New User and Recent College Grad Looking For Some Advice

[Anonymous]

I'm a long time reader here, but finally decided to register to get some advice from you fine folks.

Background:

Credit Score (6-28-12) - 664

Discover Credit Card - Limit = $2,500, Used = $2,300

- This is a relatively new card (3 months) that I opened mainly to help with expenses and bills as I winded down my college career. I am working now and plan to have this paid off within the next month.

Citi Credit Card - Limit = $3,500, Used = $3,300

- This is a "student" credit card that is my oldest line of credit. As you can see, it is pretty much maxed out. After I pay off the Discover, I am hoping to be able to pay this one off pretty soon as well. I'm not too fond of this credit card, and would eventually like to replace it with something that offers a little better rewards (mainly gas.) I plan to keep the card open since it's my oldest card (about 3 years), but hopefully it will be carrying a $0 balance within 3 months.

PayPal Smart Connect - Limit = $400, Used = $0

- Not sure if I've ever used this. I hardly use PayPal except to occaisonally send/receive money from family/friends for small things.

Amazon Store Card - Limit = $700, Used = $0

- I don't think I've ever used this either. At one point I was considering buying a laptop with this, but never got around to it.

Additionally, I have one hard inquiry from Cap. One from 7-17-10. It is my understanding that this should be coming off my record on 7-17-12, as that will be 2 years. Is that correct?

Also, I will have somewhere around $75,000 of student loans coming due in Novemember, which is when my 6-month standard grace period will end.

I am trying to pay off my two credit cards before November. My question is this....I am working now and making good money. My career path is a little uncertain now (as far as where exactly I will be located permanently), so I am living with my parents until something is set in stone. So I really have no bills to be paying right now. I'd like to try and improve my credit score while I can, because within the next 2 years I will be looking for a house somewhere and a new vehicle.

I am looking for a credit card with good rewards. I don't need a huge limit right now (maybe 1,500-2,000 if possible.) I'd like to get 0% for 12, 15, 18 months (whatever is the current offer.) I need to buy some new work clothes, a new computer, and various other things. I am hoping to put those purchases on this new credit card, while continuing to pay off the other 2 cards.

Any advice from anyone? Should I do something now before my student loans become due? Once the loans are due will that decrease my credit score a good bit?

Thanks in advance for any help! I know the message is a little long, but I just wanted to lay all the information out there.

[webhopper]

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@Anonymous wrote:

I'm a long time reader here, but finally decided to register to get some advice from you fine folks.

Background:

Credit Score (6-28-12) - 664

Discover Credit Card - Limit = $2,500, Used = $2,300

- This is a relatively new card (3 months) that I opened mainly to help with expenses and bills as I winded down my college career. I am working now and plan to have this paid off within the next month.

Citi Credit Card - Limit = $3,500, Used = $3,300

- This is a "student" credit card that is my oldest line of credit. As you can see, it is pretty much maxed out. After I pay off the Discover, I am hoping to be able to pay this one off pretty soon as well. I'm not too fond of this credit card, and would eventually like to replace it with something that offers a little better rewards (mainly gas.) I plan to keep the card open since it's my oldest card (about 3 years), but hopefully it will be carrying a $0 balance within 3 months.

PayPal Smart Connect - Limit = $400, Used = $0

- Not sure if I've ever used this. I hardly use PayPal except to occaisonally send/receive money from family/friends for small things.

Amazon Store Card - Limit = $700, Used = $0

- I don't think I've ever used this either. At one point I was considering buying a laptop with this, but never got around to it.

Additionally, I have one hard inquiry from Cap. One from 7-17-10. It is my understanding that this should be coming off my record on 7-17-12, as that will be 2 years. Is that correct?

Also, I will have somewhere around $75,000 of student loans coming due in Novemember, which is when my 6-month standard grace period will end.

I am trying to pay off my two credit cards before November. My question is this....I am working now and making good money. My career path is a little uncertain now (as far as where exactly I will be located permanently), so I am living with my parents until something is set in stone. So I really have no bills to be paying right now. I'd like to try and improve my credit score while I can, because within the next 2 years I will be looking for a house somewhere and a new vehicle.

I am looking for a credit card with good rewards. I don't need a huge limit right now (maybe 1,500-2,000 if possible.) I'd like to get 0% for 12, 15, 18 months (whatever is the current offer.) I need to buy some new work clothes, a new computer, and various other things. I am hoping to put those purchases on this new credit card, while continuing to pay off the other 2 cards.

Any advice from anyone? Should I do something now before my student loans become due? Once the loans are due will that decrease my credit score a good bit?

Thanks in advance for any help! I know the message is a little long, but I just wanted to lay all the information out there.

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Hey there!  Welcome to the forum!  We are glad to have you!

First step I would do, is consolidate all of your loans into one payment and sign up for an Income Based Repayment Plan on your Student Loans. I'm not sure what amount you will end up with, but the single payment makes it easier to keep track of.  I know when I first graduated, I was paying like 6 difference bills and it was crazy until I consolidated!!

You're doing the right thing by thinking and planning on this.

Second step will be to pay down your current balances, I know you were thinking of applying for a new card, but you won't be approved with a good limit until you pay down your current lenders... With two cards maxed, you look very risky. 

You can also ask Citi for a Product Change to the Citi Forwards... This gives you 5 points for every 1 dollar spent on entertainment, including Bookstores, which is what they classify Amazon as.  So if you order your laptop from amazon,  you get 5X the reward thank you points

There are two cards I would suggest to apply for AFTER you get finished paying down balances:

American Express Zync - to build a relationship with Amex, for future backdating of Amex Cards

Chase Freedom

These are both really solid cards that will grow with you.  Also who do you bank with?  They may be able to offer you a good rewards credit card, and take your current relationship into consideration when you app.  Also, you may look at some of the department stores you shop and determine if a store card would fit your needs.

If you think you might need to buy a car in the next three yrs, I would look at doing some type of secured loan after you get all balances paid down.  The secured loan builds installment payment history.

Do you have any military affiliations, if so, I would check eligibility for becoming a full USAA or NFCU member.  USAA and NFCU take really good care of their customers.

[crunching_numbers]

Hi RxWVU and welcome to the Forums!

First: My first question is whether the score you provided is a FICO or FAKO?  It will help people determine what products might be a good fit for you.

Second: Amazon Store card is a GE issued card.  GE is relatively generous with CLI.  If you have not used the automated system ans asked for one yet (provided the card is at least 6 months old), then you should ask them to.  Ask for a high number (like $2000), and they will counter offer. This will help your utility.  

Third: You need to get some of the balance off your cards.  They are both maxed in the eyes of FICO.  Lowering your balances will automatically raise your FICO score.

Fourth:  The student loans will have impact, but in several ways.  They will help your mix of credit.  The balances will not be helpful.  The number of loans will also have an affect.  The monthy payments due amount will affect the way creditors see you. 

Fifth:  In preparation for a mortgage, you will want to look into a SL consolidation after they all hit.  It will make you monthly payment amount go down, and make life easier with one payment due. 

After you get the balances down some, and before the student loans hit will be the optimal time.  Hopefully then your HP's will have a year to age off your CR before the mortgage app process starts.

[Anonymous]

Thanks for the responses!

I bank with BB&T. I have no military affiliations. The credit score is my FICO score.

It's very interesting to hear everyone on this board recommend consolidating the student loans. I had always planned to do this anyway, as it seems like it would just be so much easier. But, recently (before graduation) we had a university financial aid rep tell us to NOT consolidate the loans. He made the point that the interest rate you get from consolidating the loans will be higher than if you just paid all the loans separately. That really confused me, because I had always heard differently.

To tell you the truth, even if the interest rate goes up form consolidating, as long as it's not an insane increase I would still be tempted to do it. Just so much easier, wouldn't risk a late/missed payment from confusion, etc.

I am very aware that the ballance of the two credit cards really needs to be paid off before I do anything. Just this morning I posted a $500 payment to my Discover card, so the balance is now somewhere around $1,800. Small steps I guess.

Like I said, sometime within the next 2 years I will be buying a house. The vehicle is likely, but not necessary if other things are more important. My first priority is to continue paying off my cards.

Something that I just remembered after making the original post is that I still have about 8 months or so of 0% APR on my new Discover Card. So, I'm hoping to pay the majority of it off, and then use that as my "new" card to make the purchases I mentioned in the first post.

I really need to work on paying that Citi Card off though as I'm paying about 23% in interest right now.

One of you mentioned a store CC. I was thinking about eventually getting a Best Buy Credit Card, but I haven't done much research on them yet. Once my future becomes a little more clear, I will need some electronics and household appliances that I could put on that card. It's kind of hard to think that far down the line right now though. I think I'll just try to pay the Discover off by the end of July and then start making some more smaller purchases on that card, while at the same time trying to pay off the Citi ASAP.

I've read a lot about the Chase Freedom card and like it. It also seems like once I get the majority of my balances paid off, I would probably be approved for that card even with my credit score as it is now.

I will also check on the Amazon limit increase, if nothing more than to help with the ulitiy.

Thanks guys for the advice, and if you have anything else to add, it would be greatly appreciated. I'll try to keep this thread updated with news/questions as I start my quest to improve my credit score and get rid of some debt.

[TNTransplant]

All very good advice so far...

As web hopper noted, you need to get your student loan debt consolidated into one (lower) monthly payment while it's in deferrment, if you've not already done so; this will make it much easier to keep track of once you begin payment.  Also, you should definitely pay down your credit card balances before you apply for any additional cards.

As crunching_numbers advised, try to get CLIs on your Amazon store card AND your PayPal Smart Connect.  Both are GE issued cards, and you can usually get regular credit line increases with soft pulls only.  As already pointed out, not only does this help lower your overall utilization (one of the quickest ways to boost your score is to have a low utilization on your revolving debt), it will not cause your FICO score to decrease secondary to hard inquiries.  This will then set you up to apply for additional cards and maximize your chances to get good starting credit limits.

Good luck to you - sounds like you're doing all the right things. 

ETA (based on your new post above):  It's true that you often do get a higher interest rate from consolidating (not bad - mine only increased by about 1%), but it drastically lowers the payment/decreases the risk of missing payments.  If you're looking to buy a house in the next couple of years, your payments on multiple student loans will all separately be calculated into your Debt-to-Income ratio, and total payments would be much higher than one consolidated payment, thus decreasing the loan amount of your mortgage approval.  You can always pay more than the minimum on your consolidated student loan, which will be applied to the principal balance and negate the interest penalty. 

[Anonymous]

To OP: Sounds good! I'm not quite the "spring chicken" I used to be...but, not old. I wish I had originally planned better coming straight out of college the first time around. : ) Also, having said that, congrats on the Citi Card, too. I applied recently for the Citi Forward (Student) card and was denied, despite having $60k+ income and a fair amount of "considered assets" for a "Student Card." My FICO score was in the 660-670 range, and I had one CA that I paid almost 4 years ago for under $100. Other than that no negatives, perfect payment history for past 7 years minus that one "blip." I've also had a strong banking relationship with them for about 5 years now, and finally decided to apply. Go figure. Good thing I just opened my NFCU account : )))

At any rate, the GE cards are always great for 'starter cards' as mentioned. GAP was one of my first, and is great. Otherwise, Lowe's, Amazon Store Card, Walmart (especially because you get a free Transunion score every month free), Barclay's is good (Apple Financing, iTunes card), and of course AMEX Zync you shouldn't have any problems really getting. I run all of my "debit-like" transactions through my Zync now per month, and other charges on my NFCU card, and then have couple other misc cards.

I'm also running into the problem (next year) of multiple student loan payments, as my accounts are grouped into about 6-7 different "structures." That is, different interest rates, etc. Thank you TNTransplant for the Student Loan/Mortagage advice. I didn't realize that would weigh differently compared to a consolidated payment strcuture (instead of multiple)!  Love this forum! It's changed my credit history and POV tremendously. 

[webhopper]

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@TNTransplant wrote:

All very good advice so far...

As web hopper noted, you need to get your student loan debt consolidated into one (lower) monthly payment while it's in deferrment, if you've not already done so; this will make it much easier to keep track of once you begin payment.  Also, you should definitely pay down your credit card balances before you apply for any additional cards.

As crunching_numbers advised, try to get CLIs on your Amazon store card AND your PayPal Smart Connect.  Both are GE issued cards, and you can usually get regular credit line increases with soft pulls only.  As already pointed out, not only does this help lower your overall utilization (one of the quickest ways to boost your score is to have a low utilization on your revolving debt), it will not cause your FICO score to decrease secondary to hard inquiries.  This will then set you up to apply for additional cards and maximize your chances to get good starting credit limits.

Good luck to you - sounds like you're doing all the right things. 

ETA (based on your new post above):  It's true that you often do get a higher interest rate from consolidating (not bad - mine only increased by about 1%), but it drastically lowers the payment/decreases the risk of missing payments.  If you're looking to buy a house in the next couple of years, your payments on multiple student loans will all separately be calculated into your Debt-to-Income ratio, and total payments would be much higher than one consolidated payment, thus decreasing the loan amount of your mortgage approval.  You can always pay more than the minimum on your consolidated student loan, which will be applied to the principal balance and negate the interest penalty. 

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On federal consolidation loans, the interest rate is calculated by taking the average of all loans consolidated. Are these student loans federal or private?  I don't think you'll see as great an interest charge increase if they are federal, but I could be wrong, I consolidated 5 yrs ago and things have changed drastically in that time.

[Anonymous]

Webhopper:

All of my loans are federal loans. There's like 10 of them, and I'm starting to see how consolidating them is the way to go. Way too much to keep track of with that many different payments.

I haven't been given the option to consolidate yet, but I haven't received any of my financial aid stuff from my university yet. I am able to view them and see the total amount I'll owe, but according to a rep at my school they will be sending a ton of information my way about consolidating and everything within a month.

[webhopper]

I think you can consolidate at any time. I think the dept of ed is now using http://www.loanconsolidation.ed.gov/  to consolidate federal loans.  Back when I did my consolidation, you could go to individual banks and do them as long as they were offering it. I used Chase Bank to consolidate mine, and the student loans are now serviced by ACS after being serviced by Chase from 2007-2010.

All you really need is the amount for each loan and the loan number. When you start getting your first statements in, hang onto them cause you'll need that info.

[Anonymous]

One thing that hasn't been suggested is to consider moving some of the balance from citi to discover via balance transfer to sve on interest. IMHO, you should be paying down your cc as fast as possible which will likely raise your scores to the 700s and allow you to get any card you want. One option is to play with balances and see what your score is and maybe get a card to bt to. First move enough of balance of Citibank card so that it is <80% utilization. Once it reports, see what your score is. Call discover and se if they would increase cl and extend bt offer. If not, then call Citibank and see what they will do.