Yes, if I were you, knowing what I know now:
- Check your credit scores. If they are 700+...
- You should get gas card, department store card, etc; (non traditional credit card).
- If you can afford it, you should get a secured installment loan of a very small amount ($500 if you can). Make the payback period as long as possible (in my case, I did $1000/5 years). This will help establish your diversity and give you free credit score points for essentially doing nothing.
- You should have 4 our more revolving accounts (traditional credit card/department store card).
- You should put all accounts on auto-pay.
- Every 6 months, "tickle" each card, even if it is only $5 per card. Pay in full.
- Avoid junk cards (Credit One, etc). You want Amex, Discover, BoA, Chase, Capital One, Citibank, but not Wells Fargo.
- Under no circumstances should you screw-up.
Your disposition should be that of a lemur: suspicious of taking on any debt, even when/if you start to get into trouble. Remember: Credit is a sport. You want to play well. If you ever find yourself in a pinch, protect your card in the same way you would hold up your baby daughter out of the water if you are drowning. The biggest mistake that young people make with credit is making mistakes with credit, if that makes any sense.
A lot of advisors say that you should only apply for new credit when you need it. That's baloney. You should establish your credit card portfolio as soon as you can, then NOT use it. You might be thinking, "That doesn't make sense...surely it makes the bank angry the less I use the card." Well, yes, but FICO algorithms really like it when you have a lot of credit that you either do not touch or touch very lightly. That's the way the game is played. You will take a hit for opening many cards in a short period of time, but that will only last a few months, and it is better to take such hits when it does not matter, than when it does (house, etc.) Also, when you go to open the cards, the order matters. Chase is prickly about numerous enquiries. Other lenders, not so much. Cap One will hit all three bureaus, I believe. You want to play the game of "hide-the-inquiries" when you are applying. Distribute them among bureaus. It is OK to call and ask which bureaus are used before applying.
One you have your portfolio, you should regard it as you would a fine watch. It is yours. It is good. You protect it by not abusing it. You keep it locked safely away as an asset.
@Anonymous wrote:Hello all,
I have a few things I'm concerned about. I recently got a credit card about two weeks ago and I have no prior credit history. I am a freshman college student, I am unemployed, but I spend about $100 a month. I was approved for the Travel Rewards card from Bank of America with a $700 limit. Right now I have a $92 balance on my card and I am wondering whether I should pay it in full, pay some of it, or wait until after my May 7th closing date to pay it in full? Should there be months in the future where I do not use my credit card and only use my debit? Is using about 15% of my credit the best thing I can do? Also, this card has between a 15% and 24% APR but I have no idea how that will impact me if I pay everything off in full right after the closing date or before the closing date. I have looked through a lot of places online and I can not seem to have an idea of what to do. I do not need credit right now, I simply would like to build credit for the future when I am out of college.
Thank you for bearing with me and all of those questions. Feel free to respond to some and not necessarily all unless you can or provide some other key tips on how to build credit.
FICO's credit card utilization factor looks only at the statement balance.
You should let a zero balance report one month, and then a $25 balance report the following month, and compare which gets you the highest score. Then go with the one that works best.
@Anonymous wrote:Yes, if I were you, knowing what I know now:
- Check your credit scores. If they are 700+...
- You should get gas card, department store card, etc; (non traditional credit card).
- If you can afford it, you should get a secured installment loan of a very small amount ($500 if you can). Make the payback period as long as possible (in my case, I did $1000/5 years). This will help establish your diversity and give you free credit score points for essentially doing nothing.
- You should have 4 our more revolving accounts (traditional credit card/department store card).
- You should put all accounts on auto-pay.
- Every 6 months, "tickle" each card, even if it is only $5 per card. Pay in full.
- Avoid junk cards (Credit One, etc). You want Amex, Discover, BoA, Chase, Capital One, Citibank, but not Wells Fargo.
- Under no circumstances should you screw-up.
A lot of advisors say that you should only apply for new credit when you need it. That's baloney. You should establish your credit card portfolio as soon as you can, then NOT use it. You might be thinking, "That doesn't make sense...surely it makes the bank angry the less I use the card." Well, yes, but FICO algorithms really like it when you have a lot of credit that you either do not touch or touch very lightly. That's the way the game is played. You will take a hit for opening many cards in a short period of time, but that will only last a few months, and it is better to take such hits when it does not matter, than when it does (house, etc.) Also, when you go to open the cards, the order matters. Chase is prickly about numerous enquiries. Other lenders, not so much. Cap One will hit all three bureaus, I believe. You want to play the game of "hide-the-inquiries" when you are applying. Distribute them among bureaus. It is OK to call and ask which bureaus are used before applying.
One you have your portfolio, you should regard it as you would a fine watch. It is yours. It is good. You protect it by not abusing it. You keep it locked safely away as an asset.
9. You should use the card for all your NORMAL purchases to earn the points. It only makes sense to get something for nothing. Don't buy things you wouldn't normally buy or buy things because you now have a credit card.
10. You should buy big items on your credit card to reach what is called the high limit, which is merely the highest amount of the credit limit you have used. This helps you get your limit up higher later. Basically it tells your bank what you are capable of spending and repaying responsibly. You should also PIF that balance. If your school lets you use a credit card to pay tuition and you have the cash and there is no fee to pay with a credit card, then do so. Remember PIF (Pay in full the next month.)
11. Ask for credit limit increases on accounts that use a soft pull for doing so. Bank of America does not do soft pull customer initiated credit limit increses, so don't ask them. If they want to give you a limit increase then they will. Other lenders will see your higher limits and in the future you will ba able to get cards with higher limits because of this. Some banks match limits or give higher limits because of other cards you have, others don't.
Remember, don't spend, spend, spend because you have credit, spend wisely and look for discounts on what you buy(especially online purchases), but use your card for everything you would normally buy and the banks will reward you with increases for usage. (Well most banks will, others will wait for you to ask. If they wait for you to ask and there is a hard inquiry for the limit increase, then don't take it. It is always better to simply take a hard inquiry for a new card with better rewards than a hard inquiry for an increase in a current limit.
Now that you have this card, don't get a CapOne card. There are banks out there that have the same rewards structures or better than theirs and those banks don't pull every single credit reporting agency for a card. I am even amazed that CapOne still has this policy. (I do suspect that they only pull one and if the score is only a certain level, then they pull the other two to reduce their offer, make the APR higher, or otherwise make it harder for you later to switch from them. Since they are easier to get cards from some of us have made the mistake of getting multiple cards from them because of low limits. We think that because they were kind to give us credit and even though it was a low limit, that having multiple cards from them will give us the credit we want even though the number of inquiries from such an activity will cause other lenders to not approve us if we have marginal or low scores than they might otherwise do if we had less inquiries. They have their model of doing business which seems to perpetuate this and capture clients.)
