Some basic questions about credit scores

[Anonymous]

Hi guys. My first post here so please be gentle ... I'm an international student here in the US and I got my first credit card from Bank of America about 4 months ago. Before that time I've never had any credit/loan related thing in the US, even though my SSN is about 7 years old. As I expect to be here for another 5-7 years, I want to start building a credit history because of which I have some basic questions to ask:

1) I've been using my one Bank of America credit card regularly for about 4 months so how can I make sure that a credit history against my SSN being even being maintained now ?

2) Up until very recently I thought that using your credit card a lot (using up most of the credit limit) followed by a payment which cleared the whole bill is something good (as I thought it showed your ability to pay large bills), because of which I used up to 80% of my $1500 credit limit (but I paid everything on time). I now see that this is a bad thing and going forward I won't be using more than 30% of my credit limit. Question is though, how badly do you think this has affected my credit score ?

3) By when should I apply for my next credit card ? I really want to apply for a Discover credit card as it has a lot of deals, but I fear I might get rejected. Would it help if an existing Discover card user referred me ?

Thanks guys !

[takeshi74]

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@Anonymous wrote:

I've been using my one Bank of America credit card regularly for about 4 months so how can I make sure that a credit history against my SSN being even being maintained now ?

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You are building a credit history.  You can confirm by pulling your credit reports, either via the Annual Credit Report site, directly from each CRA or via a monitoring service.

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@Anonymous wrote:

Up until very recently I thought that using your credit card a lot (using up most of the credit limit) followed by a payment which cleared the whole bill is something good (as I thought it showed your ability to pay large bills), because of which I used up to 80% of my $1500 credit limit (but I paid everything on time). I now see that this is a bad thing and going forward I won't be using more than 30% of my credit limit. Question is though, how badly do you think this has affected my credit score ?

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It's commonly assumed that spending a lot and paying helps but it's primarily your credit profile and income that will be used in credit decisions.

Revolving utilization has a signficant impact, falling under Amounts Owed http://www.myfico.com/crediteducation/whatsinyourscore.aspx --  but we can't tell you how many points you''ve gained or lost for any change.  It's not just about the change itself but your credit profile and how the change factors into your profile.  If you want to know the score impact you have to pull your scores and see how they change.  However, IIRC, you need at least 6 months to generate a score.  Your prior revolving utilization doesn't matter.  What matters is your revolving utilization as indicated on your reports (balance[s] & limit[s]).  When your reported revolving utilization changes you scores will reflect the change.

Additionally, limiting spend is just one way to control revolving utilization.  You can also spend as much as you need/want and pay down the balance prior to the report date.  Your current balance on report date will be the balance reported to the CRA's.  Most card report on statement date.  Not all do.  I don't recall if BofA reports on statement date or not.

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@Anonymous wrote:

By when should I apply for my next credit card ? I really want to apply for a Discover credit card as it has a lot of deals, but I fear I might get rejected. Would it help if an existing Discover card user referred me ? 

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Again, it's your credit profile and income.  A referral does not change either of those.  As for when, it's difficult to say.  A typically suggested guideline is when your current card is around 6 months old but, again, it's really a matter of when your credit profile and income qualify and not just a matter of time.  Don't be afraid of rejection.  A hard pull is the only impact and it's a relatively small factor that will taper and fall off fairly quickly.  Don't go crazy with the applications but don't fear rejection either.  You have a thin and very nw credit profile that won't support a whole lot of credit seeking actviity, generally speaking.  You might have a better idea of the shape you're in once you pull your reports and you're able to pull your scores (though it's never just about score).

[aubie1kenobie2]

Your utilization in previous months will not impact your current score as long as you keep payments current (pay on time). If let's say your utilization last November was 80%, and this month you let 30% report, your credit score will reflect your current usage/utilization (after the credit card company updates the credit bureaus). On the other hand, if you have a late payment, that can affect your credit report for a long time.

I wouldn't use >30% of my CC's CL. Doing so can make certain creditors think you have "high-risk" behavior and may not necessarily establish you as a great customer (especially with a thin credit file and a short credit history).

[Anonymous]

Hi guys, thanks for your assistance earlier.

A few days ago I received a 'pre-screened' offer for a Mastercard Credit Card from CapitolOne. I'm wondering if I should accept the offer or not. The only reason why I feel like accepting it is because it has a credit score tracker through which I can monitor my FICO score.

I know you can get rejected even from a 'pre-screened' offer, but having said that I don't know if I should apply or not. As mentioned above, I got my first credit card (BofA) about 5-6 months ago, which I've always been paying on time.

[Anonymous]

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@Anonymous wrote:

Hi guys, thanks for your assistance earlier.

A few days ago I received a 'pre-screened' offer for a Mastercard Credit Card from CapitolOne. I'm wondering if I should accept the offer or not. The only reason why I feel like accepting it is because it has a credit score tracker through which I can monitor my FICO score.

I know you can get rejected even from a 'pre-screened' offer, but having said that I don't know if I should apply or not. As mentioned above, I got my first credit card (BofA) about 5-6 months ago, which I've always been paying on time.

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The Cap One Score Tracker uses a model different from FICO.  Since your only reason for getting this card is because you want a FICO score, I would not not take the offer.

A better choice for you would be a Discover product aimed at students.  Discover tends to be more friendly with people who are just starting out and who have very few accounts.  The Discover card should give you a true FICO 8 score based on data from TU.

I would wait to apply until your current card is 7 months old.  In the two months before you apply, you will want your current card to be reporting a very low but positive balance, e.g. 1-5% of your credit limit.