Relearning how to use credit

[Anonymous]

Friends, 

I feel like I've asked versions of this question over the last several days, and now I've gotten to the root of my question. 

How do I relearn how to use credit?

I did Dave Ramsey and went through a phase where I believed credit was bad, unnecessary, etc. I paid off my house during this time as well. 

Now, I've gotten reorganized, realize the benefits of credit, etc. 

My open lines are below in the signature line. My scores are all high 700s. 

What is the optimum use of the credit that I have? What should I be doing and why? 

Do I need any additional credit lines? For example, should I get a share loan @ PenFed? (I have no installment accounts open). 

As you see, I have four credit cards (three in hand, penfed in the mail) and one personal line of credit. 

Thanks for going with me on this journey

P

[Anonymous]

I'm not quite sure what you mean regarding how to use credit.  Perhaps you can be more specific as to what your goal is?

Just use your credit cards naturally and pay them off in full every cycle, thus never paying a penny of interest.  That's about all there is to it when it comes to revolvers.  As far as installment loans, just never miss a payment and you're good.

[Anonymous]

I mean questions like the following:

should I use each one every month? 
what is the max percentage I should use on any single card?

what do you wish you would've known about credit at the very beginning? 

P

[Anonymous]

4 cards and the loan are a good foundation to build on. The ideal profile when starting out is 3 cards and 1 loan. Only benefit i see from another loan is if the current one is almost paid off. I had my only loan drop off a couple months ago paid in good standing, and my scores dropped around 20 points. I read a book called Your Score by Anthony Davenport. This was my favorite of about 5 books. I highly suggest it, along with reading lots of posts here

[ccquest]

I don't think you should open things you don't need if you aren't planning on needing any new credit anytime soon. The SSL trick might get you some bonus points on your FICO score, but do you need a higher score for anything? Sounds like you already have your house and car paid off. But if the points make you happy, go ahead and do it if the money isn't better used somewhere else.

As far as using your credit and what's best, I recommend reading over the scoring primer.

Optimal (FICO 8 scoring) usage is [not $0] - 9% of revolving credit limit and having just one of your three credit cards reporting a balance. The Platinum factors in differently. If you go past that, try to stay under 30%. You want to follow these limits per card and overall.

Only thing I think would have been useful before it knowing the wide variety of cards out there and how much more cashback I could have been getting (along with scoring increase I guess) by having multiple credit cards instead of just the one I had for the last seven years.

[dragontears]

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@Anonymous wrote:

I mean questions like the following:

should I use each one every month? you should use cards when it benefits you (i.e. rewards) if that is every month that is fine 
what is the max percentage I should use on any single card? try to keep it under 30% but if you have to go over that for a month that is fine 

what do you wish you would've known about credit at the very beginning? AZEO is over rated when your scores are decent and you are not applying for new credit 

P

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[Anonymous]

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@dragontears wrote:

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what is the max percentage I should use on any single card? try to keep it under 30% but if you have to go over that for a month that is fine

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Keep in mine that usage is not the same as a reported balance.  One can use 100%, even 200% or more of their limit if they make multiple payments during a cycle.  What matters is what the reported balance is at the end of the cycle, which I agree should be under 30% under most circumstances to limit risk.

Cornelius has a $1000 limit card.  He buys a new TV for $1000, then pays off $750 of it.  The remaining $250 reports.  His usage is 100%, as he used all of his limit.  His reported balance is 25% however.

Rupert has a $1000 limit card.  He spends $450 on random stuff during the cycle and that $450 balance reports.  His usage was only 45%, but his reported balance is also 45%.  Rupert's usage was less than Cornelius' but in terms of Fico scoring/risk assessment he's in a worse place.

[dragontears]

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@Anonymous wrote:

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@dragontears wrote:

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what is the max percentage I should use on any single card? try to keep it under 30% but if you have to go over that for a month that is fine

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Keep in mine that usage is not the same as a reported balance.  One can use 100%, even 200% or more of their limit if they make multiple payments during a cycle.  What matters is what the reported balance is at the end of the cycle, which I agree should be under 30% under most circumstances to limit risk.

Cornelius has a $1000 limit card.  He buys a new TV for $1000, then pays off $750 of it.  The remaining $250 reports.  His usage is 100%, as he used all of his limit.  His reported balance is 25% however.

Rupert has a $1000 limit card.  He spends $450 on random stuff during the cycle and that $450 balance reports.  His usage was only 45%, but his reported balance is also 45%.  Rupert's usage was less than Cornelius' but in terms of Fico scoring/risk assessment he's in a worse place.

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Excellent point, especially when someone is starting out and doesn't yet have limits to support their natural spending in a month 

[Anonymous]

Your scores are in the high 700s. You have a paid off house. You have decent cards. Go have a beer. That's it. Really.

[joeyv1985]

I agree. Petergee, seems like you have things in order. Just keep your spending in chick and don't apply for credit unless you have to. Having score's in the hi 700's with a home that's been paid off? What's not to like? Personally, I would rather be in your situation then have an 800 score with a Mortgage. But that's just me.