topic Re: Setting Realistic Expectations in Credit Cards

Setting Realistic Expectations

MasonK — Sun, 26 Mar 2017 15:55:45 GMT

I see a ton of people who started rebuilding with one secured card and now have lines over $50k. So here's my question- what is a realistic expectation for growing my credit? I understand that YMMV and there are a ton of factors and variables, but what are your experiences?

I see people talking about SP CLIs every month, but I've never hit the button. Is that really the best route? I'm not worried about overspending on high limits because I have developed discipline of budgets. Should I use the cards for everything? Should I use the only a little and pay cash for the rest?

Here's my current (and probably poorly conceived strategy):

Use my Cap One ($2k) and Discover IT ($1.8k) for everything. Pay them at the ~$300-$350 range when I get there, and always pay it off before the statement cuts; minor purchases can carry on the statement, but not more than 10% of the limit. Is this a good strategy to rebuild on?

Re: Setting Realistic Expectations

iheartwings — Sun, 26 Mar 2017 16:17:20 GMT

@MasonK wrote:
I see a ton of people who started rebuilding with one secured card and now have lines over $50k. So here's my question- what is a realistic expectation for growing my credit? I understand that YMMV and there are a ton of factors and variables, but what are your experiences?

I see people talking about SP CLIs every month, but I've never hit the button. Is that really the best route? I'm not worried about overspending on high limits because I have developed discipline of budgets. Should I use the cards for everything? Should I use the only a little and pay cash for the rest?

Here's my current (and probably poorly conceived strategy):

Use my Cap One ($2k) and Discover IT ($1.8k) for everything. Pay them at the ~$300-$350 range when I get there, and always pay it off before the statement cuts; minor purchases can carry on the statement, but not more than 10% of the limit. Is this a good strategy to rebuild on?

Welcome, MasonK!

There is a wealth of information here, and as you recognize, everything is YMMV. Also, there isn't necesarily one right path to rebuilding. Many folks (including me!) will have opinions regarding your questions.

For me, I found these forums relatively late in my rebuilding (really becoming more active in the forums about 7 years after I filed for BK7).

What I would first recommend is that you think about what your credit goals are. They don't have to be specific, but they shouldn't be so broad as to leave you without a general framework to rebuild your credit. Many folks here want better credit to buy a house, refinance debt, etc., etc., etc. For me, I wanted to rebuild to eventually buy a house, but my goals have changed in that I chose to refinance my student loan debt in order to pay it off faster, rather than assume additional debt with a mortgage. My credit is at a point where I can usually get approved with mostly favorable terms. Now, my goal is to try to continue to improve my scores.

When you think about rebuilding, think about the factors that go into credit scoring. Paying your bills on time is the big one. AAoA is another, as is having a healthy credit mix. As for CLIs, that will help your utilization.

Keeping those in mind, your current strategy involves two credit cards. If you have other credit obligations, you should so also let us know what they are. You may have seen in the forums that a good mix of credit would involve 3 CC (with 1 reporting a small balance, resulting in total utilzation of less than 9%) and an installment loan (search for Share Secure Loan).

As for CLIs, you can request CLIs on both your C1 and Discover cards without incurring HPs. That will help pad your utilization. Just remember, utilization has no memory.

I would also recommend that you check out the Rebuilding Your Credit and Understanding FICO Scoring forums.

Hope that helps.

Re: Setting Realistic Expectations

MasonK — Sun, 26 Mar 2017 16:33:47 GMT

Thank you for the information!

My goal is a house as soon as possible on favorable terms. I will not go down the road I took at the top of the bubble in 2006. That took me to foreclosure in 2014 and contributed to my financial ruin.

I have 2 small student loans open @ $1800 on 2.65% ($80 total interest life of loan) and $5500 @ 3.86% ($1k total interest life of loan). I have no other outstanding debt. I've looked at the tables for the larger student loan and I don't see the utility in paying $3k in extra payments to recoup $500 in interest over the shortened term. Plus, I'm thinking that the more on-time payments I log the better my report will look rather than paying it off faster. If that is not a smart strategy, I am well positioned to pay off faster, but I am a big believer in the time-value of money and $3k now is better than $500 later unless there is credit scoring at stake.

Re: Setting Realistic Expectations

yfan — Sun, 26 Mar 2017 17:01:10 GMT

Your credit limits are a result of a few factors: your credit history, your income, and a particular lenders' risk exposure policies, for starters. This means that some lenders are more sensitive than others to your applications for credit from other lenders, some lenders are more generous with credit lines, while others may be more favorable on rates and rewards. So what you can grow to is really not up to anyone else to say.

I should mention here though that while it is nice to have large lines and rewards on credit cards, the main purpose of using credit cards responsibly is to reduce the interest you pay on the much bigger loans in life. Mortgages and HELOCs, car loans, student loans (or student loan refinancing), and the like. Build your credit responsibly and patiently and you can save more money on these loans in just a year than even the most generous credit card rewards can give you.

Re: Setting Realistic Expectations

Anonymous — Sun, 26 Mar 2017 19:19:47 GMT

@MasonK wrote:
I see a ton of people who started rebuilding with one secured card and now have lines over $50k. So here's my question- what is a realistic expectation for growing my credit? I understand that YMMV and there are a ton of factors and variables, but what are your experiences?

I see people talking about SP CLIs every month, but I've never hit the button. Is that really the best route? I'm not worried about overspending on high limits because I have developed discipline of budgets. Should I use the cards for everything? Should I use the only a little and pay cash for the rest?

Here's my current (and probably poorly conceived strategy):

Use my Cap One ($2k) and Discover IT ($1.8k) for everything. Pay them at the ~$300-$350 range when I get there, and always pay it off before the statement cuts; minor purchases can carry on the statement, but not more than 10% of the limit. Is this a good strategy to rebuild on?

Don't PIF before the statement. Pay down to 1%. Reporting at 1% is gold. I switch between my two cards as to not put anything on them for the 4-5 days before the statement so I can control this exactly. I started building 8 months ago now (Though the first couple months with my Disco I allowed some ~20% utils to report as I was still learning). Just look at my siggy now though. Part-time income, full-time student.

And if you have the discipline (like I do too with budgets), then why wouldn't you want to earn cash back on everything?

Re: Setting Realistic Expectations

Kforce — Sun, 26 Mar 2017 20:23:39 GMT

@yfan wrote:

+100 %

You need to pay on time and be patient.

You can't speed up time, and if you could, would just get old sooner.

No need to get a lot of cards or worry about CLi's.

You can control Util at the time you need to take out a loan.

The longer your history of paying, and age of CC the better. (Patience)

Re: Setting Realistic Expectations

Chris679 — Sun, 26 Mar 2017 20:28:07 GMT

I think your strategy is solid. I use CC for all purchases for a few reasons. Rewards and purchase protection being the big ones. Cash is overrated, can get lost, stolen, can't track the spending, etc.

Re: Setting Realistic Expectations

Anonymous — Mon, 27 Mar 2017 01:20:50 GMT

@MasonK wrote:
I see a ton of people who started rebuilding with one secured card and now have lines over $50k. So here's my question- what is a realistic expectation for growing my credit? I understand that YMMV and there are a ton of factors and variables, but what are your experiences?

I see people talking about SP CLIs every month, but I've never hit the button. Is that really the best route? I'm not worried about overspending on high limits because I have developed discipline of budgets. Should I use the cards for everything? Should I use the only a little and pay cash for the rest?

Here's my current (and probably poorly conceived strategy):

Use my Cap One ($2k) and Discover IT ($1.8k) for everything. Pay them at the ~$300-$350 range when I get there, and always pay it off before the statement cuts; minor purchases can carry on the statement, but not more than 10% of the limit. Is this a good strategy to rebuild on?

PIF is definitely the way to go, but for maximum FICO score growth you will want to allow 1% on a single card to report each month. For a new builder every little bit helps, trust me. 1.5 years ago my scores were mid/high 600's and I had 1 card, 1 LOC for a total of $1k credit. Now scores are mid 700's and I have exponentially more available credit.

Re: Setting Realistic Expectations

Anonymous — Mon, 27 Mar 2017 02:27:22 GMT

I wouldn't worry abou tthe total dollar amount at all...Only have as much credit as you are comfortable with. I am rebuilding now (scores all around 660-670) and have 5 cards and have a combined limit of $10,400. This is probably enough for me, for now. But you may feel differently.

Re: Setting Realistic Expectations

Anonymous — Mon, 27 Mar 2017 03:22:11 GMT

Which Cap1 card do you have?

Re: Setting Realistic Expectations

MasonK — Mon, 27 Mar 2017 03:27:08 GMT

MC Platinum.

Re: Setting Realistic Expectations

Anonymous — Mon, 27 Mar 2017 03:48:46 GMT

@MasonK wrote:
MC Platinum.

You should call or get on chat and ask if you have an offer to PC that to a QS. You could be earning rewards on all your purchases. There is almost always an offer for the conversion. My DH messed up and let his card go 60 days past due almost a year ago, jsut a few months after we opened it. He still can't get a CLI (waiting for that 1 year mark in May) but he was still able to convert to a QS.

As for expectations, I think slow and steady is the best plan of attack for growing. You have 2 cards that will grow with you. Ask for CLIs regularly. When it is time for new apps, thoughtfully consider which cards will be best for your spend and will stand the test of time to still be useful down the road. Your use and pay plan looks fine, but IMHO there is no need to pay off every time it hits $x. Just pay it off each month, or follow previous advice if you want to optimize your scores.

Re: Setting Realistic Expectations

MasonK — Mon, 27 Mar 2017 04:03:52 GMT

The usage/payment thing got me tripped up when I started because I thought that the reported High Balance played into the scoring. I've since learned that High Balance has nothing to do with High Utilization (that's a funny story in and of itself I'll write about another time), but nevertheless, I've still paid it off at a certain point. While I don't like writing a check for $350, I REALLY don't like writing ones for $1000.

I know that these are amounts I've paid in cash in smaller amounts over a ton more transactions, but it's the psychology of paying ALL my meals, ALL my insurance, ALL my everything in a single monthly transaction to the lenders that I get hung up on. I haven't had a credit card by choice in 20 years because I liked paying cash for everything (even before my credit was completely destroyed).

I've been thinking about the PC on CapOne, but I had been waiting for the sixth statement to cut in May. I guess there's no harm in calling them since a PC isn't a new line. When I got my Discover IT, I was really excited about 5% back on things like gas and wholesale clubs, so if I can get another cash back card in the stable, I'd be even happier about that.

Again, I thank everyone for their advice here, and on all the other threads for eneryone's assistance.

Re: Setting Realistic Expectations

Anonymous — Mon, 27 Mar 2017 05:36:36 GMT

@yfan wrote:
Your credit limits are a result of a few factors: your credit history, your income, and a particular lenders' risk exposure policies, for starters. This means that some lenders are more sensitive than others to your applications for credit from other lenders, some lenders are more generous with credit lines, while others may be more favorable on rates and rewards. So what you can grow to is really not up to anyone else to say.

I should mention here though that while it is nice to have large lines and rewards on credit cards, the main purpose of using credit cards responsibly is to reduce the interest you pay on the much bigger loans in life. Mortgages and HELOCs, car loans, student loans (or student loan refinancing), and the like. Build your credit responsibly and patiently and you can save more money on these loans in just a year than even the most generous credit card rewards can give you.

Solid advice.

Re: Setting Realistic Expectations

Anonymous — Mon, 27 Mar 2017 06:07:17 GMT

Welcome to myFICO MasonK and thanks for sharing your story with us. For starters, I think you have a good plan and there is good advice in your thread. There are two points I feel the need to reiterate: patience and time. They can be your best friends or your worst enemies. It's up to you to utilize them to your advantage. Set short and long term goals and stick to them. Research the cards you want and plan your applications.

If your Cap1 credit card has an annual fee, please contact them & ask if you can upgrade to one without it. Preferably as QS so you can have an everyday card after the double cash back promo runs out on your IT.

Cap 1 credit cards are eligible for CLIs every 6 months. IT can be a little tricky. Some people are on a 30, 60, or 90 day CLI cycle. Others, such as myself, didn't receive any SP CLIs during the first year. Like with everything credit, ymmv.

Good luck on your credit journey!

Re: Setting Realistic Expectations

grillandwinemaster — Mon, 27 Mar 2017 15:22:55 GMT

iheartwings wrote:

What I would first recommend is that you think about what your credit goals are. They don't have to be specific, but they shouldn't be so broad as to leave you without a general framework to rebuild your credit. Many folks here want better credit to buy a house, refinance debt, etc., etc., etc. For me, I wanted to rebuild to eventually buy a house, but my goals have changed...

Excellent advice Wings!

It's very important to have a framework, or purpose to rebuilding. So many people don't have a specific credit goal in mind and apply for everything under the sun! After a few months, there AAofA is trashed, and they regret what they have done.

Also, as wings stated, goals can and do change. With a goal in mind, you have a direction to go in.

Best credit wishes to you, OP!