First Ever Credit Card

[Watchmann]

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@Anonymous wrote:

TomW:

You should never set up auto-pay, it best to be done by you so that you remember what you did, what you pay and when you pay it. You should never trust auto-pay, for instance if there is a computer glitch or system errors (YOU NEVER KNOW), your payment will be missed and you will be screwed with late payments fees, APR increase and of course your credit history..

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Theoretically you are correct to never trust auto billpay, but in over thirty years of having life insurance premiums automatically deducted, and over six years of mortgage payments, I've never had one that was missed.  Sure, it COULD happen, but not likely.  It depends on the individual's reliability; if he/she tends to forget making payments than it is better to set up autopay and have it done automatically. 

It's the same with your paycheck, how many times has an autopay into your checking account gone astray?  Once set up and functioning they are about as reliable as the sun rising in the East.  The critical issue is getting it setup correctly to begin with and making sure it all goes correctly.  After that, forget about it, it'll work.

Message Edited by Watchmann on 12-15-2009 10:05 PM

[MarineVietVet]

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@Watchmann wrote:

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Theoretically you are correct to never trust auto billpay, but in over thirty years of having life insurance premiums automatically deducted, and over six years of mortgage payments, I've never had one that was missed.  Sure, it COULD happen, but not likely.  It depends on the individual's reliability; if he/she tends to forget making payments than it is better to set up autopay and have it done automatically. 

It's the same with your paycheck, how many times has an autopay into your checking account gone astray?  Once set up and functioning they are about as reliable as the sun rising in the East.  The critical issue is getting it setup correctly to begin with and making sure it all goes correctly.  After that, forget about it, it'll work.

Message Edited by Watchmann on 12-15-2009 10:05 PM

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I agree with this. I have had most of my bills set up on autopay for many years without any problems. However you need to trust but verify. I check my accounts constantly to make sure the payments go through on time. I set them up to pay early enough so that if there is a problem (never has been) I can take care of it in plenty of time.

7/09 TU-742 EQ- 779
8/09 TU-765 EQ- 783
9/09 EX pulled by lender 802

CC interest free as of 8/09
"Hello my name is Sandy and I'm a recovering crediholic".

[trynnagetright]

lol, that is too funny, yet so true moondog. I agree with you!

[trynnagetright]

i agree, with BOA especially. My first card was with them and somehow they gave me the student visa with $1k limit. I used the heck out of it and PIF every month,  sometimes 2x a month if i used that much. They liked that and after about 10 weeks of having the card they increased me to $1500, by month 3 I was at $3200. Now this was back in 2007 so i dont know if they are still that generous. But I agree, use the dang card and take care of it. Worry about util after 6 months of having credit history established.

[cashnocredit]

I agree with moondog. Don't worry about utilization. Your FICO score is of zero importance unless you are applying for new credit. You can then PIF before the statement cuts the month or two before applying. Your FICO is not hurt at all by prior month's util. If you had a new, unsecured, CC then really high util could trigger adverse action but that is not a worry with secured cards.

There's actually a good reason to PIF but not prepay and let the balance report. These monthly ending balances are a big factor in the new software used to impute income and debt capacity. A large variance indicates you have the means to make larger charges and supports a higher CL. Internally, your CC bank will know what is flowing though your account but other potential CC people will not have that info. They can only go by the monthly ending balances on your credit report. So to enhance your credit long term, use your CC normally, PIF,  but don't prepay until just before you apply for credit.

If I was an underwriter this  would be my take on 4 patterns of CC ending balances on a $500 card from worst to best:

Early-------------->Most Recent

370 380 420 410 420 435  -debt trending up, suggests smallish new flowthrough and little ability to handle new credit.

400 390 420 430 410 435 -debt stable and is being managed but small debt changes suggest marginal capacity for new credit,

25 35 15 22 36 0 25 -conservative levels of debt, low risk. Very unlikely to lose money but may not use or service higher debt/credit.

400 90 310 470 145 25 -Likely a PIF customer. High ability to handle increased debt.  

Scale to one's card limit.

[Anonymous]

I would still shoot for a small balance reporting because utilization has such a large impact on FICO scores and AA from other creditors.  I think it's a good habit.  I don't think there's anything OCD about it - just be sure your statement balance is low.  As HTSU mentioned on another post, you don't always have a month or two for FICO adjustments.  Watching your statement balance is simply FICO savvy and easy to do.  And I would start that habit from the first card - it wll always serve you well.

[haulingthescoreup]

Interesting point about letting other creditors see that you use cards a lot.

For those of us who delight in making things even more complicated, lol, one good version is the old rotation bit, letting only one card report a balance before PIF'ing. If your total CL is high enough, the util on that one card probably won't increase overall util very much. Next month let another report.

If you don't have a gi-normous number of cards, you can rotate them through, although there will probably be an occasional several-day period when two (or none) are reporting, due to different statement dates.

So as a version of the example given above, this might be the report of one consumer over a six-month period on cards A-F:

A: 0 - 850 - 0 - 0 - 0 - 0

B: 0 - 0 - 700 - 0 - 0 - 0

C: 0 - 0 - 0 - 1200 - 0 - 0

D: 0 - 0 - 0 - 0 - 1050 - 0

E: 0 - 0 - 0 - 0 - 0 - 800

F: 1350 - 0 - 0 - 0 - 0 - 0

Note: credit gardening can be fun, but every now and again you do have to slap yourself around a bit before you go completely off the road.