Credit questions

[Anthropic]

Actually, you won't build credit by keeping a zero balance. It looks better to keep a small balance then nothing. Financial experts recommend keeping a balance of 9% of whatever the credit line is.

 

Go to link removed and you can apply for cards based on your history - newbie, good credit, bad credit, student, etc.

 

Those financial experts must work for the credit card companies. Purposely keeping a balance goes completely against sound personal finance. No credit score is worth carrying a balance.

 

Come to think of it, this whole credit score thing is a sham when you think about it. I mean what is it used for? To measure credit worthiness? Ha ha, that's a joke. It's used by lenders to identify profitable people/victims, if this wasn't the case then why do activities that increase your credit score always seem to go against sound money management and lean in favor of the credit card companies. I say "boo!" to credit score (but "yay!" to credit cards if you use them with discipline).

[Philos]

Meh. I still don't own a credit card, and probably never will.

 

I took out a car loan 2 years back with my parents cosigning it, for $8000 (10.2k or something with interest), $173 a month for 5 years. I was late on a payment once, which I didn't know about but they automatically take the money out at 2AM on the 15th and I had gone there at 9 in the morning with the check. I don't plan on being late ever again, and I plan on paying it off at least a year and a half early once I get my career job in a year.

 

That'll be my source of good credit. After that loan, I might trade in the car and get a new compact car and get a loan on that.

[Fudgie]

Now, I'm confused...do I keep a small balance or pay it off in pull?

 

I thought paying off in full was best. If I kept a balance, I'd be paying in interest too. I don't want to do that.

 

I guess I could get loans w/ my parents as co-signers and not worry about credit, but I know they won't be there forever. I'd like to get a mortgage on a small house in the future. I'd like my name to be on stuff too.

In the near future, I'll need to worry about a student loan. My parents want to pay for at least 75% of whatever grad school I attend, but I need to pay the rest. They will probably be co-signing that loan but I don't want to have to have them co-sign on everything.

[BriarRose]

Those financial experts must work for the credit card companies. Purposely keeping a balance goes completely against sound personal finance. No credit score is worth carrying a balance.

 

Come to think of it, this whole credit score thing is a sham when you think about it. I mean what is it used for? To measure credit worthiness? Ha ha, that's a joke. It's used by lenders to identify profitable people/victims, if this wasn't the case then why do activities that increase your credit score always seem to go against sound money management and lean in favor of the credit card companies. I say "boo!" to credit score (but "yay!" to credit cards if you use them with discipline).

 

No, they don't work for the cc companies.

 

It shows more responsibility to carry a small balance and make your payments on time than to not have any payments to make. Studies show that people who have very high FICO's (in the 800's) carry an average of around 9% on their cards (of what that credit line is).

 

Awhile back I had been turned down for something and when I received my Equifax letter with an explanation (I have a very high score), it said from "not carrying a balance on a revolving account (i.e. cc)." I had always kept a zero balance on my one cc. Now I carry a small balance and my FICO has gone up.

 

Fudgie, go to that website I mentioned. You can apply based on the kind of credit you have (or no credit). Try to get one with no annual fee is possible, but that might be tough since you are a newbie. You do not need your parents to co-sign your first cc.

[sidehop]

Things are changing with the credit industry so it's hard to say how they'll look at you when you want to say buy a house but it'll be better to have established credit but with large savings and of course cash down so they know you do save frugally and are responsible for money.

 

But with that said if you do want to establish credit, you have to absolutely keep the balance below 35%. If your credit is new, under 10%. It's just a way FICO calculates. Overall revolving credit, so if you have two credit cards and your available credit is $10,000 and your balance is $1,000 well you're good but also makes sense to pay it off if you can.

 

Cash is king always. If you can't really afford it, don't get in the habit of taking out a loan or using a credit card. That's how people go into debt easily. Even people with 700 FICO's are considered risky by some lenders as they can get more credit and find themselves in trouble.

 

As for when to pay it off, if you want 'zero balance' to show on your credit report, make the full payment BEFORE the statement end date. Once you get your statement, even if you pay it off, that balance will show up on your credit report because that's what the company will report. Another thing is if you are new then it's probably best to show some balance, say 5% of your available balance and just pay it off after the statement ends. That way you're keeping your money spending in check, having zero balance while the FICO will see that you are using your credit responsibly. You'll have to wait about two years to see some significant changes in FICO score though. Credit scores takes patience.

 

But don't get another card, one card is enough, build on it, and the rest, save/invest and don't buy things you don't need.

 

link removed is a great resource for credit questions. They cover thousands of topics.

[Fudgie]

Hmmm...5%. So I'll probably see some interest if I leave it on til the statement ends, but it shouldn't be too expensive, right?

 

I'm planning on just getting the one card from the bank. the no frills/no rewards one. It seems to have the lowest APR of all the other cards available.

 

2 years is a long time! Good thing I plan to start building good credit now.

[sidehop]

Do these cards have annual fees? Try to get one that doesn't have one. That way paying it off, show some balance at the end of the month, repeat and your credit will be golden. You won't see much interest added onto such small balance anyway.

 

I would also focus on saving for emergencies as well as investing. No debt to your name and having the financial security will save you a lot of headaches in a long run, not to mention when it comes to buying a home or any large purchases it'll save you ton of money.

[Fudgie]

Yeah the card I'm looking at doesn't have an annual fee. It really is no frills/awards which is why I think they can offer it to me for no fee.

 

I'm not sure about investing but I'll look into it. I like watching the stock market and with some money, I'd like to try it.

[Philos]

I like watching the stock market and with some money, I'd like to try it.

 

Risky move. The economy is slowing back down for a second dip.

[Anthropic]

I am really opposed to the idea of carrying a balance if you don't have to. Ultimately, it's a personal decision if you want to carry a balance with the sole purpose of increasing your credit score. Personally, I think it is sheer insanity sprinkled with ultimate stupidity to carry a balance on purpose. I think if you pay everything off in full at the statement deadline, you will do fine in building your credit history and not incurring interest penalties.

 

Purposely throwing away money in interest when you don't have to is just not how you manage money. Especially when you are young, that is the time when you should be saving diligently. $10 saved now is worth much more than $10 saved 20 years from now because that $10 will have had 20 years to earn interest or investment returns for you. The opportunity cost of the money you would throw away in interest is very high. And how long would you carry a balance, at least 2 years? 5 years? Until you have a perfect credit score? 20 years? Insanity!

[Fudgie]

that's what I'd like to do - pay it off in full before the end of the grace period so no pesky interest fees.

 

The question is - would doing this give me good credit?

 

If so, I'm not even going to bother keeping an interest on. I'll just pay it off in full and never have to pay interest.

[Anthropic]

that's what I'd like to do - pay it off in full before the end of the grace period so no pesky interest fees.

 

The question is - would doing this give me good credit?

 

If so, I'm not even going to bother keeping an interest on. I'll just pay it off in full and never have to pay interest.

 

Yes. You can build good credit by consistently paying off in full your credit cards. Paying interest is unnecessary, I have never paid a cent of interest on my credit cards in all the years I've had them and my credit score is very good. Although, there may be other factors involved since I don't know the intricacies of credit score calculation. I was hoping to find a good link so you don't just have to take my word on this, and I came up with this link which I think has some nice easy bullet points: link removed

[Fudgie]

Thank you so much for this info.

 

This is exactly what I wanted to do - pay off in full and not pay interest and still get good credit. If it works for you (as well as my parents, who suggested this method to me) then there's a good chance it will work for me too.