topic Re: What's next? in Credit Cards

What's next?

Anonymous — Sun, 30 Dec 2012 21:34:38 GMT

Hi I will be turning 19 in a couple of months and since I turned 18 I have been trying to build my credit. Background: I am a full time student and I work part-time making about $38,500 a year. I was approved for a car loan for about $18,750 about 4 months ago. Also, I was able to get the Journey CC from Capiltal one with a $300 cl about 5 months ago and just recently I was approved for the NFCU CashRewards with a $500 cl this month. Both of these credit cards are on my own name. I stay under a 30% utilization and also to never carry a balance. I recently signed up'd with credit karma and credit sesame which have been of great help. I have a 672 under CK. Finally, what do you think I should do next? I am not sure if I should just lay off apps for a while or keep going. What do you guys think? All advices will be very much appreciated!!! Thanks

Re: What's next?

Rhaeny — Sun, 30 Dec 2012 21:39:14 GMT

Those services are cool to see use but do you have your REAL Fico scores and not FAKO? Knowing that can help people give you more advice.

Also if you get your util down to less than 10% showing on only one card your scores will increase.

Re: What's next?

SnackTrader — Sun, 30 Dec 2012 21:54:41 GMT

I don't see the need for a FICO score to give advice on this.

I would say hold off on applications for a little while. Your credit limits are low, so lenders don't appear to have a lot of confidence in your current income and credit history. Any applications you do now will likely continue that trend. I would suggest trying to wait as long as possible to app for another card (another 6 or 7 months to get that first unsecured card up to a year old. During that time, think of a plan for what to apply for next. At that time maybe you can get a higher credit limit by showing that you are committed to paying your bills on your car loan and CCs.

Re: What's next?

Anonymous — Mon, 31 Dec 2012 07:16:43 GMT

Thanks Rhaeny!!!! One question: So can I have more then 10% uti on my other cc? or is it on both?

Re: What's next?

Anonymous — Mon, 31 Dec 2012 07:17:26 GMT

Thank you Snack Trader!

Re: What's next?

Rhaeny — Mon, 31 Dec 2012 07:32:18 GMT

@Anonymous wrote:
Thanks Rhaeny!!!! One question: So can I have more then 10% uti on my other cc? or is it on both?

Well for the BEST score advantage, only one card should show a balance of less than 10%. The closer you get to 1% on one card is the sweet spot where your scores will be at the highest it can be for your current situation. However, the most ironic thing is that if all of your accounts report out at a zero balance you take a ding for that as well. Strange isn't it? But its the truth.

So lets just make it easy. When the time comes that you are ready to apply for something else, make sure that one of your cards report a zero balance and the other reports say 1% to 3%. Find out when your credit cards report to the CRA's and what balance they report. Some companies report the statement balance and others have some obscure date. Once you find out that date then you must pay down your balance to zero by or before that date. I would do this about a 2 months before (or if you get really good at it, it won't take anything but a month...LOL) you are ready to app. That way you are in a position of having your highest possible score when you apply.

That is the only time you really need to worry about paying like this. When you are not applying anywhere just pay your bills on time. Speaking of paying bills on time, I'd like to offer you a tad bit of advice. It is something that I do as old as I am...LOL! I have all of my CC's setup to make the MINIMUM payment automatically at each cards website. I do this because as you start to grow your credit, there are times when you might just forget that a bill is due. This prevents that dreaded late payment, a nose dive in your scores and a 7 year punishment because that's how long that late payment will be on your reports.

Re: What's next?

Anonymous — Mon, 31 Dec 2012 21:48:46 GMT

Ok awesome! Thanks for all he info! So are you saying that I dont need to worry about my util if I know I won't be applying for anything soon? Or should I still keep it under 30%? If one month I go over the 30% and lose a few FICO points can I recoup them the next month by keeping my util under 10%? and finally wouldn't it be better to have both cards reporting a util of 1% instead of 0% and 1%? Again thanks for all your help!

Re: What's next?

Rhaeny — Mon, 31 Dec 2012 22:03:07 GMT

@Anonymous wrote:
Ok awesome! Thanks for all he info! So are you saying that I dont need to worry about my util if I know I won't be applying for anything soon? Or should I still keep it under 30%? If one month I go over the 30% and lose a few FICO points can I recoup them the next month by keeping my util under 10%? and finally wouldn't it be better to have both cards reporting a util of 1% instead of 0% and 1%? Again thanks for all your help!

Everything you said is spot on except the red.

In response to the red comment. No...one card and one balance less than 10%, preferably at 1% for YOUR MAX potential score. You can test it out yourself to see how Fico fluctuates. Let one of your cards report at zero and one at 30%, the next month let one of your cards report zero and one at 10%, and then the next month 1%. The proof is in the pudding.

I will say this though, 1% reporting on both of your cards is not a deal breaker for a score typically, meaning that I don't think that typically it makes a huge difference (1% on all cards). But the problem may lie in the fact that you only have 2 cards so it may hit you harder. Again, all you have to do is test and you will find out how it will work out for you. For me it might make a difference of less than 10 points but that could also mean the difference between an approval or denial or max reduction in apr or CLI.

Re: What's next?

Walt_K — Mon, 31 Dec 2012 22:18:48 GMT

@Rhaeny wrote:
@Anonymous wrote:
Ok awesome! Thanks for all he info! So are you saying that I dont need to worry about my util if I know I won't be applying for anything soon? Or should I still keep it under 30%? If one month I go over the 30% and lose a few FICO points can I recoup them the next month by keeping my util under 10%? and finally wouldn't it be better to have both cards reporting a util of 1% instead of 0% and 1%? Again thanks for all your help!
Everything you said is spot on except the red.

In response to the red comment. No...one card and one balance less than 10%, preferably at 1% for YOUR MAX potential score. You can test it out yourself to see how Fico fluctuates. Let one of your cards report at zero and one at 30%, the next month let one of your cards report zero and one at 10%, and then the next month 1%. The proof is in the pudding.

I will say this though, 1% reporting on both of your cards is not a deal breaker for a score typically, meaning that I don't think that typically it makes a huge difference (1% on all cards). But the problem may lie in the fact that you only have 2 cards so it may hit you harder. Again, all you have to do is test and you will find out how it will work out for you. For me it might make a difference of less than 10 points but that could also mean the difference between an approval or denial or max reduction in apr or CLI.

This is mostly correct. 1% isn't the best for everyone. Some people find their absolute max at 2% or 7%, etc. And there are some people that can have balances on more than one card and not see a difference. In general though, only letting one card report and having it report 9% or less of that card's CL (not total CL) gives the best results. Where the sweet spot is, from 1% to 9%, really varies by individual report. But you're talking about only a few point difference at that point.

Re: What's next?

Anonymous — Mon, 31 Dec 2012 23:08:57 GMT

Awesome! Thanks Rhaeny! One last question I was looking at my credit report and it shows whats the highest balnace that I've had througout the month even if I pay in full every month. Will it look bad if in a month that I know I won't be apping if a card with a 1000 limit reports 900 as highest amount used? I always pif every month.

Re: What's next?

Anonymous — Mon, 31 Dec 2012 23:10:14 GMT

Awesome thank you Walt_K!!! I think I'm just going to play with it in the next few months that I wont be apping for anything.

Re: What's next?

Walt_K — Mon, 31 Dec 2012 23:41:04 GMT

@Anonymous wrote:
Awesome! Thanks Rhaeny! One last question I was looking at my credit report and it shows whats the highest balnace that I've had througout the month even if I pay in full every month. Will it look bad if in a month that I know I won't be apping if a card with a 1000 limit reports 900 as highest amount used? I always pif every month.

It will ding your score for that month because that card will be near maxed out, but it isn't going to have a long term effect on your score.

Some might tell you that you don't want to have a card report 90% for fear that lender or other lenders will look at it and take adverse action (AA), e.g., lowering your credit limits, closing accounts, etc. I think those fears are overstated. Back during the credit crunch, that was probably more of an issue. Today, it might be an issue if you were talking about carrying multiple accounts at 90% utilization, or carrying an account at 90% for a long time paying only the minimum and continuing to charge to that account. But having one account go to 90% one month, especially an account with a relatively low limit, should not be an issue. I think banks are fairly rational and understand that charging $900 on a $1000 limit is a lot different than charging 90% of a $25K limit card.

Re: What's next?

Rhaeny — Mon, 31 Dec 2012 23:53:13 GMT

@Walt_K wrote:
This is mostly correct. 1% isn't the best for everyone. Some people find their absolute max at 2% or 7%, etc. And there are some people that can have balances on more than one card and not see a difference. In general though, only letting one card report and having it report 9% or less of that card's CL (not total CL) gives the best results. Where the sweet spot is, from 1% to 9%, really varies by individual report. But you're talking about only a few point difference at that point.

Well, in general we've said the same thing. But I was speaking about him in particular because he's 18 or 19 and only has 3 TL's. So for him there is not much for Fico to calculate with a total CL of $800 across 2 cards and an auto loan. He needs to show an on time payment history and when he apps he needs to show util as low as possible which why I said 1%. As his credit profile continues to grow and a better mix of TL's are established then yes maybe 1% may not be his sweet spot but again, we are talking about an $800 total CL. I think he should stick with the basics for now and test his own waters with scoring as I mentioned eariler. So yes I do agree with some of what you said but I think that advice is better suited for someone who is much more established credit wise and with much higher much higher limits than he does. IIRC there is a negative code that says something along the lines of "your total CL is less than $2K" or something like that....can't really remember the exact wording because I've seen it years ago on mine...LOL!

Re: What's next?

Rhaeny — Tue, 01 Jan 2013 00:06:23 GMT

@Anonymous wrote:
Awesome! Thanks Rhaeny! One last question I was looking at my credit report and it shows whats the highest balnace that I've had througout the month even if I pay in full every month. Will it look bad if in a month that I know I won't be apping if a card with a 1000 limit reports 900 as highest amount used? I always pif every month.

The "high balance" is just that....the highest balance your card has hit and doesn't play a part in your score calculation. The balance (not high balance) and your CL are the only amounts that play a role in your score (Utilization). Now in a manual review it can be questioned but I really wouldn't worry about it. So in the example you gave above your balance is zero and CL is 1000 so your util is 0% for that card. The high balance will still report as $900 and not affect that 0%.

Re: What's next?

Anonymous — Tue, 01 Jan 2013 03:20:59 GMT

Thanks Rhaeny! That makes a lot of sense!

Re: What's next?

Anonymous — Tue, 01 Jan 2013 03:22:05 GMT

Thanks! Now I just need to figure out when the new cc reports and I'll be good to go

Re: What's next?

Rhaeny — Tue, 01 Jan 2013 03:31:16 GMT

@Anonymous wrote:
Thanks! Now I just need to figure out when the new cc reports and I'll be good to go

Well, because I'm an addict, I have a monitoring service for each CRA

But EQ and TU let you see the actual dates of the reported balance each month. That is the date you want.

Re: What's next?

Walt_K — Tue, 01 Jan 2013 18:33:46 GMT

@Rhaeny wrote:
@Walt_K wrote:
This is mostly correct. 1% isn't the best for everyone. Some people find their absolute max at 2% or 7%, etc. And there are some people that can have balances on more than one card and not see a difference. In general though, only letting one card report and having it report 9% or less of that card's CL (not total CL) gives the best results. Where the sweet spot is, from 1% to 9%, really varies by individual report. But you're talking about only a few point difference at that point.

Well, in general we've said the same thing. But I was speaking about him in particular because he's 18 or 19 and only has 3 TL's. So for him there is not much for Fico to calculate with a total CL of $800 across 2 cards and an auto loan. He needs to show an on time payment history and when he apps he needs to show util as low as possible which why I said 1%. As his credit profile continues to grow and a better mix of TL's are established then yes maybe 1% may not be his sweet spot but again, we are talking about an $800 total CL. I think he should stick with the basics for now and test his own waters with scoring as I mentioned eariler. So yes I do agree with some of what you said but I think that advice is better suited for someone who is much more established credit wise and with much higher much higher limits than he does. IIRC there is a negative code that says something along the lines of "your total CL is less than $2K" or something like that....can't really remember the exact wording because I've seen it years ago on mine...LOL!

We're really arguing over minutiae at this point, but you said that the closer OP gets to 1%, the closer he'll be to his sweet spot for highest score. As far as I am aware, there's no general rule that people with thin history and 3 TLs acheive max score at 1% utilization. It seems to vary for each individual report where in the 1-9% range they see their highest score. This usually doesn't matter unless someone is right near a cutoff for an interest break, but just wanted to point out that it might not be 1%.

I don't see what the total $800 CL has to do with it. If we assume he's going to let balance report on the card with the $500 CL, we're talking about experimenting with balances between $1-$45. Not like he's going to get into serious debt seeing if his score changes by letting a 9% balance report.

I was not aware of a negative for having a total CL less than $2K. Are you sure about that? What we usually hear is that FICO does not look at limits, it looks at utilization percentage only.

Re: What's next?

Anonymous — Sat, 05 Jan 2013 01:34:32 GMT

Alright thank you so much guys!!! I will experiment back and forth and see which one works best for me.

Re: What's next?

Anonymous — Sat, 05 Jan 2013 02:19:52 GMT

Off topic, where are you finding PT work @ $38k @ 19 years old?