I'm a woman in my early 30s who spent my early 20s mismanaging credit cards. By the time I was 23, a long-term hospitalization (after coma) and repeated major mistakes financially landed me in a world of trouble with creditors. Nearly every account I had (medical collections and store credit cards) was charged off. I negotiated and paid them off, but it took years and my credit was utterly shot. Fortunately, I grew up, managed money better, and my husband has a high income and we enjoy a very comfortable life and pay cash for everything including our college educations and cars. Unfortunately, paying cash for a home in our area of New England is not really in the cards with four children, nor do I think it's the best use of our resources to clean everything out. The house we live in we have a lease option for, which is why actually having credit matters now, as we'd like to own it. The sooner we can purchase it, the less money we are sticking towards rent.
Fast forward to about two months ago and I was purchasing something at J. Crew and received a pop up saying I was pre-approved. I hadn't had anything in my name in probably 8-10 years. I decided it couldn't hurt my already horrible credit (the three scores averaged to 512) and went for it. I then utilized this forum to read more about the so- called "shopping cart trick" and after opening Victoria's Secret ($350), J. Crew ($300), and Overstock ($750), decided to just say "what the hell" and applied for credit at Blue Nile, (I was purchasing something anyways and was approved for $1000) and finally, my very first "real" card and received a Capital One visa ($300, but it stated that after 6 on time payments I would be increased automatically to $500). My scores today average 631.
I realize these are all "toy cards" and tiny limits, but I don't need the credit to purchase things day to day, but our goal is to purchase a home in 18-24 months. The downpayment isn't an issue. Managing these cards isn't a problem, as we could pay them off in full tomorrow if I maxed them out today. My issue is how to get over the 700 mark and obviously, the higher the better. Do I wait awhile to apply for another Visa/MC/AmEx? Do I *want* to get more store cards? Will that help me? I have read varying advice about utilization. Is it best to purchase something money and pay it off in full? Carry a small balance? I've read several times to stay under 30% utilization overall, which makes sense. Should I ask our bank for a pre-paid card using our savings as collateral? Are credit cards even the best way to get from A to B here?
I apologize for the length, but I figured I'd err on the side of too much information. I feel as though the more I read, the more confused I become about how to best reach our financial goals. Thank you for any assistance you can provide.
