Help me start my credit off right please!!

[Anonymous]

Good Morning Everyone,

Thank you for taking your time and reading my post, I am 28 years old and i am now trying to start building my credit up. I have never had credit cards, auto loans or anything that reports to build credit. In the past month I have gotten 3 Secure credit cards because everywhere i have read 3 is the best # of cards to start with.

I have a Discover IT Card with a $200 Limit, a Capital One Platinum Card with a $200 limit and a BOA Card with a $300 Limit. 

What I need to know is how much of each i should be using and when i should pay that balance off to be able to generate the best results for my credit score? Any help at all I will seriously appreciate.

Thanks again,

Coach K

[toadsworth]

To optimize your score, you should pay them before the statement drops so that 2 report $0 balance and the other reports like $2-3.

To grow and graduate those cards, you should definitely use them but pay mid-statement so that you don’t end up with a statement closing where you have it maxed out because utilization that high is very bad for your score. Don’t let anything report as over 30% utilized of you credit limit and you’ll be fine. Within a few months you’ll see your scores are quite decent; I started out the same way!

[601flyguy]

Thats good advice. I also suggest an Alliant ssl ( secured loan). Then head to the garden for about 6 months

[Anonymous]

Here is the link for the Share Secured Loan Technique.  Although Alliant no longer offers SS loans, we feel confident that we will eventually find some good options in our Quest for an Alternative to Alliant. 

Note that the "all zero except one" technique for credit cards (also called AZEO) only really comes into its own in the 40 days before an important application for credit.  By implementing AZEO 40 days before you apply for your next loan or card, you will get all the extra points from AZEO that you can.

In the meantime, there is nothing wrong with allowing cards to report a small balance each month.  Be sure that you are only using your cards to buy stuff you really need: gas, groceries, cell phone bill, etc.  Keep your total utilization (all credit limits combined) very low (less than 9%) and each card considered by itself at less than 29%.

And don't apply for any more cards for at least 13 more months.

[Anonymous]

Someone educate me. I started off life well because I was an authorized user on credit cards via parents and I just kind of slipped right into knowing how to properly use a credit card. I am nearly 30 as well and have never paid interest on a credit card.

I advise people new to credit that department store cards like JCPenny or Kohls are easy to get and a good way to build credit. Am I wrong? A friend of mine started with a $500 unsecured captial one card then got a department store card. Recently they applied for an Amazon Prime Visa Signature and are around a $5000 credit limit. This all took place within about 3 years.

[Kree]

coach, sounds like a great start.  Good quality cards that can grow with you.  One thing to decide is when you need good credit by, and what you need credit for.

Option a:  "Hit the garden"

Short term.  Open up a SSL and don't do anything else for 6 months.  This will peak your score, and it will continue to grow over time, but if you ever use your credit to get new credit you will have a large downward spike.

Long term. You can even hit 850, but it could take 20 years.

Option b: :spree".

Short term.  Your score will stay in the gutter  because every few months new accounts are added.

Long term.   You will have a thicker profile, and as time goes on your score will be more resistant to new credit lines being added.

These are the two extremes, most people pick a path inbetween. 

[Anonymous]

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@Anonymouswrote:

Someone educate me. I started off life well because I was an authorized user on credit cards via parents and I just kind of slipped right into knowing how to properly use a credit card. I am nearly 30 as well and have never paid interest on a credit card.

I advise people new to credit that department store cards like JCPenny or Kohls are easy to get and a good way to build credit. Am I wrong? A friend of mine started with a $500 unsecured captial one card then got a department store card. Recently they applied for an Amazon Prime Visa Signature and are around a $5000 credit limit. This all took place within about 3 years.

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You are not wrong.  But it's important for a person to be aware of two implications of opening store cards:

(1)  They can be harder to keep active, because you can only use them at that particular store.  A major credit card (anything with an Amex, Visa, MC, or Discover logo) can be used thousands of places, and so it is easy to make sure you are only using the card to buy stuff you absolutely need anyway (groceries, gas, cell phone bill, etc.). 

(2)  Some credit scoring models (notably the non-FICO models used by the insurance industry) penalize you for the simple presence of store cards on your report.  Even closing the store card might not eliminate the penalty. 

[Kree]

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@Anonymouswrote:

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@Anonymouswrote:

Someone educate me. I started off life well because I was an authorized user on credit cards via parents and I just kind of slipped right into knowing how to properly use a credit card. I am nearly 30 as well and have never paid interest on a credit card.

I advise people new to credit that department store cards like JCPenny or Kohls are easy to get and a good way to build credit. Am I wrong? A friend of mine started with a $500 unsecured captial one card then got a department store card. Recently they applied for an Amazon Prime Visa Signature and are around a $5000 credit limit. This all took place within about 3 years.

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You are not wrong.  But it's important for a person to be aware of two implications of opening store cards:

(1)  They can be harder to keep active, because you can only use them at that particular store.  A major credit card (anything with an Amex, Visa, MC, or Discover logo) can be used thousands of places, and so it is easy to make sure you are only using the card to buy stuff you absolutely need anyway (groceries, gas, cell phone bill, etc.). 

(2)  Some credit scoring models (notably the non-FICO models used by the insurance industry) penalize you for the simple presence of store cards on your report.  Even closing the store card might not eliminate the penalty. 

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3. Stores are more likely to close (especially in todays economy)  which would lead to problems with profile growth in 10ish years.

[SouthJamaica]

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@Anonymouswrote:

Good Morning Everyone,

Thank you for taking your time and reading my post, I am 28 years old and i am now trying to start building my credit up. I have never had credit cards, auto loans or anything that reports to build credit. In the past month I have gotten 3 Secure credit cards because everywhere i have read 3 is the best # of cards to start with.

I have a Discover IT Card with a $200 Limit, a Capital One Platinum Card with a $200 limit and a BOA Card with a $300 Limit. 

What I need to know is how much of each i should be using and when i should pay that balance off to be able to generate the best results for my credit score? Any help at all I will seriously appreciate.

Thanks again,

Coach K

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Let 2 cards report a zero statement balance and 1 report a small balance. That will optimize your credit utilization factor across all FICO scores.

[SouthJamaica]

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@Anonymouswrote:

Someone educate me. I started off life well because I was an authorized user on credit cards via parents and I just kind of slipped right into knowing how to properly use a credit card. I am nearly 30 as well and have never paid interest on a credit card.

I advise people new to credit that department store cards like JCPenny or Kohls are easy to get and a good way to build credit. Am I wrong? A friend of mine started with a $500 unsecured captial one card then got a department store card. Recently they applied for an Amazon Prime Visa Signature and are around a $5000 credit limit. This all took place within about 3 years.

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I was given similar advice when I was starting out and I wish I hadn't followed it.

IMHO the only time to get such a card would be if you have no FICO score at all yet. Then I would get one and only one such card, and I would get rid of it, or at least cut it up, as soon as I could get a regular credit card.