New to Building Credit - Seeking Advice

[jed2009]

Hi everyone.  New to the forums (have been lurking a while) and decided it's time to post my situation and get some advice.  

I am 23 with a 4 year degree, making approx $35,000/yr Net after tax and retirement.  I had never used a credit card (foolish me) unitl I graduated last May and started using one.  The only way I have been using my CC so far is as if it were my Debit card, and paying it off in full every week or two.  In the 12+ months I've had it I have not made a payment.  My CL started at 200, request increase about 6 months ago, got it boosted to 400, and then the other day asked again for a boost and it went up to 1k.  This is my local Credit Union card.

The other day I decided it's time to apply for a cash back card and also a card that gives me no APR for a certain time.  I am looking to make some large purchases in the next year or so and thought it would be fitting to utilize the no interest program!  I took a leap and applied for the Chase Freedom the other night, and was approved (via my inquiry on their automated system) for a 3,500 CL with terrible APR (which isn't an issue anyways since I PIF every month unless I have 0 interest).  I am pretty excited about getting my first cash back and large balance CC.  Chase also gives me $200 cash back on $500 which I will take advantage of within the first month.

Credit history: Never made a late payment or missed a payment.  I have basically had zero credit until May of last year.  My student loans took effect Aug 2009 so that's basically when my credit started, but have made no payments on it until about 6 months ago (my official start date for pmts). The only debts I have are student loans (approx 28k).  I have made my monthly minumum (due to old job and low income) every month for 6 months.  Now I have a new job and will continue to make minimum payments plus principal when available.  I have no car loan or mortgage, and never have.  Mortgage is possible within 1-2 yrs depending on job.

Basically I am here seeking advice from the CC gurus, as this is a fairly new arena for me.  The basics I have gathered are try to keep a 25% or under utilization rate, try not to get into a "paying interest" situation, and that's about it.  I have no idea how many cards I should have.  I am a big user of Amazon, and they are currently running a promo for $60 gift card on their rewards card.  This is something I would use frequently, plus get $60 free.  Would three cards be good for me?  Five?  Ten?  I see people on these boards that talk about "Gardening" and some people have over ten cards... This seems crazy to me but I must be enlightened.  I see all sorts of strategies here, like taking advantage of 0% APR cards every 12-18 months, allowing me to make payments interest free for several or more years on different things.  

If anyone has some advice, links, general info or anything good to say, feel free to let me know.  My cards and credit scores are in my sig.

Thanks!

[CarnegieS]

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@jed2009 wrote:

Hi everyone.  New to the forums (have been lurking a while) and decided it's time to post my situation and get some advice.  

 I am a big user of Amazon, and they are currently running a promo for $60 gift card on their rewards card.  This is something I would use frequently, plus get $60 free.  Would three cards be good for me?  Five?  Ten?  I see people on these boards that talk about "Gardening" and some people have over ten cards... This seems crazy to me but I must be enlightened.  I see all sorts of strategies here, like taking advantage of 0% APR cards every 12-18 months, allowing me to make payments interest free for several or more years on different things.  

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Welcome to the forum!

I don't know the range needed for approval (someone feel free to chime in), but you might look into the Sallie Mae card which is issued by Barclaycard. I see you stated that you are a frequent amazon user… so this would allow you to earn 5% back on your first $750 spent on amazon a month. In addition you would earn 5% on groceries and gas up to $250 a month. If you do some spending in these categories I think this would be a better fit than the amazon card though. Also I see a lot of talk around here recommending a minimum of 3 cards to maximize fico score, so getting at least one more might not be a bad idea.

If you want to get more cards let us know what you are into (cash back, travel rewards etc.) and where you spend most of your money and I’m sure someone will tell you a good card that will fit your profile. Anyway I can’t answer all of your questions, but I’m sure someone will chime in soon.

To learn about gardening: http://ficoforums.myfico.com/t5/Credit-Cards/Garden-Club-Meeting-June-2014/td-p/3138796

[BluePoodle]

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@CarnegieS wrote:

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@jed2009 wrote:

Hi everyone.  New to the forums (have been lurking a while) and decided it's time to post my situation and get some advice.  

 I am a big user of Amazon, and they are currently running a promo for $60 gift card on their rewards card.  This is something I would use frequently, plus get $60 free.  Would three cards be good for me?  Five?  Ten?  I see people on these boards that talk about "Gardening" and some people have over ten cards... This seems crazy to me but I must be enlightened.  I see all sorts of strategies here, like taking advantage of 0% APR cards every 12-18 months, allowing me to make payments interest free for several or more years on different things.  

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Welcome to the forum!

I don't know the range needed for approval (someone feel free to chime in), but you might look into the Sallie Mae card which is issued by Barclaycard. I see you stated that you are a frequent amazon user… so this would allow you to earn 5% back on your first $750 spent on amazon a month. In addition you would earn 5% on groceries and gas up to $250 a month. If you do some spending in these categories I think this would be a better fit than the amazon card though. Also I see a lot of talk around here recommending a minimum of 3 cards to maximize fico score, so getting at least one more might not be a bad idea.

If you want to get more cards let us know what you are into (cash back, travel rewards etc.) and where you spend most of your money and I’m sure someone will tell you a good card that will fit your profile. Anyway I can’t answer all of your questions, but I’m sure someone will chime in soon.

To learn about gardening: http://ficoforums.myfico.com/t5/Credit-Cards/Garden-Club-Meeting-June-2014/td-p/3138796

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+1 

Also, if your Student Loans are serviced through Sallie Mae, you can take your rewards and apply them to your student loan.

[jd352]

I learned over time I am more of a points collector than a cash back collector. Be very careful of taking advantage of too many 0% offers. Thus far it sounds like you have done well, but if you make too many big purchases and other things come up for you financially, you may find yourself in a bind making payments and end up reversing everything you have done with your credit. You may also end up with crappy balance transfer cards that end up useless after you pay them off. You will also increase your debt-to-income ratio which will make you appear a greater risk and potentially making it difficult to get CLI's or other lines of credit when you really need them.

In the end, you want cards that work for your needs. Try to figure out what you want out of your cards. Currently, each card of mine has a purpose. I save up my MR points for El Al. I will use my Chase UR points for South West or United. My credit union credit card is essentially my emergency card should I ever HAVE to carry a balance, the high CL and low APR will allow me to do that comfortably. Finally, my Citi card was used to charge my final semester at school. It gave me 21 months interest free (so almost 2 years to pay it off interest free). 

[jed2009]

Thanks for the replies everyone.

Carnegie - I don't see where it says I get any money back on Amazon.  I am seeing 5% back on gas/grocery and books, and 1% on everything else.  I am into either points or cash back, I don't fly so not really an interest there.  

JD - Thanks for the info.  I plan to not go crazy with the free APR cards, just thought it was a strategy that I could use for large purchases.  Good call on having cards with a purpose.  My main CU card has kinda dumpy rewards but a decent APR of like 11% IIRC.  The Chase will now be used for main things to get cash back, and big purchases so I can spread payments out without paying interest for the first 15.

[CarnegieS]

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@jed2009 wrote:

Carnegie - I don't see where it says I get any money back on Amazon.  I am seeing 5% back on gas/grocery and books, and 1% on everything else.  I am into either points or cash back, I don't fly so not really an interest there.  

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"5% cash back on the first $250 you spend per month on eligible gas and grocery purchases each and the first $750 you spend per month on eligible book purchases." - Amazon is coded as a bookstores so even though you are not purchasing "books" it will still count toward the 5%. 

[hizzaah]

Amazon's merchant code has them show up as book store which is why you'll get 5% back. I'm currently an undergrad student and I tried for a Sallie MaeMastercard but was denied, even through recon. Now that I think about it, I should call them back.... 

Anyway, the Discover IT card is easy enough to get and offers 5% CB in rotating categories like the Freedom card. I've found that Discover has a wider variety of merchant discounts than I can find through Chase. Discover seems to be conservative with handing out the CLI's, but they supposedly reassess accounts every 6mo. Last month, they emailed me $5 Starbucks gift card, just because. It wasn't a lot, but it was a nice surprise! 

You also might want to look at an Amex card. I just got a Blue Cash Everyday card from them which gives 3% back on $6k in groceries, 2% on gas and 1% on everything else. My understanding is that with Amex you can ask for a 3x CLI by soft inquiry after your first 60 days (if you've been good) , and then every 6mo after that so it's a good way to quickly add some credit. 

Good luck! 

Edit: Beat me to it! 

Edit2: Amex 3x CLI after 60 days, not 90!

[jed2009]

Thanks for the replies guys.  Interesting info about Amazon.  So I will continue thinking about another one or two cards, and continue using responsibly, and all should be well.

[jed2009]

Wondering what everyone thinks about hard pulls effecting my credit score if I were to apply for 1-2 more cards.  I am considering the Sallie Mae card (wish I woulda knew about that before the Chase Freedom) as well as the Amazon Rewards card, solely for the $60 gift card promo right now.  Wondering if it would be a significant hit.  Chase said my Score is 665 from their own research, which is a bit low compared to scores in sig.  Would like to hear opinions on whether or not I should do it now or wait or just pass completely.

[gh17]

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@jed2009 wrote:

Wondering what everyone thinks about hard pulls effecting my credit score if I were to apply for 1-2 more cards.  I am considering the Sallie Mae card (wish I woulda knew about that before the Chase Freedom) as well as the Amazon Rewards card, solely for the $60 gift card promo right now.  Wondering if it would be a significant hit.  Chase said my Score is 665 from their own research, which is a bit low compared to scores in sig.  Would like to hear opinions on whether or not I should do it now or wait or just pass completely.

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I wouldn't recommend the Amazon Rewards card - you'll get more cash back through the Sallie Mae Card, and I don't think $60 is enough to warrant opening a new tradeline you will never need to use.  A better idea might be to get an "everything else" rewards card like Fidelity Amex (2%) or Capital One Quicksilver (1.5%).  That way, you can use your Sallie Mae card for gas, groceries, and Amazon, and you'll still have another card to get you some cash back on other purchases.  The reason most of us have several cards has to do with maximizing rewards on our everyday spending.  That said, the Amazon card certainly isn't bad, and maybe it will be helpful years down the line if Amazon ever stops coding itself as a bookstore for the other cards out there - but at this point in time, it's not very valuable.

The inquiries won't hurt your credit score much, and they only affect your score for a year.  The longer term impact is the effect of new tradelines.  Since you're building, it's fine to open new cards.  It will help you in the future to have a few "old" accounts.  Average age of account is a piece of your score.

Personally, I think 3-7 is a good amount of cards.  But more isn't going to hurt you necessarily - it has to do with when you opened them (average account age) and how much you're spending on them/what your limits are.  Sometimes more is helpful because it increases your available credit, so even if you have a month where you have to make a lot of purchases, your utilization (a part of your score) stays low without you having to make multiple payments throughout the month.  Opening a new card every year for the rest of your life won't be great for your score because it will keep your account age down.  Having at least a few is good because a factor in your score is something like "number of revolving accounts reporting balances" so it's good to have a few to report $0 balances if you're trying to maximize your score.