topic Re: How to use credit cards for the sole purpose of building credit in Credit Cards

How to use credit cards for the sole purpose of building credit

jg1983 — Tue, 10 Jan 2017 02:05:47 GMT

I was just approved for a NFCU cash rewards card with a $1600 limit and a DCU card with a $1000 limit. I just received the NFCU card today and am still waiting for the DCU card. I do not plan on using the cards for anything I am not able to immediately pay back. The sole reason I have them is to build my credit. That being the case what is the best way to use them? How much should I spend and when should I pay it off each month? Should I pay them in full before the due date or carry a balance? Should I keep one of them at 0 balance and does it matter which one? It is also my goal to increase my credit limits in the shortest amount of time possible.

Here is my credit situation if it helps. Not counting the two credit cards I have a $14k car loan and no other accounts positive or negative. My credit scores are Experian and TransUnion 650 and Equifax 589.

Re: How to use credit cards for the sole purpose of building credit

marcforza1 — Tue, 10 Jan 2017 02:32:27 GMT

You can carry a balance as long as you make the minimum payment each month. But if you really want to build up credit, I would say pay you bill in full and definitely on time. You don't want your utilization to be over 30%, so it's a good idea to keep an eye on what you spend within a month's time. Use it on something you normally pay each month like water, cable or even groceries would be a good start.

Re: How to use credit cards for the sole purpose of building credit

jg1983 — Tue, 10 Jan 2017 02:55:37 GMT

Say I use the NFCU card to pay my $130 car insurance bill and don't use my DCU card at all then pay the full balance as soon as I get my statement every month. Is this a good strategy or should I use the one card more or both cards?

Re: How to use credit cards for the sole purpose of building credit

marcforza1 — Tue, 10 Jan 2017 03:13:18 GMT

It's best to utilized both cards because lenders don't like it if you don't use your cards at all. I plan on getting two cards for the purpose to also build credit. I was planning to use one for gas, cell phone bill and/or groceries. The other one will be for things like school supplies, summer vacaton and certain hobbies that I do. It's best to not get carried away with spending too much at one time because it can easily become overwhelming to make payments on time. That was my issue the last time I had a Credit One card. Have a plan on how you want to use the card, do lots of research about building credit and stick to your plan. Your statement about your car insurance is a good start!

Re: How to use credit cards for the sole purpose of building credit

jg1983 — Tue, 10 Jan 2017 03:48:03 GMT

My plan for the NFCU card is to pay a bill or two (like my car insurance) with the card then deposit the money for the bill imediately to my NFCU checking account and use the checking account to pay the balance every month after getting the bill. That way I'm not spending more than what my monthly expenses already are. I currently have direct deposit with DCU and use that account for all my bills and expenses so the NFCU checking account would be strictly for credit card payments.From what I have been reading the NFCU card is relatively easy to get a CLI on so that is the one I wan to focus on the most. From what I have been reading 9%-30% is where you want utilization but what is the optimum number? My goal right now is a personal loan from DCU for $3000-$5000 in a few months to repair my car. They denied me but told me if I make on time payments on the refi and credit card for a couple months and get my score up a little they might be able to help me out.

The other op[tion would be get a high enough CLI where I could use the credit card to fix the car with under 30% utilization but it would take 2-3 months to pay the balance down. How badly would that hurt my credit and how quickly could I recover assuming I made the minuimum payment each month (I would probably be shooting for $700-$1000 a month)?

Re: How to use credit cards for the sole purpose of building credit

Subexistence — Tue, 10 Jan 2017 04:07:29 GMT

@jg1983 wrote:
I was just approved for a NFCU cash rewards card with a $1600 limit and a DCU card with a $1000 limit. I just received the NFCU card today and am still waiting for the DCU card. I do not plan on using the cards for anything I am not able to immediately pay back. The sole reason I have them is to build my credit. That being the case what is the best way to use them? How much should I spend and when should I pay it off each month? Should I pay them in full before the due date or carry a balance? Should I keep one of them at 0 balance and does it matter which one? It is also my goal to increase my credit limits in the shortest amount of time possible.

Here is my credit situation if it helps. Not counting the two credit cards I have a $14k car loan and no other accounts positive or negative. My credit scores are Experian and TransUnion 650 and Equifax 589.

You can keep your utilization high during months you don't have to deal with using your credit. The month right before you apply for something get your utilization to exactly 1% all across. So that means you pay back multiple times during the statement period to keep your NFCU balance at $16, DCU balance at $10, then during the grace period pay off the $16 and then $10. This way you have the best utilization rate of 1% during the times your utilization matters.

Re: How to use credit cards for the sole purpose of building credit

fltireguy — Tue, 10 Jan 2017 04:11:51 GMT

@jg1983 wrote:
My plan for the NFCU card is to pay a bill or two (like my car insurance) with the card then deposit the money for the bill imediately to my NFCU checking account and use the checking account to pay the balance every month after getting the bill. That way I'm not spending more than what my monthly expenses already are. I currently have direct deposit with DCU and use that account for all my bills and expenses so the NFCU checking account would be strictly for credit card payments.From what I have been reading the NFCU card is relatively easy to get a CLI on so that is the one I wan to focus on the most. From what I have been reading 9%-30% is where you want utilization but what is the optimum number? My goal right now is a personal loan from DCU for $3000-$5000 in a few months to repair my car. They denied me but told me if I make on time payments on the refi and credit card for a couple months and get my score up a little they might be able to help me out.

The other op[tion would be get a high enough CLI where I could use the credit card to fix the car with under 30% utilization but it would take 2-3 months to pay the balance down. How badly would that hurt my credit and how quickly could I recover assuming I made the minuimum payment each month (I would probably be shooting for $700-$1000 a month)?

Take good care of your NFCU card.. and wait about 2 weeks after your third statement cuts.. and request a CLI.... and then you should probably see a really nice CLI

Re: How to use credit cards for the sole purpose of building credit

Anonymous — Tue, 10 Jan 2017 04:12:22 GMT

I would use the NFCU card like a debit card - put as much of your regular spend through it as you can and enjoy 1.5% cashback (more if you use the Member Mall) - just be certain to pay it down under 10% before the statement cuts and you're golden. As for DCU, I'd put something small like a Netflix sub on it, put it on autopay and otherwise leave it alone.

Do this for about 4-6 months and you'll be in good position for massive increase from NFCU, which in turn will help you qualify for other things

Good Luck!

Re: How to use credit cards for the sole purpose of building credit

jg1983 — Tue, 10 Jan 2017 05:45:51 GMT

So I could theoretically max out my card for the cash rewards then pay it down to 10% before the statement is generated? Not that I am going to do this just wondering.

Re: How to use credit cards for the sole purpose of building credit

Anonymous — Tue, 10 Jan 2017 06:02:10 GMT

@jg1983 wrote:
So I could theoretically max out my card for the cash rewards then pay it down to 10% before the statement is generated? Not that I am going to do this just wondering.

I did this several times per month when my cashRewards had a $500 limit - the more usage you put on a card, as long as you pay it off and don't allow it to report a high balance to the credit bureaus, is just putting money in the lender's pocket from all those swipe fees with no negative repercussions

When it comes time to consider a line increase, they're going to want to make it easier to get more of those delicious fees

Re: How to use credit cards for the sole purpose of building credit

Anonymous — Tue, 10 Jan 2017 07:24:39 GMT

@jg1983 wrote:
So I could theoretically max out my card for the cash rewards then pay it down to 10% before the statement is generated? Not that I am going to do this just wondering.

This is exactly what CAN be done ANY and every month, where one 'cares' about PROTECTING their 'reported' debt/ratio (ie utilization) ...this # IMO is the MOST

important, valuable number that YOU control on the month over month basis...

(we all know that paying on-time is 35% but paying on-time is a GIVEN ...but the 30% value attached to credit usage/debt-to-credit line ratio is a HUGE power move totally controlled by the card user's hand)

Your original question was HOW TO use CC's to best manipulate the scoring model (I take that to mean pump the score....w/o much regard for point/reward 'chasing'...but 1st and foremost to bulk up the credit profile THEN once the file gets 'all-growed-up' ...decide to actually USE credit....If you've read my post before you'll know that's the mantra I preach on the correct way the stroke a file.)

As mentioned IMO..if the GOAL is the stroke the score (not impress a lender in the short term) ...remember they ALL come around once the score and 'age' looks sexy anyway, so again IMO pay attention stroking the scoring model, to build your overal score and age and all else will fall into place

Putting a bunch of spend and chasing it down prior to statement closing CAN be done but for me there are 2 reasons NOT to

1) It can be dangerous if one miscalculates and I'm not a fan of starting to TRAIN a new CC holder the play russian roulette with statement closing dates for IMO no 'real' measurable gain.

2) Too often people get the mistaken thought pattern that what a lender may 'like' in the short term is the MOST important factor is RISK SCORING ...however the scoring model CRAVES certain things....that are measurables that we can CONTROL

And for my money why 'play' any other game than the one you can EXCACTLY control

a) Pay on-time

b) Protect the crap outta the debt/ratio that gets reported

(Which is the 'picture' taken of the reported balance on statement day...tha being said the GOAL is for that % to be as PRETTY as possible...again IF that is the ultimate goal 'why' put ANYTHING on a building CC oher than well calculated spend' for SHOW 'only'....ZERO else, zero?

There is NO upside to EVER have more than a 'token' 9% reported on ONE CC ...just to show 'some' well managed usage vs dormant accounts, period

*Again I'm speaking of the short period of BUILD ONLY....too many times I see ppl screwing themselves up ...where 4-8 months of careful 'chess-like' moves would

have blown up their scores.....

c) You've got an installment loan (the 14k car loan) along with the now 2 revolvers...giving you the 'credit mix' and variety that the scoring model is looking for

So let's recap

35% on-time...you got that, check

30% low debt/ratio ...control that, check

10% credit mix...boom ya got that

15% AGE..This you CAN'T stroke...you have to allow the TIME to work FOR YOU...that being said, again the ONLY 'real' thing you can push buttons on is the debt/ratio, so take great care of what get's reported.

Random thoughts

a) If a loved one can help out with allowing a A/U piggy-back ride (as long as the account is prefect with a low debt ratio, obviously) it could sky rocket the 'aging' juice of said profile

b) NFCU (my fav CU) 'used to' be pretty good with the no HP CLI but lately that has NOT been as almost automatic as it used to be in the past, unfortunately too often they HP more than you'd want, just seeking CLI's

But again, if the goal is stroking the scoring model for POINTS...keep the reported ratio down, not zero but down, with only ONE card reporting a balance at a time ( you can rotate in some token spend once every 3-4 months and the lender will be fine)

I don't know how young the car loan is but once your profile shows the MANAGEMENT of multiple 'mixed' account types AND the non-dependency of light usage your score will soar, especially with a bit of time

*Side note

If you decide to attempt a auto refi with Navy, make sure that app for the CLOC as it would be the same HP evaluated in the same dept (this is NOT true for CC's, so you can't doublr dip a CC app or CLI request...but loans and the CLOC are one and the same, so if always inquire for those two together...also always request the 15k max on the CLOC, the will counter with a lower # if they like but the rule of thump is ask for the max

This is whether or not 'if' you "want" the CLOC or not...having the account helps stroke your credit profile, which again is PART of the overall goal of building a profile in the 1st place)

Best of Luck

Re: How to use credit cards for the sole purpose of building credit

jg1983 — Tue, 10 Jan 2017 20:39:46 GMT

I activated my NFCU card this morning and according to creditchecktotal my Experian score jumped 15 pointsand it is already showing the credit card on my credit report. I did not think I would get fast results like that. Wonder what will happen once I get my DCU card and activate it. I checked credit karma for my other two reports since creditchecktotal wont update them for another 10 days and the credti card isn't showing on the other two yet but maybe that is because it is from credit karma which might not be up to date. Creditchecktotal is nice to have for $15 a month to get my updated Experian report and score everyday but they only update the other 2 every 30 days. Anyone know a good service to use for the other two reports? DCU gives me my Equifax score but only once every 30 days also.

Re: How to use credit cards for the sole purpose of building credit

Anonymous — Tue, 10 Jan 2017 21:31:06 GMT

@Subexistence wrote:

You can keep your utilization high during months you don't have to deal with using your credit. The month right before you apply for something get your utilization to exactly 1% all across. So that means you pay back multiple times during the statement period to keep your NFCU balance at $16, DCU balance at $10, then during the grace period pay off the $16 and then $10. This way you have the best utilization rate of 1% during the times your utilization matters.

This is not good advice if one is considering a mortgage, as mortgage UW can look at trended data for at least the last 12 months if not 24 months. They like to see the behavior of a Transactor, not a Revolver and consistency with that. While your statement above is true for CC apps, it simply isn't good advice at all if someone is considering a mortgage in the next 1-2 years as this behavior represents significantly more risk in the eyes of lenders.

Re: How to use credit cards for the sole purpose of building credit

Anonymous — Tue, 10 Jan 2017 23:01:08 GMT

@jg1983 wrote:
Creditchecktotal is nice to have for $15 a month to get my updated Experian report and score everyday but they only update the other 2 every 30 days. Anyone know a good service to use for the other two reports? DCU gives me my Equifax score but only once every 30 days also.

Yes - CreditCheckTotal. The key is not to subscribe, but instead take advantage of their $1 trials - we discussed it in this thread

Re: How to use credit cards for the sole purpose of building credit

Anonymous — Tue, 10 Jan 2017 23:11:30 GMT

Honestly, you build credit by getting credit limit increases, applying for new credit cards, ALWAYS ALWAYS pay on time and make sure you use them. I like to buy huge things on my credit cards and let them sit there while I make minimum payments. This is a fantastic way if you have cards that offer 0% interest or with deferred payments. My credit score has jumped significanly just by applying to cards and asking for increases on them. I do have a word of caution in that, don't over it. You'll be rejected for having too much credit unfortunately.

Re: How to use credit cards for the sole purpose of building credit

AverageJoesCredit — Tue, 10 Jan 2017 23:33:52 GMT

For me one of the most important things you can do to build credit is just use your cards you have and make sure to pay on time each month. Though it may seem slow making ontime payments helps establish good credit habits and shows good responsibilty with limits you are given. Perhaps my favorite advise ive picked up from here, though not always easy, is to try not to spend more than you think can pay back by end of the month. This is good in that if we can train ourselves to think that way, it msy help not to overspend and make sure wirh atay the path. I fsll off every once in awhile but that little mantra is always in back of my head thanks to my fellow Ficoers

Re: How to use credit cards for the sole purpose of building credit

Anonymous — Tue, 10 Jan 2017 23:36:31 GMT

@Anonymous wrote:
Yes - CreditCheckTotal. The key is not to subscribe, but instead take advantage of their $1 trials - we discussed it in this thread

CCT $1 trials are absolutely fantastic and impossible to beat. Your 3B scores/reports for 50 cents each (2 pulls per $1 trial). No brainer.

Re: How to use credit cards for the sole purpose of building credit

jg1983 — Wed, 11 Jan 2017 07:01:39 GMT

Can I cancel my membership and sign up for the trial again? If so how do I do it without calling customer service? I don't see another option. I started out with a trial membership that I canceled and renewed a few times but figured it was a fluke so I signed up for the monthly membership.

Re: How to use credit cards for the sole purpose of building credit

Anonymous — Wed, 11 Jan 2017 09:05:46 GMT

@jg1983 wrote:
Can I cancel my membership and sign up for the trial again? If so how do I do it without calling customer service? I don't see another option. I started out with a trial membership that I canceled and renewed a few times but figured it was a fluke so I signed up for the monthly membership.

once you cancel, your membership will terminate on the last day you're paid up to - the next day, you'll have a new trial offer waiting for you when you log in

Re: How to use credit cards for the sole purpose of building credit

elim — Wed, 11 Jan 2017 11:48:09 GMT

or you could actually pay the $15/mo. just saying.