Looking for tips on building credit for a 19 year old.

[Anonymous]

Hey there, I've been doing a bit of reading here and there about credit, FICO score and what not. I was wondering if anyone had any advice on how to build my credit and raise my FICO score (not sure if I even have one yet, I'm guessing probably not.) I also have a few questions.

I just opened up my first credit card ever, a Citi mtvU Platinum Select Visa Card for College Students and was approved for a credit limit of $1,000. I have a part-time job and I am a pretty wise spender, in my opinion at least.

Should I bother opening up another credit card? Will this help me build my credit if I keep a balance on both of them? If so, is there a certain time frame I should be waiting after opening my first card until I open my next one?

Do store branded cards (ie. Best Buy Financing card) affect you the same way as a credit card?

Is it a bad idea to cancel a store branded card after all payments are made? If so, when is the best time to cancel them or should I just keep them open? Is there a certain time frame I should be waiting after opening my Citi mtvU credit card before I open a store card?

Any other tips or advice?

Thanks a bunch, I appreciate it!

Message Edited by gnobiz on 11-04-2008 02:30 AM

[llecs]

Welcome to the Forums!

I'd recommend a couple things:

Start by pulling each CR directly through the CRA via annualcreditreport.com. You can pull each of the 3 CRs for free annually. If there's any account listed on there, other than collections, older than 6 months, then I would recommend pulling each CR via this site to get a baseline for your scores.

Once that new CC reports, and if it is your only reporting CC, then I would go for a second revolving (Visa, MC) CC so as long as your current CC reports a low balance (9% or less). Once the second reports, and all the while keeping both balances low, then I would try for a store charge card (Macys, Target, etc.). And that would round out a proper mix of credit. Anything more would lead to a temporary score drop.

To track to see what is reporting and the balances reporting, I'd recommend subscribing to a CMS like TrueCredit. For a low cost you can see what is reporting and what isn't.

Store charge cards are an important component to your mix of credit. After you make a purchase and PIF, you should never close it. IMO, take it out every 4-6 month, buy something small, shelve it until next time, and PIF. I'm partial to Macys. They start you slow, but are very generous with CLIs.

After you establish the 3 CCs, just chill. Build your history.

[Anonymous]

Macy's is a good card to get for a retail card.

Also, if AMEX offers any products for students, you might consider trying to open an account with them.  Because of their policy of backdating any future AMEX accounts back to the earliest one you have, if you can open one now, that benefit will help keep your AAoA (average age of accounts) up.  When I was in school, they offered Optima cards to students, but that was a long time ago.

If you can get an AMEX now, then after you get out of school, you can open a Green card (or other open credit card) which will also improve your credit mix.  And that card will be backdated to the earlier AMEX card start date.

[Anonymous]

Hey guys, it's gnobiz, my password isn't working so I created a new account.

Thanks for the replies and advice guys.

Alright, so I pulled up my CR (all three) through annualcreditreport.com and there's not much info at all since I have no credit history yet. So, I guess I'll be applying for my second CC when the time comes and the first CC starts reporting and then I'll same steps for my third card, the store card. Still unsure which store I'd like to go with yet though, haha.

I did have a few more questions since I'm not too familiar with credit cards yet.

So, I was wondering if there's a certain way that I should be making monthly payments and if it would affect my credit in any way.

Let's say I have a balance of about $300 on the card right now. Should I pay it off in full right now or should I pay like maybe $200 and leave a $100 balance on there? If the latter, when do I pay off the remaining balance?

For the APR, how long do I have before I get hit with it? Right now I have 6 months 0% APR but I was wondering after that 6 months, how does the APR work? I'm guessing once I get my statement, I can pay it all off and have nothing charged or I can pay a partial amount and have the APR fee charged on my next statement? The reason why I ask is because I am wondering if it's good to leave balance on the card for when it's reported to the CRA and if so, would I have to pay any APR fees for those balances? Sorry if this sounds confusing or dumb!

Thanks!

Message Edited by kalv on 11-06-2008 12:04 AM

[llecs]

FICO only takes a picture of your credit at the moment you pull your scores. In other words, it doesn't matter to FICO if you PIF every month and pull 6 months from now or carry a balance for 5 months and PIF the 6th month. Your score will be the same. However, some lenders don't like to see balances carried. So YMMV on that.

If you pay down your CC to let's say $1, your interest on that would be practically nil. I recommend PIF each month, avoid the interest, and then after you have a good mix of credit, then you can experiment by carrying $1 here or there. The interest will usually be charged and placed on your statement of which you'd have to pay on anyway.

Also watch out for some of those $0 interest deals. Some go as far as to charge retroactive interest for the previous months if you carry a balance on the date the 0% deal expires. Some store CCs have been known to do this.

Message Edited by llecs on 11-06-2008 09:41 AM

[Anonymous]

I see, thanks!

One last question for now (well, hopefully the last, haha.)

I was wondering when should I be worried about the utilization percentage?

Right now, I have about $300 (out of $1,000 limit) so I'm at 30% utilization. Should I just leave it as is and not use my credit card anymore until my statement comes in so I can pay off that $300 first? What I want to do right now is order something for about $100 or so but it'll put me at about 40%-50% utilization (have some other charges too.) and I'm worried if that would affect me. Should I wait or should I just charge it and pay it all in full when the statement comes?

I have the money to pay it off by Citi's website is not allowing me to pay off the balance until my statement comes in.

Thanks!!

[llecs]

I wouldn't worry too much. That first statement can be tricky where you can't pay until it comes in. At this point you'll be stuck with at least 30% utilization. Remember, FICO is a snapshot. Next month you can PIF, let it report, and you'll see your util at 0%. FICO lacks a utilization memory. The only thing to worry about is how the lender will see you. Amex, for example, is slashing everyone's CL. Citibank has been fairly stable through this. I wouldn't sweat it.

[Anonymous]

So I just applied for a Macy's card and they gave me an embarassing limit of $100.

When can I ask them for a credit limit increase? Any advice?

Should I keep a balance on my card? If so, should I do this by paying off about 90% of the balance I owe and then just pay the mininum balance for each statement after that or should I just pay it off in full and buy other things to keep a balance on it?

Thanks!!

[llecs]

Congrats! It is an awesome card to have. I started last fall with $300. I'm now at $1500 with a CLI due in this month. DW started with the same, but kept a balance most of the time and she's at $1000 after the same amount of time.

They love it when you PIF each month. PIF and ask for a CLI after your third monthly payment. Then ask every 3 months thereafter. Don't let a balance report, IMO.

[Anonymous]

I see many people saying to keep a small balance on the cards. Why do we want to keep a balance? Use it for a while yes and PIF every month and NEVER pay a penny in interest is the way to go to me. I am 21 and I have a score of 748 last I checked. I do not keep a balance on any of my cards except the one. I have a citi card with a limit of 11,400 and I use about 500-1500 a month paying bills and such but I PIF before it really ever reports but other then that I dont have a balance on any other cards. I think the most important thing is just spend responsibly and pif every month and your credit will improve. Do not stress and worry about doing everything to perfection when it comes to your score. Read the credit scoring 101 thread and learn the basics and then just be responsible with your money and spending and the score will fall into place.