Re: Will this increase my score?
09-26-2012 11:15 PM
Yes. what increases your score is the "utilization" ratio. this means your (card balance / credit limit).
card balance 25 125
------------------ ---- = 12.5% ----- = 31.0%
credit limit 200 500
Rule of thumb is keep the utilization below 9% of your card balance and pay it in full every month. That means $500 * 9% = $45/month. If you use the card the "traditional" way that means charge $45, put the card in the freezer so you won't use it, then pay the card balance when the bill comes. Then re-use the next month. However, the volume, from the bank perspective, assuming I am correct, shows a volume usage of $45 * 12 = $540/year. FYI, your credit may only go up 1-3 points every month but if it is going up, regardless of the amount, you are making the right decisions.
For myself, if I understand correctly, their "hidden" algorithm, this is under the "character" category of the 3 C's of credit. means show them you can handle the volume of the credit line you desire. If that means making multiple payments to accomplish the credit limit you want, then so be it. When I started, I paid every week. this means my volume was $200 x 4 = $800 a month volume and paid in full every month, just in 4 equal payments. When you first open your card, this technique will not work because they hold payment for a two (2) week period until they get confirmation the payment has cleared. After a 6 month period, they finally quit arguing with me accepted that i never bounce and my credit limit hold is posted back to the account the next day. What I did was to charge to the credit limit every week, pay it 3 days later after the charge went from pending to posted plus i increased my line an average of $300/month to the savings account and increased my usage and paid it off every week.
Review period for "unsecured" credit -- i wouldn't advise calling them just demonstrate that can handle the credit line you want.
The second category is called "capital." In the present day where people are laid off, etc., banks are nervous. That means show them you can "save".... save at least $100 to increase your line of credit AND I recommend save $100 to a seperate savings account for rainy day expenditures. this way you never get caught with a large payment or missing a payment which is even worse.
Basically, my strategy is to rally people to save $100/month in the CD account. When they give or authorize you an "unsecured card", then roll that over to a $5,000 CD with capital one and continue the $100/month savings. If my research and theory are correct, keep that behavior up -- pay in full every month, 9% utilization, and savings $200 a month between the CD and rainy day fund, and they will increase your credit line. ($100x12 months) x 5 years (using capital one's definition of average credit level) is $6,000 in the bank. with these assets, $5,000 in CD and $1,000 for backup payments, you will transition to the nice "unsecured" cards rather quickly plus of course cleaning up any "other" bad credit you may have.
I am at the $3,000 credit level, 10 months into the card, and have acquired $450 total unsecured credit. i will post the results when i get my annual review to see if I am right about what capital one decides to do plus the letter i sent them.