Am I taking the right steps?

[Anonymous]

I've decided I want to buy a new car this year.  My EQ & TU score is 670.  I know it's not great but it could be worse.  I bought my credit report the other day and it said one of the things hurting me is I don't have any revolving accounts (I have no credit cards).  I decided to apply for a Capitol One card. I got approved with a $500 CL.  (That was my first inquiry to my credit in 2 years.)  Am I taking the right steps to get a higher score? I know my score will take a hit for the inquiry but if I start using the credit card and pay it off each month, it should help build it back up, correct?  Is it better for my score to pay it off each month or allow a small balance to roll over a couple times a year?

My parents have awful credit so I'm just learning all this on my own.  Thanks, in advance, for any info!

[Anonymous]

Hi Tina,

Welcome!  And keep reading the threads - they are full of great stuff.

FICO likes to see a bank (or national credit card co.) card and they score you on that.  You only need one.

In your case, adding your first bank card (Cap One is a bank - which is very evident when I'm on the East coast and walk by Cap One branches, but can be news to those in my neck of the woods where there's not a brick and mortar branch anywhere in sight) will probably net you some good FICO points.  DH saw 29 points when he opened his first bank card; I saw 20 points.  But we both had older revolving accounts that were closed on our CR's; so YMMV.  Keep us posted when your Cap One reports - if you check out your FICO scores.  We'll all celebrate with you!

It looks like you're watching your inquiries, and you'll also want to watch your AAofA.

[MarineVietVet]

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@Anonymous wrote:

I've decided I want to buy a new car this year.  My EQ & TU score is 670.  I know it's not great but it could be worse.  I bought my credit report the other day and it said one of the things hurting me is I don't have any revolving accounts (I have no credit cards).  I decided to apply for a Capitol One card. I got approved with a $500 CL.  (That was my first inquiry to my credit in 2 years.)  Am I taking the right steps to get a higher score? I know my score will take a hit for the inquiry but if I start using the credit card and pay it off each month, it should help build it back up, correct?  Is it better for my score to pay it off each month or allow a small balance to roll over a couple times a year?

My parents have awful credit so I'm just learning all this on my own.  Thanks, in advance, for any info!

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Welcome to the forums.

A couple of comments. Revolving utilization (total balances divided by total available credit) is 30% of your total score so it's very important to keep it under control. The general consensus around here is to keep both individual card and overall utilization to <9%. In your case that is $45.

You can use your card as much as you want during a month but make sure the balance that is reported on your monthly statement is down to that desired percentage several days before the statement posts. The reason being is that your monthly utilization is calculated by whatever balance is reporting each month.

Once the statement posts then always pay in full before the due date to avoid finance charges. You NEVER have to carry a balance forward from month to month. All that does is cost you money and makes the credit card companies happy. 

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[Anonymous]

Thanks for that info! I think I'm going to link up the credit card to my iTunes and maybe use it for gas and then just pay off a couple days later.  It's got a high interest rate so if I don't have to carry over a balance then I won't. 

[larinoriani]

I think you are in the right direction. Let the new CC age a bit and you should be in better shape in about 6 months to apply for a car loan. When you open the car loan, you can wait about a year, so your new loan ages and builds history and you can then refinance for a better interest rate.

Then, is just matter of time and on-time payments, and you'll see your score go up consistently.