Perfect Credit Utilization for No Credit History

[BalisongAddict]

Hello everyone, I'm just 18 years old, and I was just approved for my first credit card: Discover It for Students. My main reason for getting it is too build my credit score. I have a few questions that could be useful for others in my situation. The main question is regarding credit utilization. So, I was ecstatic when I was approved for my Discover card earlier today because I have no co-signer, no credit history, and I will be a full time student in college next year.

So a brief here's a bit of information about me: I applied for the Discover card because I deemed it the best possible first credit card that I could get. I got a $500 credit limit (the minimum). The free FICO score every month is awesome because building credit is my main reason for getting the card. The rewards system is also pretty great as it is the same as the regular Discover It card. I'm the type to heavily research anything before I make somewhat significant decisions, so assume I know the basics about FICO scores: payment history, credit utilization, AAoA, hard inquiries, etc. So far, the only thing that should be on my credit report is the one hard inquiry from applying for the Discover card. I want to have everything related to my credit score as perfect as possible because I want to apply for the Barclaycard Arrival World MasterCard as soon as is appropriate because I will be flying about 7 roundtrips each year of college. Anyway, I better get to my questions.

I know that I should keep credit utilization below 10% and above 0%, but are any numbers better than the others? For example, I have it in my head that I'll always report a 1% credit utilization, but would that make me look too inactive? Would 5% or 7% be better? Two things to take into account might be what the current credit company wants utilization to be when applying for CLIs and, more obviously, how utilization affects credit score. If you only reply to one thing in this post, please try to make it about this question about credit utilization. I'll leave the rest of my questions in the next paragraph.

Will my credit score be reasonable enough after 6 months or a year of as perfect use of a credit card as I can do? Any idea how long it might take to reach 700 given my low AAoA? Also, I just want to confirm that I can, indeed, use as much of my CL as I want as long as I pay it down by the date that Discover reports to the credit bureaus (is bureaus the right word?). On that note, does anyone know when Discover does that reporting? I've read that most CC companies report at the end of the cycle. Also, what credit card(s) would you recommend I get next? For example, I read that Upromise is good because it gets 5% off books, and I think I'll be buying a lot of books. The Capital One Quicksilver looks pretty great for general use. How long should I wait or what credit score should I have before I apply for any of the cards you recommend?

Alright, that's all the text I'll throw at you for now haha. Sorry if I seem a little excessive, I just want to do it all right. Thanks for reading all of this, and thanks in advance for any advice you provide.

[nachoslibres]

Welcome!

Personally, if I were you I would wait a year, get used to using a credit card, and get a good payment history.  This will set you up much better for getting the cards you actually want down the road - and allow you to see how much you actually spend so you can see what card best fits you.

As far as util, I personally pay in full my cards on the day the statement closes.  This usually leaves a small balance on both cards - depending on the amount of purchases that post on the exact day the statement closes.  I found by doing this instead of waiting to pay the full balance on the actual payment due date has increased my scores greatly - and the other reason I do this is because I would never want to have a late payment and don't want to risk trying to pay my card so close to the due date.

The Quicksilver card is good for cash back but most every one would recommend the Fidelity Amex (as long as most of the places you shop take Amex).  It gives 2% cash back instead of 1.5% cash back like the Quicksilver.  A lot of people recommend the Sallie Mae card because it gives 5% back on gas and groceries - though I personally don't have that card.

[Skye12329]

If you do decide to apply for a new card it would be best to wait for 6 mos. I learned that a few times, because when i got my first card i wouldnt qualify for anything else. However once my first card hit 6 mos. i was able to obtain 4 additional cards. As for utilization it will depend on the company for credit increases. Capital One likes to see usage and large payments but what company doesnt right? So for me personally i use my Quicksilver card for everything and charge near the limit which is normal for me. However just so i get it to report like 1% utilization. I pay it in full before its due date. This way i earn no interest. Also i still then charge just a small amount before the statement cuts. Statements usually cut 3 days after the due date. So whatever i charged after i made my payment will be what reports. So if i pay in full on my card on the 15th ( before due date) and charge $100 before the 17th (due date) that $100 will be the amount that reports to the bureaus when my statment cuts. This way it shows i only charged between 1-10% utilization. So long story shot as long as you pay in full and charge a small amount before your statement cuts it will show a small utilization and you wont pay any interest. 

As for cards it will lead to your personal shopping habits and what you want. I like the Quicksilver Card, capital one isnt hard to get in with. Also for me personally 1.5% is just fine with me since i dont normally shop inside the categories given. However personally i am going to be going for Chase Freedom soon 

One last bit of advice, if you ever get declined for a card always call the backdoor number! Sometimes they can/will still approve you.

[takeshi74]

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@BalisongAddict wrote:

I know that I should keep credit utilization below 10% and above 0%

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You should keep it under 30%  Under 10% is only really necessary to optimize when you're applying.

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@BalisongAddict wrote:

but are any numbers better than the others?

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Varies by person.  You'd have to test & monitor to find out for yourself.

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@BalisongAddict wrote:

 Also, what credit card(s) would you recommend I get next?

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You need to give us more information for recommendations.  What are you major spend categories?  What other criteria do you have that would help narrow down the options for all the various cards out there?