all cards) is used to reduce the reported balance.  Since it's the data in your reports that is used to generate scores it's the reported balance that matters for determining revolving utilization.

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This is perfect. I think that the advice about carrying a balance is particularly important. You don't need to carry a balance, but you do need for the statement to show one every month. The distinction is that you pay off the statement balance by the due date, which prevents you from owing interest. 

[Anonymous]

You can actually charge as much as you want as long as you pay it in full by the closing date on your bill. It is OK to let balances report as zero. It is myth that some think that you have to let something report. Simply having an account with a zero balance in good standing is good enough.

[Anonymous]

thank you for your response