Using Credit Cards to Increase Scores

[Tankee]

Hello,

I am new to credit cards and MYFICO all together. Other than charging something on the card and paying it off before the end of the month, is there any other advice or suggestions on how to build credit? Right now I have 4 cards, 3 at $0.00 and one Capital One at $67.00/ $2750.00. Total available credit between all 4 cards= $4,550.00

I know to:

Pay on time

Pay every month

Try to pay off in full everymonth

Low utilization~1%-7%

How many credit cards should I have/ use?

When should I apply for a new credit card?

Which score is affected when applying for credit cards? Bankcard score? General Score?

Should I use each card at least once every month? OR just one card and make sure to pay if off?

Any advice would be appreciated!  

[Pway]

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@Tankee wrote:

Hello,

I am new to credit cards and MYFICO all together. Other than charging something on the card and paying it off before the end of the month, is there any other advice or suggestions on how to build credit? Right now I have 4 cards, 3 at $0.00 and one Capital One at $67.00/ $2750.00. Total available credit between all 4 cards= $4,550.00

I know to:

Pay on time

Pay every month

Try to pay off in full everymonth

Low utilization~1%-7%

How many credit cards should I have/ use?

When should I apply for a new credit card?

Which score is affected when applying for credit cards? Bankcard score? General Score?

Should I use each card at least once every month? OR just one card and make sure to pay if off?

Any advice would be appreciated!  

---

You are doing great.  You have three cards for maximum scoring.  Do you have an installment loan?  Student loans, car note or etc?  How long have you had your current cards?

[Tankee]

Hi Pway and thanks,

Yes, I have consolidated student loans that are deferred, $49,000 total. I have a recent car loan, obtained March 2015, that has been on time. I just got the Discover IT card today. I sold my house in March 2015, so no home loan as of right now.  I got the capital one cards (2) September 2014. I've had the First Tech credit card since 2013.

[Pway]

You welcome.  You are doing things as planned.  Allow those cards and loan to age and you will be on your way. 

Good Luck

[Tankee]

Thank you!

So....should I use each card at least once every month?

OR just one card and make sure to pay if off?

What is the best approach?

[Pway]

I have my credit monitoring on one of my cards.  I use the other for everyday purchases and the others are in my sock drawer.  I switch up about every 2 months or so or you can put a pack of gum or a tank of gas on it.  It just depends. 

[Thomas_Thumb]

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@Tankee wrote:

Thank you!

So....should I use each card at least once every month?

OR just one card and make sure to pay if off?

What is the best approach?

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It is not necessary to use every card every month. I would recommend having a primary card that you use every month. Rotate through the other three cards and use them where appropriate. My guideline is to use each card at least once every six months to show activity. Best to PIF if possible.

Try to keep # cards reporting a monthly balance to one or two with aggregate utilization 9% or less for best results. You may want to go test impact of one card reporting a balance vs two or even three to see how your profile is scored in each situation. The # cards you allow to report has no lingering impact on score.

[Tankee]

Awesome! Thanks!

[takeshi74]

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@Tankee wrote:

Other than charging something on the card and paying it off before the end of the month, is there any other advice or suggestions on how to build credit?

---

You don't necessarily need to charge to a card and pay it off before the end of the month. You can look at your own reports to see what creditors see and such activity is not reflected in reports.

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@Tankee wrote:

Low utilization~1%-7%

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Standard advice is do not exceed 30%. Lower is generally better and optimal is much lower -- under 10%. That said, optimizing revolving utilization is really only recommended when applying for new credit though some choose to do so all the time.

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@Tankee wrote:

How many credit cards should I have/ use?

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 At least 2-3 are recommended for scoring purposes.  Beyond that it's your needs/wants and what you can reasonably manage that will determine number of cards.

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@Tankee wrote:

When should I apply for a new credit card?

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 Impossible to say given the information provided.  It all depends on what you need/want and what your credit profile supports.

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@Tankee wrote:

Which score is affected when applying for credit cards? Bankcard score? General Score?

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All scores are affected.  There are no scores that ignore the standard scoring factors.

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

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@Tankee wrote:

So....should I use each card at least once every month?

OR just one card and make sure to pay if off?

What is the best approach?

---

Define "best".  Never assume that everyone is on the same page as you whenever you use the word best for any topic.  For scoring purposes you have the information.  Such usage is not indicated on your reports.  It's the reported balances and the impact to revolving utilization that matters -- hence the general recommendations on revolving utilization and number of balances.  For input on what's best for your specific situation you'd need to provide more information.

If you're asking about closure due to inactivity then you need to verify such policies with each of your creditors and ensure that you're maintaining at least the minimum required activity.

[Tankee]

Thanks Takeshi74!