EPTThe power of credit cards
| Forum Index > General Forum |
|
Wasabi
United States3085 Posts
| ||
|
perLi is 2down
United States533 Posts
| ||
|
NewbSaibot
3849 Posts
Scams? Your own credit card company isn't going to scam you. If they tell you that you can earn referral points and get a free laptop, im sure it's probably true. But good luck finding 20 people who feel like opening a new credit account. You probably have $20,000 because your mom cosigned on it, so the credit really reflects against her history. Dont piss her off by racking up a huge debt. Nothing has changed, no new doors are opened. You dont need that new pc for schoolwork, you dont need an 06 car for commute, you dont need a whole new wardrobe to attend class with your new classmates, etc etc. | ||
|
perLi is 2down
United States533 Posts
| ||
|
Mora
Canada5235 Posts
I just have it to build credit. I don't spend more money on it than i will make up in the next paycheck. it's never done me wrong. I don't like paying interest  | ||
|
Wasabi
United States3085 Posts
| ||
|
Cambium
United States16368 Posts
| ||
|
skyglow1
New Zealand3962 Posts
| ||
|
The Storyteller
Singapore2486 Posts
| ||
|
Wasabi
United States3085 Posts
| ||
|
NoNameLoser
United States1508 Posts
Credit cards were meant for the banks to make money of you, the interest they charge is just crazy. If you want to buy something you dont have money for, just get a loan, itll be much cheaper. The only good use off credit cards is that if you pay it all out monthly, you can, in such way, post pone payments on your purchases up to ~20 days, and if you keep you cash in bank money market account (especially those internet only ones), you earn extra interest that you otherwise would not have. | ||
|
Physician
United States4146 Posts
| ||
|
gLyo
United States2410 Posts
On December 23 2006 00:20 Wasabi wrote: NewbSaibot, that example I put is like the one you always see in random websites as popups. Something like "FREE PSP/WII/PS3/VAIO LAPTOP CLICK HERE" And then, you go on about putting your credit card number and singing up for random online subscriptions. So far good info. Thanks to you grown ups in the real world www.freeipods.com will actually give you a free iPod if you get 5 other people to sign up for the various trials they offer. I don't recommend doing it, though, unless you have a lot of free time. It's very hard to actually get five people to do it, and it all has to be done just right. Even then, it can take months for the iPod to actually get to you. | ||
|
Wasabi
United States3085 Posts
| ||
|
oneofthem
Cayman Islands24199 Posts
| ||
|
OhThatDang
United States4685 Posts
you would more likely want to use it to build credit and not use it cause u dont got money | ||
|
azndsh
United States4447 Posts
Compounded interest is not good. Just spend less than you make and you'll be fine | ||
ManaBlue
Canada10458 Posts
Contrary to what some might say, you should never spend more on a credit card than you will have at the end of the month to pay. Paying the insane interest that a credit card changes in completely unacceptable and only the most financially irresponsible people will do it. There are 3 reasons for you to have a credit card right now: -To build a credit rating, as mora said -To have flexibility when paying things (ex. internet purchasing, or situations where cash is a pain in the ass like restaurants) -So your mom can keep track of your purchases and spending habits The last one may not apply to you, but trust me, many parents do this with low limit credit cards (not like yours) and joint bank accounts, so they know their kids aren't fucking around and being wasteful. | ||
Bockit
Sydney2287 Posts
Method 1) You use your credit card as a financing tool. You make purchases with it knowing you do not have enough money available at the time of purchase to pay otherwise. If mismanaged this can lead into serious problems. I would only use a credit card in this manner in an emergency. Method 2) You use your credit card to pay for everything that you would normally buy. If you didn't have the credit card you would still be able to make your purchases. You get your bill at the end of the month and pay it all off before any interest hits you (Most, not all, credit cards have the interest-free period something you need to check). Some advantages to Method 2: - You have less shit in your wallet. All transactions that can use a card you put on your credit card. You still need some cash for places that don't accept cards. - (This might not apply to you but it's the main reason for following Method 2) By purchasing with a credit card, you have 'spent' your money, yet your money is still in your bank account. Purely by being in your bank account it's earning interest, meaning you are getting returns on money that you have 'spent' (Assuming that you will be paying the bill in full for your credit card at the end of the month). This mainly applies to people who make large purchases or invest a considerable amount of money, otherwise the gains are small (but still gains). Another advantage is that you can easily keep track of everything that you are purchasing and any problems that occur. Method 3) Many websites now accept other method of payment, but the universal one is the credit card. Whether or not you have the money to pay for what you are buying, this is the one reason I would get a credit card at this stage in my life (similar age to you). I just read manablue's post in mid-post of mine, he raises a good point about the credit rating. EDIT: Usually people following method 2 have their bank account linked to their credit card statement to pay it off as soon as the bill comes in so that they don't forget. This further removes hassle, but you have to be 100% sure that you'll have the money to do this. | ||
|
DarkYoDA
United States1347 Posts
Rationale: Most credit card companies allows you to make payment to the bills the following month. Your bill is due the next month. You are still required to make payment. Why pay interest to purchase something you can truly afford in 1 months' time? If you can make the bill payment in a months' time, then buy it next month. Else you really can't afford it. This is the reason why many people get into lawsuits and trouble with the banks because buy on credit an amount they are not able to fulfill the next month. The real advantage is only one months advantage or in some cases a little more grace period. Too many people take it that credit card means don't have to think how to repay it a month later. Debit card ensures you spend what you can earn and no troubles with the law or banks. | ||
Manifesto7
Osaka27172 Posts
However, I will give you one trick which, if people were smart like me, would make their lives much easier. I actually suggest everyone do this. Go to your bank, and have them set up your bank account to automatically pay the minimum charge for your CC every month. After that, anything you put on is applied to the balance. So, even if you forget your bill for a couple months, or spend way too much money, you are autolmatically paying out the minimum payment (like 20 bucks on 1k balance or something). This saves the company from bugging you, and makes you look like a darling on your credit report. So many people get black marks just because they are too lazy to pay their bills. | ||
ilovecats
United States265 Posts
On December 23 2006 00:22 NoNameLoser wrote: actually that high limit is not good for your credit score. The most balanced limit should be set such way that you would use up 20-40% of it monthly. If you use up more, it makes them think you have some short cash problems and cant pay -> lower credit score; if you use up less, they assume you dont have any cash inflow and there fore dont spend -> lower credit score. Credit cards were meant for the banks to make money of you, the interest they charge is just crazy. If you want to buy something you dont have money for, just get a loan, itll be much cheaper. The only good use off credit cards is that if you pay it all out monthly, you can, in such way, post pone payments on your purchases up to ~20 days, and if you keep you cash in bank money market account (especially those internet only ones), you earn extra interest that you otherwise would not have. Your information regarding utilization (the credit card balance percentage against total credit limit) is very very false. In fact, the industrial credit score, FICO, favors low utilization. In general, the lower, the better. 40% is VERY high for utilization and can be a major score killer. Most people find their score to be the highest while they keep their utilization under 10%. It is correct, however, that high limits sometimes "trigger" high spending which can put a consumer easily into credit card debts. It's a rather a matter of personal self control and financial responsibility. Another potential drawback is that too much unused available credit can sometimes be viewed as potential high risk by some lenders. Please note that this also depends on one's income and overall credit history. In general, its not uncommon for US consumers to have very high credit limits these days simply because of the intense competions among banks. "Excessive available credit" is no longer a big concern nowadays. Let's put it this way. If you have very high limits, it means your credit is great. If a lender denies you for "excessive credit", chances are good that you can take your business to somewhere else. For you guys who want to learn more about credit, please visit this site at http://www.creditboards.com It has lots of information about building credit and how credit score works. It also contains a lot of information on "credit repair" for those who once messed up their credit and wants a second chance. Do NOT learn that because you do NOT ever want to get yourself in that situation. | ||
|
DarkYoDA
United States1347 Posts
you must pay it in a months' time, and with a little more interest to it...  If you buy a $500 item on credit, please, save a little more than $500 next month because this is what living on credit means. More hard work, which only the very disciplined can fair modestly. There is nothing very comfortable/soothing about flashing that card. The hard work to repay stays the same and a little more. I'll leave the advantages of it out because the banks will be showering you with those informations till you are drunk.. | ||
|
Bockit
Sydney2287 Posts
On December 23 2006 04:28 DarkYoDA wrote: you must pay it in a months' time, and with a little more interest to it... This isn't entirely true. Many credit cards will have an interest free period, for example... http://www.commbank.com.au/personal/creditcards/yellow.asp "Up to 55 days' interest free on all purchases" interest isn't charged until the interest free period is up, meaning you can still pay only the original amount back if you pay your bill in full when it arrives (assuming the bill comes in quicker than the interest free period ends). However if you don't, the interest you *would* have accumulated over that interest free period is added on the day you go over. | ||
|
ilovecats
United States265 Posts
On December 23 2006 04:28 DarkYoDA wrote: If you learn financial accounting or finance, you will know a lot more implications of these matters. However, if you want it simple - When you spend using credit card, just remember this: you must pay it in a months' time, and with a little more interest to it... If you buy a $500 item on credit, please, save a little more than $500 next month because this is what living on credit means. More hard work, which only the very disciplined can fair modestly. There is nothing very comfortable/soothing about flashing that card. The hard work to repay stays the same and a little more. I'll leave the advantages of it out because the banks will be showering you with those informations till you are drunk.. Most credit cards have a "grace period", that is a period of time you can repay the debt in full without incurring any interest. Please note that the balance must be paid in full, a partial payment will still result in interests being calculated from the day a balance occured. Grace period is usally 20-25 days from the statement date. There are a few sub-prime cards on the market that do not have a grace period. These cards usually target those with damaged credit history and they often carry some other hefty fees as well. They should be generally avoided. For those with new or limited credit history there are much better approaches to build credit such as secured credit cards. There are many advantages of using credit cards, wisely of course, such as: 1) Protection against theft/robbery etc as most cards offer 0% fraud liability 2) Convenience 3) Various rewards (cash, frequent flyer points etc) 4) Flexibility in case your cash flow is affected by certain events (sudden change in life etc, but should be ones you know that you can overcome) 5) Building strong credit for other financing needs such as vehicles and housing. 6) Higher score also helps reducing insurance rates and even some employers do credit checks. | ||
|
EscPlan9
United States2777 Posts
1) building a good credit score 2) for emergencies when you do not have the money in your account then (I've had to do this with car repairs a couple times) | ||
|
dronebabo
10866 Posts
| ||
|
tiffany
3664 Posts
On December 23 2006 08:26 dronebabo wrote: i'm not sure i understand here- can you pay off everything in the month and have no interest to build up your credit score, or must you have to pay some interest? if you pay your bill in full when the monthly bill comes in, you will not have interest accumulation, provided your credit card isn't from some scrub company | ||
|
tiffany
3664 Posts
| ||
|
j0ehoe
United States2705 Posts
On December 23 2006 04:50 Bockit wrote: This isn't entirely true. Many credit cards will have an interest free period, for example... http://www.commbank.com.au/personal/creditcards/yellow.asp "Up to 55 days' interest free on all purchases" interest isn't charged until the interest free period is up, meaning you can still pay only the original amount back if you pay your bill in full when it arrives (assuming the bill comes in quicker than the interest free period ends). However if you don't, the interest you *would* have accumulated over that interest free period is added on the day you go over. haha i was gonna say how did you get a 20k$ spending limit at 18 my friend just got a card that was no interest for a whole year. while its notice to give your a little breathing room, its probably a better idea to get used to spending only what you have and paying it off right away. i pretty much use mine in place of cash. if you lose cash, its gone. if you lose the card, you just have to call and no problem. so far, everyones given good advice. ill just add one thing that no one really talked about. if youre paying online and intend to use your card later that nite, you gotta know that payment doesnt go into effect right away. its especially bad on low max cards like urs. say you got ur 300$ limit card and use about 260$. most companies, if you pay after 3 pm, its not gonna go into effect unil the following day. so if you spend $50 that night going out, you just went over your limit, and kicked your credit in the balls. even if you pay at noon, you should still check it before you use it because it doesnt always post quickly. that happened to me once. i had only about 20$ left so i paid around 10 or 11 am on a friday. after work, i filled up my gas tank and went out. ended up something like 50$ over because for some reason it didnt post til about 10 at night. good luck with teh card. just remember to use it responsibly and youll be fine | ||
|
j0ehoe
United States2705 Posts
On December 23 2006 08:26 dronebabo wrote: i'm not sure i understand here- can you pay off everything in the month and have no interest to build up your credit score, or must you have to pay some interest? from what i understand, you gotta use it for something. i started mine off by just buying gas to get credit. | ||
|
Endurance
United States119 Posts
Basically, treat it as an ATM/check card and you will have really good credit. And if you are ever in question that something is a scam, it probably is, so don't do it. | ||
|
davidgurt
United States1355 Posts
| ||
|
maVi
Germany542 Posts
On December 22 2006 23:55 NewbSaibot wrote: You probably have $20,000 because your mom cosigned on it, so the credit really reflects against her history. Dont piss her off by racking up a huge debt. Nothing has changed, no new doors are opened. You dont need that new pc for schoolwork, you dont need an 06 car for commute, you dont need a whole new wardrobe to attend class with your new classmates, etc etc. damn good post!!! listen to this guy... | ||
|
NewbSaibot
3849 Posts
On December 23 2006 08:26 dronebabo wrote: This is the biggest credit use fallacy out there. People think the credit companies only look to see that debt's are paid, not how theyre paid. So their idea is that "well if i spend $10,000 and pay it off in a week, i look like a responsible trustworthy borrower!". Wrong. Paying off the entirety of your bill every month does nothing to affect your overall credit score (or as mentioned earlier, can actually hurt it believe it or not). It certainly cant be used as a method to build strong solid credit. The super secret creditor computing algorithm's used to analyze customer risk is a bit more complex than that. For instance, my buddy paid off a credit debt of $10,000 over the course of a couple of years on his car in college. Once he graduated, he was able to secure a $250,000 mortgage on his new house. I cant even do this, my credit is fine, however I never made any large purchases. i'm not sure i understand here- can you pay off everything in the month and have no interest to build up your credit score, or must you have to pay some interest? Credit history shows a proven track record of debt repayment. If you can sustain payments on something for a year or more straight, that looks good. Anybody can pay off their bubblegum purchases in a month using a credit card. It's not stupid to pay interest, you are proving that you have the intelligence to manage a complicated budget. | ||
|
_PulSe_
United States541 Posts
| ||
|
ManaBlue
Canada10458 Posts
On December 23 2006 08:26 dronebabo wrote: i'm not sure i understand here- can you pay off everything in the month and have no interest to build up your credit score, or must you have to pay some interest? I disagree with newbsaibot's analysis. Here's why. Paying interest in itself does not help a credit rating. I would guess that his friend got financing for his 10k car debt from the dealer. This is different than credit card debt. The debt is larger and the payments are created to be made over a long period of time. If you did the same thing with a 10k credit card debt, not only would you pay an insanely larger amount of interest. (so much that it would be a moronic way to buy a car) But you would be carrying over short term debt for a long period. In short, this is basically shitting on your credit rating. If you use a credit card to pay for your bubble gum purchases, as newbsaibot said, you are creating a credit rating. A good one if you always pay on time, and a bad one if you don't. But since the debt is so superficial, lenders don't care about it much. It may, however, help you to secure a car loan in the future and that car loan (properly paid) will lead to getting a mortgage. Keep in mind that social factors, such as marital status, age, full time work vs student or part time, all effect your overall credit score as well. Particularly when you have very little history, when you're young like us. To summarize, newbsaibot's post is out of place in this thread. If he was advocating paying your credit card late to pay interest to help your credit score (I'm not saying he did, but people seem to be interpretting it that way, mistakenly), it is bad advice. To answer dronebabo's question, just paying it off every month without incurring interest charges is the best way too improve your credit rating using a credit card. It's true that it won't help you tremendously, but it certainly will help a bit. | ||
|
NewbSaibot
3849 Posts
I also forgot to mention that yes, your employment and residency history is also a factor when it comes to improving your credit, albeit in different ways, which im not entirely sure about. And again i stress the importance that paying off your credit bill each month does not help your credit score, not much anyway. And in some instances, can actually hurt it. Theres an entire article out there about it, but basically the general idea, as someone mentioned earlier, is that you should have some type of credit balance at different times rather than 0 balances. If you have 4 credit cards all with 0 balance, this actually HURTS your score. If you have 2 cards with 80% balance, this also hurts your score. The idea is to have 2-4 credit cards with a combined balance of roughly 20-40% of their limits. This builds your credit score. Nobody knows the exact inner workings because the FICA calculations are trade secret. Using your credit card to buy groceries and paying it off every months is a waste of your time, unless youre building flight miles or something like that. Interest can be bad if you let it get out of control, but it isnt that bad. Typically you would start around 20%, and every 6 months to a year or so it will probably drop a quarter or half percent. My dad's interest rates are 7% i think. Paying $2000 above sticker price on a car that you couldnt afford but will have payed off in a year is an ok deal if you ask me. It aint pretty, but at least you got the car, and you got some nice credit out of it too. And manablue, i just realised your avatar waves his finger from time to time  | ||
|
sith
United States2474 Posts
Use in place of cash, like someone else said. You have 200 dollars in your wallet and lose it...nobody cares....you have a credit card and lose it, one quick call and you're ok. | ||
|
Pressure
7326 Posts
it can become insanely addicting and could put you with bad credit pretty fast | ||
|
KOFgokuon
United States14910 Posts
Saying that you should cut your card is retarded | ||
|
ilovecats
United States265 Posts
The idea is to have 2-4 credit cards with a combined balance of roughly 20-40% of their limits. This builds your credit score. Nobody knows the exact inner workings because the FICA calculations are trade secret. Again, the 20-40% utilization ratio is completely false. The ideal utilization should be below 10% for maximum score benefits. And the industrial standard score is "FICO" (Fair Issac Co.). The 20-40% false figure I constantly see among consumers is most likely to be purpopsely advertised by certain lenders. Remember, just as previously mentioned, credit card issuing banks are in business to make money. They do NOT want everytone's score to be high. This is because credit card interest (APR) is often calculated based on one's score. In most cases, the higher your score is, the lower APR you'll most likely qualify. It's a bad idea to receive credit advice from banks. There are some very good consumer groups out there that provide much more accurate information such as creditboards.com. 2-4 is plenty for most young adults who are new to the financial world. As a mature adult with steady income it's usually considered a better idea to have a "more diversified" credit portfolio. It basically consists of a healthy mix of prime credit cards issued by different prime lenders. This is because banks are notorious for some dirty tactics these days such as rate jacking. You do not want to put all your eggs in one basket. At the same time, more cards with higher limits helps your utilization. There is no proof that FICO penalizes purely based on the number of credit cards one has. So there is no strict rule on the this department. It should be based on one's needs and income, given that the portfolio is deversified. For instance, it's a much better idea to have a couple of cards from Citi, a couple from AMEX, a couple from BOA/MBNA, a couple from a reputable credit union, than all 8 cards from let's say Chase. As for the concern about "too much available credit", I have explained it in my previous posts. | ||
|
Jonoman92
United States9107 Posts
| ||
|
DarkYoDA
United States1347 Posts
On December 23 2006 17:03 KOFgokuon wrote: don't buy what you can't afford, simple as that Saying that you should cut your card is retarded Well true but, you know, some people could never resist that card hanging around their wallet day and night and have enough self control to buy what they can't afford, it's true with drugs, it's true with smoking and other vices, it's true with spending - Even if they sincerely intended to put a stop to it. The user should know himself well enough if he can be tempted to use it while in his wallet or he needs to "uninstall" the game all together. | ||
|
Ilvy
Germany2445 Posts
On December 24 2006 01:09 DarkYoDA wrote: Well true but, you know, some people could never resist that card hanging around their wallet day and night and have enough self control to buy what they can't afford, it's true with drugs, it's true with smoking and other vices, it's true with spending - Even if they sincerely intended to put a stop to it. The user should know himself well enough if he can be tempted to use it while in his wallet or he needs to "uninstall" the game all together. Yes it means you have to grow and controll yourself, a creditcard does not do things by itself, it just a way to pay things more easy if you order online or avoids to run arround with lot paper in pocket and it´s a must if you travel a lot. In Norway its the usual way to pay for everything and you get a Card with every bankaccount. But the only things where you loan money for should be house and car and not random fun shit or you soon get trouble. Trashing the card would never help, if you are a weak person, you will fail on a other way | ||
|
decafchicken
United States20155 Posts
- Peter Ustinov | ||
|
artofmagic
United States1951 Posts
On December 24 2006 10:43 decafchicken wrote: nice! hahah!The only reason I made a commercial for American Express was to pay for my American Express bill. - Peter Ustinov I actually prefer AMEX because of their cool offer.. iron clad protection and amex wishlist :> | ||
|
MaNNeRDex
United States169 Posts
[Says something intelligent about credit cards here] | ||
|
oshibori_probe
United States2934 Posts
On December 22 2006 23:45 Wasabi wrote: I just got my own credit card today. My mother helped me apply for one. It's got a limit of $20,000, but I heard that some people have insanely low credit limits, like $1000 or less when they're too young to make serious amounts of money or when they have bad credit. I'm currently 18 right now, at a full-time college in U.C. Berkeley, so there's no way I can fill that limit anytime soon. In fact, I don't even have a job, but I have soem skills that would make me quick freelance money (Photoshop CS 2, Java language, web design, and one experince as an administrative assistant). I know, it's quite aggravating for me to be this naive about credit cards. Can you guys fill me up on where I should start, how to use it, some general tips to not get scammed? Also, a few years ago I always hear about these referral deals. Are they a scam? Have you had experience with it? Did you get anything at all after fulfilling their conditions (example- getting 20 people to sign up for it successfully, then they ship an electronic of your choice, such as a laptop)? dont leave it in your car, someone broke into my moms car, took her credit card, and racked up about 800$ in gift certificate purchases in a few hours. | ||
|
KOFgokuon
United States14910 Posts
Leaving your card in your car is asking for trouble though | ||
|
decafchicken
United States20155 Posts
| ||
|
Eduardo!!
United States86 Posts
| ||
|
jinorazi
Korea (South)4948 Posts
| ||
|
lightman
United States731 Posts
Who the hell's your mom ? Jennifer Lopez ? | ||
|
collegeBored
United States1524 Posts
to the OP: how did you get a 20K credit limit on your first credit card? unless its not really your credit card but simply you mom's second one with your name on it. ive had a card since early high school (~7 years now) and my first one had a limit of $250. i believe my current highest one is around 6K | ||
|
Wasabi
United States3085 Posts
| ||
Rekrul
Korea (South)17174 Posts
I use a Visa Check Card...I have never had debt and a lot of $ goes through that account. This is good for credit history even though its not a credit card? | ||
|
ilovecats
United States265 Posts
| ||
|
ManaBlue
Canada10458 Posts
On December 25 2006 12:04 Rekrul wrote: Question I use a Visa Check Card...I have never had debt and a lot of $ goes through that account. This is good for credit history even though its not a credit card? It's still credit. You write the check and you get your monthly statement to pay off the credit check use. So yes, it helps your credit. Particularly if you're carrying over large balances, consistently over a long period of time, and consistently paying them on time. As far as newbsaibot's analysis, I still don't agree. Paying interest on a credit card means you're late on a payment, and that has never helped anyone's credit score, ever. Trust me. Late payments are the first red flag creditors look for and a consistent history of missing payments will hurt you badly. Let's get something straight about your friend. He might have gotten the loan because a parent cosigned on it. This essentially means that the bank/car dealership is basing the loan on the cosigners credit score, not his. You say he has a "phat house"? Is it his? Does he own it? Is it partially paid off? Where did he get the mortgage? There is a lot about your friend that we don't know. The reality is, he did not improve his credit by buying a car on a credit card and making late payments to incur interest. I would be willing to bet that he got financing from the dealership. As I've explained before, that is different from credit card debt, as the lender works the payments out over a long period of time and expects regular interest payments with the principal. It has nothing to do with the fact that some of the payment is titled "interest". It's because it's a larger debt and because the regular payment structure is more restrictive and long term than a credit card. Bottom line, the nature of a debt effects your credit score differently. This post is long and most of you won't read it, so here are some truths that I'd like to outline for you guys, as a graduating business student specializing in finance. This is my bread and butter. -Credit cards do not build a credit score as well as structured debt like a car or home loan, but they do help create a profile. Everyone's got to start somewhere right? We're young people and this is the best we can do this early in our lives. -Paying interest in itself does not help you. If you incur interest on a credit card, you are late and this is bad. ALWAYS bad. Paying your credit card bills, in full, every time will only help your credit profile. IT WILL NEVER HURT IT, EVER! -Credit checks are viewed in a similar manner to credit cards. Most intitutions don't bother differentiating between them at all. Using a check rather than the card is user preference. It's still debt, so they don't care either way. -Cosigning is a big part of many people's first big debt. Chances are, your parents will cosign on the loan for your first car, and once you've paid it off and worked full time for a while living in a rented apartment, etc. you'll become more and more elligable to carry a mortgage. We're all people in our late teens, early twenties, so this is more than likely something that you'll need to work forward to for a good number of years. -As a young person, using a credit card for personal purchases and paying them on time is good. Being late is bad. This is always the case. That was very repeticious and boldly worded because I want you guys to have the truth. For those of you who bothered to read it all, I hope you take it to heart and talk to a lender yourself to get all the information that is relavent to you. If you go to a bank, they will be happy to sit a representative down with you to talk about credit scores and strategies for a young person who is thinking ahead. I encourage you to do that. | ||
|
ManaBlue
Canada10458 Posts
On December 25 2006 12:25 ilovecats wrote: To answer your question, no Rekrul it does not build your credit if it's a debit/check card. Debit cards are different from Credit checks. A debit card directly withdraws money from a bank account. You are correct, this is not debt and won't effect a credit rating. Visa checks show up on a monthly statement, just like when you swipe the card to buy something. You are carrying debt, so it is the same. In fact, most visa credit cards allow you to use some credit checks and the regular card simultaneously. All of the card and cheque transactions show up on the same monthly credit statement. | ||
|
ilovecats
United States265 Posts
So no to answer Rekrul's qestion, a Visa check card/debit card does not build credit. Also there are two false statements in your quotes above: -Credit cards do not build a credit score as well as structured debt like a car or home loan, but they do help create a profile. Everyone's got to start somewhere right? We're young people and this is the best we can do this early in our lives. It's very very false. A credit card account is a revolving credit account on one's credit report. It is the strongest type of trade line and it is VERY VERY important for one's score. It is very important to have a strong revolving credit history to be considered "good credit". Car loans and mortages are both "secured" loans because cars and houses are collaterals. In case you default, a creditor has the right to take them back. This substantially reduces a creditor's risk. Such loans belong to the "installment loan" type under which you have a fixed and scheduled monthly payment till the debt is paid off. A credit card on the other hand is a unsecured loan because the bank relies solely on your promise to pay. (An exception here is a secured credit card, used mainly to establish or re-establish credit). It's revolving because payments are determined by how much one spends and once they are paid back, the credit becomes available again. In other words, a high limit unsecured credit card carries a LOT more risk for a lender than most car loans/mortages. A credit card is a stronger credit builder than a car loan/mortage. It is generally more difficult to qualify for a good prime credit card than a car/mortage loan. Of course the later two are important too. With existing satisfactory car/mortage loan tradelines on one's credit report it is easier to qualify for a lower rate on new car/mortage loans. But even without such lines, established exellent revolving credit history still has no problem getting you a good deal on a car loan/mortage loan as long as your income and DTI (debt to income ratio) supports it. Credit checks are viewed in a similar manner to credit cards. Most intitutions don't bother differentiating between them at all. Using a check rather than the card is user preference. It's still debt, so they don't care either way. If by "credit checks" you are talking about those checks credit card companies send you in the mail, you have to be very very careful. In the U.S., most of such checks are either for cash advances or balance transfers. It is VERY important to read the fine prints on these checks because most of them have a hefty TRANSACTION FEE. It is also VERY important to know what APR you are getting with such checks? Is it a promotional 0%, 1.9%, 5.9% APR or a STANDARD CASH ADVANCE APR that can range from 18%-30%? If it's promotional, how long does it last and when it expires, what kind of new APR will apply? Finally it's important to know that most checks like this have NO grace period, which means interests (unless its 0%) start to accumulate from the date the check posts to your account. | ||
|
ManaBlue
Canada10458 Posts
As far as your post goes, in practice it usually doesn't work that way. Firstly, the amount is usually much lower unless you're an exceptionally big spender. The size of the debt is a big factor in how it effects your credit rating. In addition, the amount of risk for the lending institution doesn't effect how the debt will impact your credit rating. The risk to the institution (secured vs unsecured debt) will rather effect whether they give the credit to you or not. You are completely correct about the visa credit check card (debit card). Pardon my mistake. However I don't agree with your assessment of credit cards and their effect on scores. Prime cards are hard to get, you're right. But a person that gets one already has a good score. A standard limit credit card will not have a maxed limit every month that is paid off on time. If it did I'm guessing you're not the kind of person that needs to worry about this stuff anyway. Structured, secured debt in normal circumstances will normally be the most important financial factor of a person's score because it will be for the largest amount and will carry over the longest time period. If you spend a fortune in consumer spending, you'de be better off with a line of credit or a similar product from a bank for the purposes of credit building anyway, so I don't see why you think credit cards are that good for building a rating. A normal person, particularly a young adult, doesn't have enough cash flowing around to do what you described in your post. | ||
|
ManaBlue
Canada10458 Posts
On December 25 2006 12:04 Rekrul wrote: Question I use a Visa Check Card...I have never had debt and a lot of $ goes through that account. This is good for credit history even though its not a credit card? So to clarify Rek, ilovecats is right. If your card is a direct withdrawl from a bank account, it's a debit card, so there isn't any debt created. | ||
|
collegeBored
United States1524 Posts
On December 25 2006 12:40 ManaBlue wrote: Debit cards are different from Credit checks. A debit card directly withdraws money from a bank account. You are correct, this is not debt and won't effect a credit rating. Visa checks show up on a monthly statement, just like when you swipe the card to buy something. You are carrying debt, so it is the same. In fact, most visa credit cards allow you to use some credit checks and the regular card simultaneously. All of the card and cheque transactions show up on the same monthly credit statement. the only difference between a debit and a check card as far as i know is you ability to use check card wherever appripriate (visa/master/etc) credit cards are accepted. it still withdraws money directly from your checking accoutn and u cant spend more than your current checking accoutn has. this is my understanding of it from a few conversations with cashiers who im sure dont know jack shit really (no sarcasm). if im right, i doubt it builds any credit scores | ||
|
ilovecats
United States265 Posts
As far as your post goes, in practice it usually doesn't work that way. Firstly, the amount is usually much lower unless you're an exceptionally big spender. The size of the debt is a big factor in how it effects your credit rating. "Size of the debt" is a very vaglue concept. First of all, "big" or "small" debts are relative to one's income and total credit limit. A score mechanism can no way penalize based on solely the amount of debts, hence the DTI ratio and credit utilization ratio come to play. Secondly, secured and unsecured debts are totally different, and are viewed totally different as such. The US industrial credit score, FICO, cares little about the amount on secured debts such as car loans and mortage loans. In other words, a person with no car loan and no mortage loan, a person with a $25k car loan and $250k mortage, can have the same score as a person with a $150k car loan and $1 million mortage. In a credit analyst's review, again he/she looks at the ratio, not the actual figure. If the above two people with loans both have appropriate income (let's say $80k/annually and $4 million/annually) to support their debt, they are both viewed as credit worthy, In addition, the amount of risk for the lending institution doesn't effect how the debt will impact your credit rating. The risk to the institution (secured vs unsecured debt) will rather effect whether they give the credit to you or not. As a matter of fact, in US, the type of the debt resulted from certain types of lending has a very major impact in one's credit rating. For example, the FICO score penalizes HEAVILY on certain types of high risk lendings such as pay-day loans. If such loan companies ever appear on your report, you can expect a major score hit. The theory behind this is rather simple: if a person has to borrow from a high risk lender, chances are its because he cannot be accepted by "regular prime" lenders, hence the reduced credit rating. It might not be accurate in all cases, but that's the way it works. However I don't agree with your assessment of credit cards and their effect on scores. Prime cards are hard to get, you're right. But a person that gets one already has a good score. This fact is directly available from Fair Issac Co, the creator of FICO score, the US industrial credit score. Established good history on credit accounts are the biggest score builder. A standard limit credit card will not have a maxed limit every month that is paid off on time. If it did I'm guessing you're not the kind of person that needs to worry about this stuff anyway. Sadly, many consumers with few "standard limit cards" (by standard I'm assuming limts ranging from $5000-$15000) carry a few thousands balance from time to time. This hurts their score because FICO prefers very low utilization ratio. This is why the common understanding "3 or 4 cards is plenty" is false in many cases. It might not be enough, if you want a high score and you do not have very high limits on those cards. Structured, secured debt in normal circumstances will normally be the most important financial factor of a person's score because it will be for the largest amount and will carry over the longest time period. A mortage loan does tend to have a long period. A well aged mortage paid on time can be very rewarding score wise, I agree. Actually this single factor often results in the difference between "exellent credit" and "exellent exellent credit". Car loans are usually short. (less than 6 years). However by no means credit cards do not have a "long period". Most US consumers with established credit history have credit cards that have more than 10 years of payment history. This is a very strong credit reference in US lender's eyes and FICO surely loves to see these accounts. Let's put it this way. Here in the U.S. a person with exellent revolving history but no previous car loan/mortage loan has no problem getting approved for such loans with an exellent rate as long as their income supports it. On the other hand, a person with only car loan/mortage loan can have heck of a hard time getting approved for a good card by a prime lender. I'm sure some may approve him, but a lot will deny him for "insufficient revolving history", a classic FICO denial code. If you spend a fortune in consumer spending, you'de be better off with a line of credit or a similar product from a bank for the purposes of credit building anyway, so I don't see why you think credit cards are that good for building a rating. A normal person, particularly a young adult, doesn't have enough cash flowing around to do what you described in your post. Again credit cards are exellent and the most important credit builders in the U.S. Lines of credit are not very popular compared to credit cards. For those who spend a fortune here, there are "speciaty credit cards" with generous limits such as the American Express Centurion (the "black card", with minimum yearly spending of $250k on other AMEX cards to qualify). These people do not need to build credit really. Their money is their credit. For the average people, credit cards are important for credit. For young adults, I totally agree that a couple cards with responsible payment behaviors is a great way to start them off on financial management. | ||
|
ManaBlue
Canada10458 Posts
I don't contest anything you said there. I'm just thinking of this in the context of a young adult with no credit history. Your example of a person with 10 years of excellent revolving credit history constrasted to a person with a car and mortgage but no revolving credit and their likelyhood of getting a prime credit card makes sense. But the maturation of an individual's spending habits will rarely, if ever, materialize like that. I'm saying, when you get your first "real" job after graduating from where ever you are, you'll need a car. You probably have very little credit history. In the next 5+ years, you're going to want a home. This is very common. The biggest factors that a typical mortgage lender will consider are marital status, employment factors, and other indications of personal and social stability. Annual salary and other income are also very big. These factors overshadow personal credit history by a very very long shot. I would never say credit cards build no history, but with the time frame that most of us are looking at the history we'll be able to build before needing these types of loans is insufficient for it to be a major factor. Your posts are all great, and well written. You clearly know your stuff. Just as a point of reference, credit scoring models in Canada and the U.S. are very similar. I'm not an expert on the differences, which I'm sure there are, but when I study credit risk at school they regularly interchange Canadian and American examples depending on the consept. If I could pose a question to you, rather than this turn into an arguement or something. Do you think I'm underestimating the influence of 5-7 years of marginal credit card spending on a mortgage? Why or why not? | ||
|
j0ehoe
United States2705 Posts
| ||
|
ilovecats
United States265 Posts
To answer your question 5-7 years of "marginal credit card spending" is more then sufficient for car loans/mortages. You really are underestimating it. Given that you are : 1) Never late on these accounts 2) Keep your utilization low (marginal is actually way better than heavy, I'll explain it later) 3) Do not open new accounts before the loan (low number of credit inquires too) You'll be easily looking at a 700+ score, or even higher. This combined with an acceptable income will qualify you for the best deals out there. Credit score IS very imporant and personal creidt IS very important for these lendings if you want a good rate. Actually, people with strong personal credit tend to leave dealerships with their new cars without ever having their income verified. Some mortage lenders may omit income verfication with a strong score too.(or conduct a very brief simplified one) When a credit report is pulled, it shows all your credit accounts and their payment history. Whether they are paid on time or if they are ever late at certain points. It shows the latest balance reported by your creditor (most creditors update the balance and status monthly) as well as your total credit limit. (Some creditors such as Capital One does not report limit, which is a very bad thing for utilization radio and score) No matter how "marginally" you used your account, as long as you paid on time, it will report as "paid as agreed", and this is what builds the score over time. At the time the report is pulled, the scoring model compares the balances on your accounts against their credit limits (utilization ratio). It likes to see a low ratio because that means you still have a lot of room and you are not desparately running up your accounts. It hates to see a high ratio because it's concerned that you are using up a lot of your available credit due to financial difficulties. Obviously you want your potential creditors to see low balances on your accounts at the time of credit application. "Marginal" usage against your credit limits is always a good thing, espeically when you do not have that high of limits as most young adults don't. I'm saying, when you get your first "real" job after graduating from where ever you are, you'll need a car. You probably have very little credit history. In the next 5+ years, you're going to want a home. True on the "very little credit history" part because unfortunately not every high school/college student is well educated on credit. You see all the misunderstandings in this thread alone. That's a typical problem. If they never had a credit account till they graduated and they are not authorized users/secondary account holders on their parents' accounts, chances are they'll have very little credit. Even worse, many kids who did have credit cards in colledge messed up on them instead of using them wisely. They ended up with debts and bad credit out the door and of course they'll get in troubles financing a car or a house. For those who DID have credit cards and always paid on time, 5 years is a very nice accumulation. They'll surely be rewarded when they apply for that first car loan of their life. This is very common. The biggest factors that a typical mortgage lender will consider are marital status, employment factors, and other indications of personal and social stability. Annual salary and other income are also very big. These factors overshadow personal credit history by a very very long shot. As explained above this is not true in the case of good credit. A good credit itself is a strong indication of personal responsibility and financial stability. If a person manages to control his spending and pay his credit card bills on time over years, it is very unlikely that he'll default on a car loan/mortage which is a low risk secured loan in nature. It is very true however in case of no credit/bad credit. These people need cars and houses too, and since they do not have the good credit to prove themselves, lenders need to carefully evaluate their job/income before making a decision. These people tend to get substantially worse rates than those with good credit even if their income is higher. I would never say credit cards build no history, but with the time frame that most of us are looking at the history we'll be able to build before needing these types of loans is insufficient for it to be a major factor. This is a valid concern. Fortunately if one starts to build credit once he goes to college (or becomes 18, or even earlier than 18 with co-signer) and always pays on time, by the time he graduates he will have sufficient credit for what he'll need. Another bonus is to have a parent/guardian add him/her as an authorized user on one or more of their well seasoned credit accounts with low utilization. It will surely improve the score a lot. | ||
|
NewbSaibot
3849 Posts
A late payment on credit bill is entirely different, and very damaging for your credit if it continues to happen. A late payment is just that, the bill was due on the 1st and you didnt pay till the 15th. In such a situation, not only will you be charged interest (sometimes the interest increases as a penalty), you will also be subject to a fine, anywhere from $20-$50 or more depending on the severity of the issue and the balance remaining. IloveCats feels the idea behind a medium balance on your credit cards to be one put forward by the lenders of the nation to dupe customers into extending their interest payments for longer periods of time, which is how the banks make money. This could easily be true, although I doubt theres anyway to prove it, other than to examine the credit scores of those with medium balances and those with low balances. I imagine either is probably suitable, and the difference between the two is likely nominal, in which case maintaining large credit balances really does benefit the banks and not yourself. But I think we all agree now that keeping a zero balance on every credit card, and paying them all off within one month is useless yes? | ||
|
ilovecats
United States265 Posts
IloveCats feels the idea behind a medium balance on your credit cards to be one put forward by the lenders of the nation to dupe customers into extending their interest payments for longer periods of time, which is how the banks make money. This could easily be true, although I doubt theres anyway to prove it, other than to examine the credit scores of those with medium balances and those with low balances. I imagine either is probably suitable, and the difference between the two is likely nominal, in which case maintaining large credit balances really does benefit the banks and not yourself. It has been proven by the actual experience of consumers and you'll find it out in related consumer credit forums. FICO itself also stated the fact that a low utilization ratio improves the score even though there is no "exact low". Generally less than 10% is considered the best. 15% is acceptable but 20%-40% is too high. And no it's not always a "nominal" difference. As a matter of fact high utilizations can kill scores, especially on the relatively thinner files. But I think we all agree now that keeping a zero balance on every credit card, and paying them all off within one month is useless yes? I'm not sure what you mean by "keeping a zero balance on every credit card". If you pay the bill in full by the end of the grace period monthly, it will not incure any interest. However since you can still use the card after the statement is cut, I'm not sure how u can have a zero balance unless you pay it in full and not use it at all. If we are talking about the balance that gets reported to the credit bureaus, just because you paid the bill in full doesnt mean a "zero balance" will be reported. This is because most creditors report the "statement balance" itself. If it's high, then it's high, and it might hurt the score. Some creditors may report the balance as of a certain date (say the first or the end of each month). But as far as I know no creditors will intentially report the balance after you make your payment. This means the only way to have all 0 balance on your report is to either not use the card at all, or pay it off as you spend even before the statement cuts. It's not necessary. If your creditor reports the statement balance, just keep your statement balance low. You may even make a partial payment before the statement cuts if in a given month you feel that it's gonna be high. For young adults (with limited income that is), I recommend paying the bill in full each month. You do not want to spend more than what you have in your bank account because you do not have the financial strengh to "turn around stuff" flexibly. Paying interest under such circumstances is a bad idea. If you ever fall behind, you may find it hard to ever catch up again. Paying in full constantly reminds you of your spending control. | ||
|
NewbSaibot
3849 Posts
Anyway, of course 80% usage of your credit card would go against your score. You say <10% is good based on what you've heard, i say 20%. No matter what your credit limit, a 5% remaining balance could easily fall into the hundreds of dollars category. Building credit by owing $400 for 8 months just sounds silly to me. Not that I enjoy making larger interest payments, it's just youre one guy on the internet going against everything ive been told, heard, or read in the past. Im stickin to my guns on this one. Anyway, there were some huge bombshells dropped in this thread when it comes to how some people believe credit works. And they wonder why teens/young adults are in such peril when it comes to proper credit use. I hope these lectures spread amongst their peers, valuable information here, and thx for contributing. | ||
|
ManaBlue
Canada10458 Posts
Guess I don't need to bother taking personal finance next semester. | ||
|
ilovecats
United States265 Posts
You can find a lot of good information here at http://www.creditboards.com. Just be careful because there are lots of credit whores on that board. (People with good credit but are obsessed with credit who go after every single card on the planet)A special note about car loans. It's always a good idea to walk into a dealership with funds in hands. For this purpose a relationship with a good credit union can be very handy. Credit unions are member funded and operated organizations. Unlike most profit-hungry banks these days, they can provide credit cards and loans at very competitive rates. If you have solid credit, a credit union may cut you a check with a preapproved amount that you can use directly at a dealership. This will prevent the deceiving tactics dealerships like to pull on customers such as excessive number of credit inquiries and APR traps. Most credit unions have secured credit cards for those with limited credit history to establish a relationship with, and imo it's well worth it. I also want to emphasize the importance of good credit yet again for those who havent or were just starting out. You probably wont realize it till the day you need it. Income is a peice of paper. There are plenty people out there with nice 6-figure incomes who ended up over-extending themselves and declaring bankrupcy. That signature of yours is just a flip of a pen. Sure you promised to pay, but so did u promise your bf/gf that you'd never cheat. And that word of yours? Well it's just that word of yours. Your credit report, however, is a factual sheet. It speaks for itself. Don't mess up on credit. Spend wisely. | ||
|
IIICodeIIIIIII
China1101 Posts
| ||
|
ilovecats
United States265 Posts
On December 25 2006 22:45 IIICodeIIIIIII wrote: take the advice from Warren Buffett. Don't use your credit card. There used to be a very long discussion about that speech of his on creditboards. The conclusion was that the talk was very one-sided and did not justify the many benefits of credit cards. It's more likely that he was just trying to make a point about unwise credit card spending. Let's face it. He's a multi-billionaire and he can spend his money the billionaire way. He can buy a town in cash and we need a loan just for that $20k car. | ||
|
Rekrul
Korea (South)17174 Posts
I have enough cash, so it doesn't really matter, but it seems like maybe it would be a good idea for me to get a credit card and use it to build up credit? | ||
|
ilovecats
United States265 Posts
I don't know anything about your current credit profile so I cannot tell whether or not you can be approved for certain cards. If you ever had any student loan/car loan or things like you probably already have some credit. It always helps a lot if you have someone with established credit add you on one of their seasoned accounts with low utilization. If you do not have sufficient credit and get denied for a prime card for that reason, you may consider a secured card. Or you can try a store credit card such as Target/Macy's/Chevron/Kay. Also if you receive any pre-approved credit card offers in the mail from a reputable bank, you might give them a shot. Some major US prime lenders to consider: Citi (my personal favorite) AMEX Bank of America / MBNA Chase (kind of sneaky) US Bank Some great national credit unions: Pentagon Federal Credit Union Palteco Credit Union Digital Federal Credit Union NASA Credit Union Agriculture Credit Union These cards are generally a bit easier: Juniper/Barclay's Washington Mutual | ||
|
Rekrul
Korea (South)17174 Posts
| ||
|
j0ehoe
United States2705 Posts
first off, let me say fuck capital one. first, ive had my card for 2+ years making over 30k a year and they havent raised me past 500$ limit. and now, over the last two days, ive wasted about 3-4 hours of my life and still havent had my problem resolved. on dec. 24, i needed to go pick up a gift certificate to my parents favorite restaurant, this upscale italian place. my card got declined despite me paying 470$ on 12/20. this was after i used it a few times during the last two days, totaling about 200$. i go to look online to see why and it says im carring a balance of 49$ and that i have no available credit. i sit on the phone and they first tell me that the reason was because on 12/20 i made a $270 purchase. it never happened. finally they tell me its an error and that the reason that i was declined was that they withheld 200$ of my payment. the lady said she didnt know why and couldnt get anyone else to figure out why. then they told me that a supervisor is going to call in 24 to fucking 48 hours. so im stuck longer without a card now. id like someone to plz make sense of this situation, because i have no fucking clue what is happening. | ||
|
collegeBored
United States1524 Posts
if u rely on a single card (or single anythign else really) ure a moron and are bound to get fucked over at some point. get another card, keep multiple cards in your wallet, use a checkbook, pay cash. not like a credit card from capital one is the only possible solution. if you want higher credit limit, ask them, or apply for a different card, noones gonna increase it for u. | ||
|
ilovecats
United States265 Posts
On December 26 2006 21:04 j0ehoe wrote: id like to ask some advice from the those who know a lot about credit cards first off, let me say fuck capital one. first, ive had my card for 2+ years making over 30k a year and they havent raised me past 500$ limit. and now, over the last two days, ive wasted about 3-4 hours of my life and still havent had my problem resolved. on dec. 24, i needed to go pick up a gift certificate to my parents favorite restaurant, this upscale italian place. my card got declined despite me paying 470$ on 12/20. this was after i used it a few times during the last two days, totaling about 200$. i go to look online to see why and it says im carring a balance of 49$ and that i have no available credit. i sit on the phone and they first tell me that the reason was because on 12/20 i made a $270 purchase. it never happened. finally they tell me its an error and that the reason that i was declined was that they withheld 200$ of my payment. the lady said she didnt know why and couldnt get anyone else to figure out why. then they told me that a supervisor is going to call in 24 to fucking 48 hours. so im stuck longer without a card now. id like someone to plz make sense of this situation, because i have no fucking clue what is happening. One word, (actually three), CAPITAL ONE SUCKS. Capital One (a.k.a. CRAP1 in the credit community) is notorious for being one of the nation's leading sub-prime lenders. They are mostly known as "once sub-prime, always sub-prime". They sure do issue "some" good cards to certain (few) people they like, but if you take a look at their overall portfolio, you will find tens of thousands of people telling the exact same story like yours. Capital One loves to target young people as well as people with little/bad credit. Many people find their cards rather easy to get, of course with small limits such as $200, $300 and $500. The problem is, as your credit gets better and better over time and as you establish a nice on-going relationship with them, they on the other hand, are not willing to grow with you. They still see you as a sub-prime consumer even if your credit says otherwise. As a matter of fact, they are trying to do things that make your credit suffer. How? As I explained in my previous posts, a very important factor to determine one's credit worthiness is UTILIZATION RATIO. This is calculated by comparing the balance on your credit card against its credit limit. There is individual utilization (on a single card) and there is also overall utilization(total balances against total credit limits on all cards). For example, a $400 balance on a card with $500 limit will have a utilization of 400/500 = 80%. We call this almost "maxing out" in the credit community and it's BAD BAD. An optimal utilization should be less than 10%! See when all you have is small limit cards (we call them "toy cards" in the credit community) like Capital One, your utilization ratio is almost guaranteed to suffer because you'll easily max out your card. As a matter of fact, Capital One does not even report credit limits while most other credit card companies do. They report "high balance" as credit limit, which is the highest balance ever accumulated on one's Capital One account. In your case, your limit is so small it doesn't matter a lot because chances are you've already come close to $500 plenty of times. But imagine someone with a higher limit card let's say $5000, however the most he ever spent on that card is $1000. Capital One will then report $1000 as the credit limit. So when that same person spends $500 next month, he'll have a utilization ratio of 50% instead of 10%. Sad, isn't it? Alright, so much for the ranting about Crap1. They have lots of other dirty tactics too such as the "holding of payments" you experienced but I'm too tired to list them all. What should you do then? Stop your heavy usage on Capital One, now. You better pay it off, and let it sit there. Do NOT close it because the age of the tradeline helps your credit. If you must use it, try not to spend more than $50 on it each month because you do not want your utilization to suffer any more. Give up any hope you have on Capital One even though you've been such a good customer for years. They don't like you, and they probably never will. Get other cards from PRIME LENDERS. 3-5 to start if you can. I wish I could tell you which cards you would qualify for. But I have zero knowledge about your credit profile. How old is your credit? Besides Capital One what other tradelines do you have? Do you have ANY degrotary items on your report such as "lates" and "collections"? If I were you, I'd order copies of your credit reports with FICO scores from http://www.myfico.com. Note that there are hundreds of websites out there providing reports and fake scores (we call them FAKO), but myfico.com is the only place you can get real FICO scores from all 3 credit bureaus. But it does cost money (about $39 with discount code CPPSAVINGS) and it's okay if you don't want to spend it. If you think you don't have any degrotary information on your reports because you were never late on any account and never owed some company money, you might have decent credit already. Wait a month for your credit reports to reflect the updated low balance on your Capital One card and try out for a few cards from the PRIME lenders I listed in my post above in response to Rekrul. Note that if you are a college student, you might wanna try the "college student cards" from AMEX, Citi and Boa/MBNA as they are usually easier to get. You may not get high limits initially (of course if you are lucky you might do, it depends on your credit). But if you can get in the door with the prime lenders I mentioned, they'll grow with you as you grow with them. They might give you automatic credit limit increases, or you might ask them for perioadic guideline increases. There are a LOT of strategies to get higher credit limits and it's impossible to cover them all in this post. One thing to keep in mind though, is that a credit inquiry (hard inquiry) is placed on your credit report every time you apply for credit. Lots of recent inquiries can hurt your score as it's a sign of someone desperately applying for credit.You might want to start slow. Try a couple cards first and if you get declined, study the reasons. If there are problems with your credit and you know that you are not likely to be approved till you fix them, do NOT go on a mad application spree and hoping to be approved randomly. It will hurt your credit even more. if you want higher credit limit, ask them, or apply for a different card, noones gonna increase it for u. This is not true. While some lenders do not give automatic increases, some do. Citi for example, has been known to give good increases. Chase also gives automatic increases if they like you, and US Bank is another bank that has been known to give $1500 increases every six months automatically with good credit performance. There are many banks out there and situations vary. Generally, to get nice credit limit increases one should keep their credit in top notch performance by always paying on time and keeping the utilization (again!) low. Lots of lenders such as AMEX are generous with credit limit increases while some are not. Some will give increases if you ask them, without pulling a hard inquiry on your credit reports while some insists a hard inquiry. Your mileage may always vary. But the bottom line is if you have good credit,know the tricks and play the games right, it's not difficult to get good credit limit increases from good prime lenders. | ||
|
MarcX
Netherlands772 Posts
| ||
|
collegeBored
United States1524 Posts
| ||
|
ilovecats
United States265 Posts
On December 26 2006 22:46 MarcX wrote: Permit me to ask a very dumb question. Why is it so important (to them) that you keep your utilization low? So that they won't have to bother with you a lot? Because utilization is an important factor in credit score. High utilization = low score = high risk. From a creditor's point of view, when your utilization is high, it means you are using up a lot of your available credit. They are concerned that you are running up your credit cards because you are in financial trouble. When your utilization is low, on the other hand, you give them the better feeling that you still have a lot more room to spare. | ||
|
ilovecats
United States265 Posts
On December 26 2006 22:47 collegeBored wrote: ive had citi for about 3 years now, my credit line is still the same. my last 2 credit cards had a link on the online accoutn management page "request credit limit increase". but u seem more knowledgeable on the subject. Yeah not everyone gets auto credit limit increases. Some always have to ask. What kind of cards are those? Did you ever call and ask? There is a "request credit limit increase" link on Citi's online management. If you are already pre-approved for any increase, it will tell you right when you click it. Otherwise it will show you a form to fill out. If you fill out that form, they'll pull your report. If your overall credit is good and you dont have many recent inquiries/new accounts, it doesn't hurt to fill out the form and try. And another good secret about Citi is that they are good on reconsideration. If you are ever denied for new credit or a credit limit increase, you can always shoot them a letter from http://www.planetfeedback.com. It's okay to include personal information in this letter. Someone from the excecutive office will review your letter and reconsider your request. | ||
|
j0ehoe
United States2705 Posts
also, i got a ton of pre-approved cards in the mail but never applied for them. i was actually considering filling out for an approved amex i got a few weeks back. i was just unsure because i know their payment schedule is different than a regular card. tonite after work im probably going to apply to chase, as per my mothers reccomendation (weve got a few cards thru them). as for closing out the account with cap1, you suggest just minimizing my utilization for a month and then closing it? i gotta go to work, ill reread your stuff there and edit this. thank you very much again | ||
|
j0ehoe
United States2705 Posts
On December 26 2006 21:29 collegeBored wrote: shit happens. your problem isnt a bad credit card company or bad customer support, nor even the fact they havent raised the limit past 500. i mean an issue in a 2+ year period with a company who proceses millions of transactions a day? how could it possibly happen. if u rely on a single card (or single anythign else really) ure a moron and are bound to get fucked over at some point. get another card, keep multiple cards in your wallet, use a checkbook, pay cash. not like a credit card from capital one is the only possible solution. if you want higher credit limit, ask them, or apply for a different card, noones gonna increase it for u. i have a checkbook and i paid cash dipshit, its the fact that its embarrassing to get declined at a place that people know you. and most companies will automatically increase, not that it matters because i asked several times, so clearly, you dont have a clue waht youre talking about. try not being such a fucking smartass when you post. | ||
|
AmorVincitOmnia
Kenya3846 Posts
| ||
|
ilovecats
United States265 Posts
On December 27 2006 05:21 j0ehoe wrote: wow, i never really understood the utilization process youre talking about, thanks. i should have good credit, no lates or anything. i always pay my stuff off, but yea, ill let it creep up to 400's sometimes. does paying my card when i use something like 150$ reflect better credit? also, i got a ton of pre-approved cards in the mail but never applied for them. i was actually considering filling out for an approved amex i got a few weeks back. i was just unsure because i know their payment schedule is different than a regular card. tonite after work im probably going to apply to chase, as per my mothers reccomendation (weve got a few cards thru them). as for closing out the account with cap1, you suggest just minimizing my utilization for a month and then closing it? i gotta go to work, ill reread your stuff there and edit this. thank you very much again Regarding Captial One, NONO don't close it. The age and history of that account helps your credit a lot because it's your only credit card. Just minimize the usage. Yes whenever you run up that card it helps if you pay it down immediately so that high balance doesn't get reported to the credit bureaus. Okay now I see you get quite a few pre-approved offers. It means your credit could be pretty good. But be careful, pre-approved does not mean approved. The creditor will still check your credit report and evaluate your application when you fill out those forms and mail them back (or respond online). However pre-approval does increase your chance for approval and in American Express' case, pre-approvals *usually* turn into real approvals. Here's how AMEX works. AMEX has two types of cards, charge card and credit card. A charge card works like a credit card, but the important difference is that you have to always pay in full every month when the statement cuts. Green, Gold, Platinum and One cards from AMEX are all charge cards. AMEX charge cards come with pretty hefty annual fees and they traditionally targeted those with higher than average spendings, otherwise the rewards will not offset the annual fees. For now you should stay away from charge cards because another important drawback of charge cards is that they do not report credit limits. As a matter of fact they do not have a clear "pre-set" credit limit. This can hurt your score with your current credit portfolio. Actually chances are you'll never need a charge cards these days because they are simply no longer what they used to be. Credit cards are a a lot more flexible because you have the option to carry a balance, and their rewards are just as good, if not better than charge cards. The rest of the AMEX family are all credit cards. This includes Blue, Clear, Optima and a bunch of airline/hotel partner cards such as Delta and Hilton. If you have pre-approvals for these cards, select one that suits your needs the most (best with no annual fee) and send it in. Here are some hints you should keep in mind with AMEX. AMEX was tradionally an exclusive charge card issuer. They didnt introduce their first credit card, Optima, till 1987. Since charge cards were "pay in full" cards, AMEX's credit card operation kind of inherited a bit of such tradition. That is, even though they allow you to carry a balance just like every other credit card, deep in their soul they like to see "pay in full".They tend to highly reward those who use their card a lot and pay in full each month. Of course there are exceptions, but what I'm trying to tell you is that when you have a AMEX credit card, it's best to pay in full when possible. Avoid carrying a balance on AMEX over an extended period of time. Another thing with AMEX is that they have recently "tightened up" their operations a little bit. You want to start slow with them. Don't apply for multiple cards from them in a short period of time or they might bug you with some financial statement stuff. Get one for now, use it wisely for at least 6 months and you'll start to build a good relationship with them. Once AMEX likes you, they can be very very generous with credit limits. After a year you'll be able to get pretty much any AMEX card you want with nice limits. But I suggest that you do not have more than 3 AMEX cards. Defintely not in the first year. Oh AMEX has a "luv button" on their online management website. It's basically a link to get credit limit increase. Upon activation of your card you might want to click that link and see if you can get a incresae. If not wait 6 months and try again. AMEX is generally very generous with limit increases once you establish a relationship with them.. Don't click it too often though. Oh by the way, AMEX signed some deals in the recent years with other banks such as Citi and Bank of America/MBNA. You can see these "co-branded" AMEX cards issued by these banks. Remember these cards run on AMEX's network and are accepted where AMEX's are accepted. Other than that, they are not related to AMEX. They are issued and maintained by those individual banks accordingly. Now let's talk about Chase. Chase has been a controversial bank in the past decade. Many people hate them because they are known to "rate jack". That is taking disciplinary actions on your accounts for no obvious reason by suddenly increasing your APR to a sky high figure, like 29.9%. This combined with some other questionable tactics of them screwed a lot of people up. However Chase does treat some customers right, including me and a few people I know. It's hard to figure out exactly what they like and don't like. One thing for sure is that they don't like to see a lot of new accounts and they don't like to see high utilization ratios. If you read my post on the previous page in response to Rekrul, you'll see that I named quite a few prime lenders in this country. For example Citi is rated far ahead of Chase and is considered one of the best credit card issuers. Defintely get a couple cards from Citi if you can. Again use them wisely and establish a strong relationship with them. That will surely be rewarding in the long run. Credit union cards can be very nice too. They usually have very competitive rates and low fees compared to bank credit cards. So you might wanna check those out. Finally when applying for credit cards, for now you want to try to stay away from two types of cards: "Visa Signature" and "World Mastercard". These are considered premium credit cards but they do not report credit limits, which is not good for you at your current stage. When your credit portfolio gets stronger and you have higher overall limits, you may consider these cards. There are a lot to learn about credit cards and over time you'll begin to realize which offers are good and which are not. Read the terms and conditions of each card. Stay away from those cards with various fees such as "annual fee, application fee, enrollment fee, participation fee and program fee". Use your cards wisely and soon you'll have a pretty shiny wallet. | ||
|
j0ehoe
United States2705 Posts
| ||
|
ilovecats
United States265 Posts
| ||
|
j0ehoe
United States2705 Posts
 | ||
Plexa
Aotearoa39261 Posts
this thread is perfect... i recently got my first credit card and i had no idea about any of this stuff... ilovecats you are amazing! thanks so much | ||
|
ilovecats
United States265 Posts
On December 27 2006 06:52 Plexa wrote: wow o.o this thread is perfect... i recently got my first credit card and i had no idea about any of this stuff... ilovecats you are amazing! thanks so much I'm not knowledable on credit systems outside the U.S. so some of my statements may not be true in your country. But there is one thing I believe that's universal. Time. Credit is all about performance over time and building good credit definitely takes time. It's quite easy to pay on time for 3 months. But to keep doing so for 30 years is not. Keep time in mind when you start out on credit. Be patient and don't try to advance too fast. Let your existing accounts age for a while before trying to get new ones. Good luck. | ||
|
omgbnetsux
United States3749 Posts
Fatwallet Finance There's a lot of really good credit sign up bonuses and balance transfer options posted on there from time to time. Some of the recent highlights are the $150 bonus for the Chase Sony card and the $250 American Express Business sign up bonus. | ||
| ||
