topic Building a credit in General Credit Topics

Building a credit

Anonymous — Thu, 15 Jun 2017 18:48:15 GMT

Hi everyone. Im 21 yo moved to States about a year ago from Russia. Recently started working on my credit score (in Russia we don't have such a thing to worry about, so it's all new to me). Apparently in America you better have solid CS and history to get best offers for cars/credit cards and even renting apartment. Well, thats something new to me, but I hope with your help I'll figure all this out pretty quick.

So, recently I applied and received my first BofA secured credit card with $1000 credit line. People I know reommended to apply for other CC in couple of months. So there's a lot of info on the internet about how to build your credit but all of it seems pretty general. So my question is what I should and what shouldn't do to build my credit? What I need to avoid? Are there any "tricks" that aren't obvious but have good impact on CS?

Im currently working with monthly income about $1600. Don't pay rent. But I do pay for all family bills (roughly $600-$650 a month). Have a few thousand dollars savings.

I would highly appreciate any information/advice.

Thank you

-O

Re: Building a credit

Anonymous — Sat, 17 Jun 2017 17:01:33 GMT

Welcome to the US! We are glad you are here -- in our country and on this forum.

The first thing you need is understanding, and your post just now is a good step toward that. Have you read up on what the three big credit credit bureaus are, what they do, and how to get a "credit report" from each one that shows what information they have on you? That's needs to be your first big step -- pulling your reports and learning about what the Big Three bureaus are. Their names are Equifax, Experian, and TransUnion -- abbreviated here on this forum as EQ, EX, and TU.

Do a little research on them to make sure you know what they are, and then we can give you some free tools that will let you pull your reports at very little cost.

Do you have a social security number yet? Did you use that (or some ID number like it) when you applied for your BOA card?

We'll be glad to give you a basic plan that should get you a very nice entry level score in eight months, all at very little cost. It will involve opening two more cards and a small loan -- which you can do gradually at the speed that is right for you.

Re: Building a credit

Anonymous — Sun, 18 Jun 2017 00:20:54 GMT

Thank you so much.

Yes, I've read a lot of info on these bureaus. Main point I got is that they never show the same score. Yes, I got my SSN little over a month ago and they asked for it, as well as my California ID. I already started using my card, but whenever I try to get my score it shows that it's unavailable, but I think it's because I just started using it and haven't closed any month statement yet. Btw, does it matter if I pay my card in full or make minimum or bit more that minimum payments?

Anyway, thank you again for helping!

Re: Building a credit

PrinceCorwin — Sun, 18 Jun 2017 00:39:43 GMT

@Anonymous wrote:
Thank you so much.

Yes, I've read a lot of info on these bureaus. Main point I got is that they never show the same score. Yes, I got my SSN little over a month ago and they asked for it, as well as my California ID. I already started using my card, but whenever I try to get my score it shows that it's unavailable, but I think it's because I just started using it and haven't closed any month statement yet. Btw, does it matter if I pay my card in full or make minimum or bit more that minimum payments?

Anyway, thank you again for helping!

It definately DOES matter how you pay your bill. Paying in full will of course prevent you from accruing any interest. If your card is relatively new, you probably have an intro 0% interest rate for a number of months, so this may not affect you immediately. As far as how it affects you score, you want to keep your balance as low as possible. Definately under 30% of your total credit available, but more preferably closer to 9% or lower. Your score will definately fall if you continually keep your balance high each month

Re: Building a credit

Anonymous — Sun, 18 Jun 2017 05:03:11 GMT

Great advice by our friend from Amber. (PrinceCorwin)

Here's some easy actionable next steps for you.

(1) Use your card each month. It doesn't have to be a lot. One purchase for at least $5 is plenty, though more is fine too. Until you get a hang of how this all works I'd keep your balance very low, like < $70 (that would be < 7% of your credit limit). It'll be easiest if you just keep it < $70 at all times for the first year. (Strictly speaking < 8.99% is fine, but you'll be better served by not pushing it close to the edge.)

(2) Let the statement print with a balance of at least $5 and write down what date that happend.

(3) After the statement prints, pay the amount owed at the top of the statement in full.

Then loop #1-3 each month.

Sometime in August, join Credit Karma. It will be a free way to pull your EQ and TU reports. You should ignore their scores, since they are not FICO scores. But the reports are very valuable.

Make sure that your credit card appears on both reports at that point and the information is correct on it.

At that point, consider implementing something called the Share Secure Loan Technique. You can read about it here, but it's really for people who have spent at least a month learning the basics of how FICO scoring works. (And for people with no loans.) All the you need to do is read the first 2-3 posts of this thread.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/m-p/4506756

I would not try doing this until your credit card has been appearing on your EQ report for a solid month.

6-7 months after you opened your BOA card, you will be able to get your first FICO scores. At that point you can pull your scores through the $1 trial at Credit Check Total.

Circle back with the people here about the cards that seem right for you at that time based on your scores. Then get 2-4 more cards. It doesn't all have to be on the same day -- you can space out the applications over a couple weeks if you want.

That's an easy plan that should work fine for you.

Re: Building a credit

PrinceCorwin — Sun, 18 Jun 2017 13:04:11 GMT

@Anonymous wrote:
Great advice by our friend from Amber. (PrinceCorwin)

Always nice to find a fellow book nerd on here.

Re: Building a credit

SouthJamaica — Sun, 18 Jun 2017 15:08:36 GMT

@Anonymous wrote:
Hi everyone. Im 21 yo moved to States about a year ago from Russia. Recently started working on my credit score (in Russia we don't have such a thing to worry about, so it's all new to me). Apparently in America you better have solid CS and history to get best offers for cars/credit cards and even renting apartment. Well, thats something new to me, but I hope with your help I'll figure all this out pretty quick.
So, recently I applied and received my first BofA secured credit card with $1000 credit line. People I know reommended to apply for other CC in couple of months. So there's a lot of info on the internet about how to build your credit but all of it seems pretty general. So my question is what I should and what shouldn't do to build my credit? What I need to avoid? Are there any "tricks" that aren't obvious but have good impact on CS?
Im currently working with monthly income about $1600. Don't pay rent. But I do pay for all family bills (roughly $600-$650 a month). Have a few thousand dollars savings.
I would highly appreciate any information/advice.

Thank you

-O

My advice would be to wait, and just make some use of the card you have, always paying it down to zero.

Once you have your FICO scores, then you can reassess the situation.

And even then, there's no rush to get a bunch of credit cards. 2 or 3 credit cards is enough to get a perfect score.

Re: Building a credit

Anonymous — Sun, 18 Jun 2017 16:10:24 GMT

Can you explain 2 and 3 steps in details?

Re: Building a credit

Anonymous — Sun, 18 Jun 2017 17:18:58 GMT

@Anonymous wrote:
Can you explain 2 and 3 steps in details?

Sure. Your credit card has a billing cycle. That cycle lasts about 30 days. It might begin on the 8th of the month and close on the 7th of the following month. That's just a made-up example.

At the end of every billing cycle your credit card will produce a statement. In olden days it was always a paper statement that was mailed to you. Now it is more common for it to be an online statement.

Thus if the billing cycle ended on June 7 (say), then the statement would print shortly after 12:01 am on June 8.

The statement will have an AMOUNT OWED at the top. This will be your balance as of 11:59 pm, plus any fees and interest. (Assuming you are handling your cards properly there should never be fees or interest.)

The day that the statement prints your CC issuer will report that Amount Owed to the three credit bureaus. (There are some CC issuers who work on a different timetable, e.g. always reporting on the 1st of the month, but they are very rare. Assume your issuer reports on the day that the statement prints.)

You now have roughly 25 days to make a payment on that Amount Owed. If you pay that amount in full (PIF) then you will not be charged any interest.

Thus in step 1 you make one or more small purchases every month

In step 2 the statement prints with a small balance. (Somehwere between $5 and $70 if you followed my advice.) At the same time the CC issuer will report that balance to the three bureaus.

In step 3 you pay the Amount Owed at the top of the statement -- and you pay it in full (PIF). Almost everyone nowadays does this electronically, but mailing in paper checks are a possibility too. My recomendation is to pay it shortly after the statement prints (e.g. a couple days after). Or you may choose to set up autopay so that the CC issuer always automatically debits your checking account for the amount in full. If you do set autopay (a great idea) bear in mind that autopay won't start right away, so be sure to make manual payments the first two months after you set it up (and also call the issuer a week later and ask if they can confirm that autopay was set up).

Once you get comfortable with how this all works, you can if you want spend more than $70 per month. You just have to make two payments. Thus, if some month you buy an $800 TV on your card, you'd need to pay that huge balance down to $5 a few days before the statement prints, and then (a few days after the statement prints) make your usual payment in full of the Amount Owed. Don't do that untill you are really comfortable with how it all works. It would be bad for you if your sole credit card reported a high balance to the three bureaus.

When you have exactly one card, you ideally want the card to report a positive but still fairly small balance each month. When you have more than one card, it's fine if most of your cards report $0, but you still want one card to report a positive balance.

Re: Building a credit

Melisaw24 — Mon, 19 Jun 2017 22:56:31 GMT

CreditGuyInDixie - Love your post . Very helpful.

THANK YOU.

Re: Building a credit

Anonymous — Tue, 20 Jun 2017 03:21:50 GMT

@Melisaw24 wrote:
CreditGuyInDixie - Love your post . Very helpful.
THANK YOU.

Very welcome. And glad you have joined the forums!

Re: Building a credit

Anonymous — Tue, 20 Jun 2017 13:22:50 GMT

@Anonymous wrote:
Hi everyone. Im 21 yo moved to States about a year ago from Russia. Recently started working on my credit score (in Russia we don't have such a thing to worry about, so it's all new to me). Apparently in America you better have solid CS and history to get best offers for cars/credit cards and even renting apartment. Well, thats something new to me, but I hope with your help I'll figure all this out pretty quick.
So, recently I applied and received my first BofA secured credit card with $1000 credit line. People I know reommended to apply for other CC in couple of months. So there's a lot of info on the internet about how to build your credit but all of it seems pretty general. So my question is what I should and what shouldn't do to build my credit? What I need to avoid? Are there any "tricks" that aren't obvious but have good impact on CS?
Im currently working with monthly income about $1600. Don't pay rent. But I do pay for all family bills (roughly $600-$650 a month). Have a few thousand dollars savings.
I would highly appreciate any information/advice.

Thank you

-O

Welcome to the USA and to these forums, which are just about the best resources for managing credit cards in particular and credit in general! (Just don't get too overwhelmed by the folks who have tons of credit cards with gigantic limits - they make me go good gosh almighty, too! )

You've already taken one of the most important steps by getting a good secured card from Bank of America with a good starting credit line - that particular card, with a history of responsible use, has a good possibility for being upgraded to an unsecured card. CreditGuyInDixie's post has a good general roadmap for you to follow; I also echo the recommendations for you to get your free credit reports from the three major bureaus (TransUnion, Equifax and Experian) once you've built up some payment history with your secured BoA card. There will be some variations among the three FICO scores, which is entirely normal. Also, going forward, be aware that not every lender will pull the same bureau when making a credit decision, so you'll see a different number of inquiries on your report depending on which bureau you're looking at.

One thing that I need to caution you on is the so-called Shopping Cart Trick, which you'll see numerous discussions about here and elsewhere. Basically, if you don't already know about this, it's a way to get store/retail credit cards quickly and without incurring hard inquiries on your credit reports by accepting "pre-approved" offers from Comenity Bank, which issues many store credit cards, at checkout time on those particular store websites. It can be useful, but you need to be VERY careful to only apply for cards that you actually intend to use regularly from stores that you plan to shop at regularly. Comenity is known to take adverse action ("AA") against cardholders who have a LOT of their cards with very high limits, if they don't use those cards regulary and/or run up too-high balances, by either reducing credit lines and/or closing cards entirely, so be careful!

Also, avoid "subprime" lenders like Credit One, Surge, Premier, etc. if at all possible. They'll hit you with all sorts of fees and deduct those fees from your credit lines, which usually aren't very good to begin with. Stay away from them and only get bank cards from reputable lenders like BoA, Capital One, Discover, etc.

Re: Building a credit

Anonymous — Tue, 20 Jun 2017 17:01:22 GMT

Got it, so I received my first statement yesterday, im attaching link to it as well, closing date is June 14 and so I need to pay if full each month BEFORE 14. Is that right?

Joe8185 - thank you for your advice as well, I was thinking to apply for Capital One in couple of months from now.

https://ibb.co/gVQqhk

Re: Building a credit

Anonymous — Tue, 20 Jun 2017 17:20:57 GMT

@Anonymous wrote:

Got it, so I received my first statement yesterday, im attaching link to it as well, closing date is June 14 and so I need to pay if full each month BEFORE 14. Is that right?

No. I will recap my recommendations again in green boldface below:

(1) Use your card each month. It doesn't have to be a lot. One purchase for at least $5 is plenty....

(2) Let the statement print with a balance of at least $5 and write down what date that happend.

(3) After the statement prints, pay the amount owed at the top of the statement in full.

Note that step #3 advises you to make your payment after the statement prints.

Paying the CC balance to zero before the statement prints will cause the statement to print with a $0 balance, and therefore will cause the issuer to report $0 to the three bureaus.. This strategy is called PTZ or Pay To Zero and is different from PIF or Pay In Full. PTZ is something that can sometimes be helpful when a person has multiple credit cards -- it then becomes part of a larger strategy called AZEO or All cards reporting Zero Except One.

It is important, however, to always have one card reporting a positive balance. That is why when you have exactly one card you need to always pay after the statement prints.

When you start getting more familiar with this (3+ months from now) you could start using your card more if you need to -- in which case you'd make two payments. You'd pay your balance down to $5 three or four days before the statement prints, and then you'd PIF again a few days after the statement prints. I explain this in detail earlier in the thread as well.

Re: Building a credit

Anonymous — Tue, 20 Jun 2017 17:52:29 GMT

Oh, ok, I understand it now. So for the begining I need to pay in full AFTER the statement prints, and later if I'll make any expensive purchases (let's say TV for $500) I'm gonna make $480 payment BEFORE the statements prints (in my case it's 14) and AFTER I get the statement I pay ramaining balance of $20.

Re: Building a credit

Anonymous — Tue, 20 Jun 2017 18:12:53 GMT

Yup, you got it!

That way you will keep the amount that reports to the three bureaus a small positive number. $20 is a perfect number to shoot for. It could be as small as $5 or as high as $89. (But $89 is right at the edge, try for a good bit lower.) The 89 dollar figure I got from the fact that you have a $1000 credit limit. You want to always have your total utilization < 8.99% of that credit limit -- if you want to avoid a scoring penalty.

Temporary scoring penalties are not even a big deal, except that in your first 13 months you will be doing things like adding an SS loan, adding more cards, etc. -- and so it makes sense to watch your reported balances very carefully.

Re: Building a credit

Anonymous — Tue, 20 Jun 2017 18:34:06 GMT

Perfect, THANK YOU so much for your help!!