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Got my first credit card, how do I build credit?

hobbbz

hobbbz

macrumors 6502a
Original poster
Mar 8, 2005
605
4
I've finally been able to get my first credit card with a measly 250$ limit.

I am very financially responsible and also have very few bills so I don't need to use it for anything I can't buy with cash.

What I want to know is how do I go about using it to build credit without wasting my money on interest payments.

Any advice would help and if you have specific sources I would be glad to read them.

Also, how long do I need to use it before I have positively affected my credit rating? (ie to apply for a better card)
 
carefully spend no more than you can pay back and it will build.

and be sure to pay everything you can by the end of the monthly billing cycle.
 
I am 18 just got a Capital One Platium card with $300 Limit about 3 months ago. I used it on paypal to buy my brothers car parts and would put his money in my bank account and direct draw from the bank account to the card and pay it off. Which was about a $1000 worth of stuff.
Now that I have built credit, I have an A credit rating!!! and have $4400 in the bank.:D

I'm saving $5000 for this and getting a $2000 loan: Emmm Turbo charged AWD

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I currently drive this gas hog...

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hobbbz said:
I've finally been able to get my first credit card with a measly 250$ limit.

I am very financially responsible and also have very few bills so I don't need to use it for anything I can't buy with cash.

What I want to know is how do I go about using it to build credit without wasting my money on interest payments.

Any advice would help and if you have specific sources I would be glad to read them.

Also, how long do I need to use it before I have positively affected my credit rating? (ie to apply for a better card)
Click to expand...

Ironically, if you allow a balance to carry for one month, and thus incur some interest, this will give you a better credit rating. But, generally speaking, pay within the grace period (20-30 days depending on the card, pay attention to this) and you won't have to pay interest. A credit card is great, but be careful, running it up to the limit or opening additional cards is a great way to dig yourself a rather deep hole. So, use it only what you could pay off easily in a month.
 
I think of a credit card as a short term loan, from when you make the purchase to when the payment is due. The key is to ALWAYS pay on time. Your credit will grow.
 
Define 'A Rating' what number range is that? 650? 700?
 
hulugu said:
Ironically, if you allow a balance to carry for one month, and thus incur some interest, this will give you a better credit rating. But, generally speaking, pay within the grace period (20-30 days depending on the card, pay attention to this) and you won't have to pay interest. A credit card is great, but be careful, running it up to the limit or opening additional cards is a great way to dig yourself a rather deep hole. So, use it only what you could pay off easily in a month.
Click to expand...

Thats what I did...
 
hulugu said:
Ironically, if you allow a balance to carry for one month, and thus incur some interest, this will give you a better credit rating.............
Click to expand...

Be careful, it surprises me the number of people that aren't aware that if you are 5 days late you are charged 35 days interest.

Caveat emptor.

and have fun :)
 
I've read advice on the Consumerist that says you should pay the minimum on the due date and then pay the remainder during the grace period.

Does this sound...sound?
 
hobbbz said:
I've read advice on the Consumerist that says you should pay the minimum on the due date and then pay the remainder during the grace period.

Does this sound...sound?
Click to expand...

It's cool when your limit is $250.00
but again, be careful, next year you'll be offered $2,500.00

don't let your guard down.
 
hobbbz said:
I've read advice on the Consumerist that says you should pay the minimum on the due date and then pay the remainder during the grace period.

Does this sound...sound?
Click to expand...

Not for a new card holder.

You have the card. Now, buy lunch. When the billing period ends, and your bill is available online, pay it off.

Next month, same thing. Go twice even. Just don't buy something you can't pay off in full.

Don't screw around with stretching it out.

Build a track record of payments. Don't pay twice a month, once for the minimum, and the rest later. What happens if something comes up and you miss the 2nd payment? Now you're paying interest.

The credit card industry is in business to charge you late fees, interest, overdraw fees, etc. They also get a piece of every transaction you make with a vendor as they get 1-3% of the sale.

Don't give them the chance to take your money. Use the card for you, not for them.

And, as long as there is no annual fee for this card, NEVER cancel it. One of the biggest factors in a credit score is length of time holding credit with a firm. Use the card until you can qualify for one with better terms, lower interest, rewards of some sort and a higher balance.

When that happens, until the original credit card company tries to charge you an annual fee, keep that card in your safe. Use the new card. Never cancel the old card until it becomes a pain in the butt to keep track of it. By this point, your other credit points will make up for the hit you'll take by canceling it.

Don't ever give any credit card an annual fee, or interest, or late fees, or overdraft fees. It's their problem if in their eyes you're a deadbeat because they don't make any money on you.

I've been following the credit card industry for a long time, and I've seen them do some tricky stuff. Keep an eye on your account. If they ever try to add an annual fee later, tell them to remove it. If they won't, tell them you'll cancel. If they still won't, pay it off, when the payment has been applied, cancel the card.
 
just cancel that card if you don't need it. worked at Bank of America for 4.5 years (now i'm happily NOT working in a freakin' office :D ) and learned that credit does diddly squat! if you're under the age of 25, unless you just F-ed your credit score to hell, most of the time what's going to hold you back is your income.

over the age of 25 most banks/car retailers look at your debt to income ratio before they even bother with your credit score. true story. i can't remember the last time we denied someone (non credit card holder) making 90k or more a year who needed a 50k loan for a car. if you do have a perfect credit score, but you bring in 60k a year, it will be pretty unlikely you'll get the 50k loan that you want...most banks then will pull your credit score and give you some clown-ass counter offer like, "well sir, you'll be happy to know we have approved you for 20k..." and when they tell you the interest rate your blood pressure increases by a factor of 10.

however, if you really feel the need to use the plastic then in as little as 6 months you can call to ask for a credit line increase...though most credit line bumps seem to come around 8-10 months if memory serves.
 
Decrepit said:
You have the card. Now, buy lunch. When the billing period ends, and your bill is available online, pay it off.

Just don't buy something you can't pay off in full.

Don't screw around with stretching it out.

Build a track record of payments. Don't pay twice a month, once for the minimum, and the rest later. What happens if something comes up and you miss the 2nd payment? Now you're paying interest.

And, as long as there is no annual fee for this card, NEVER cancel it.
Click to expand...

Some more background on my situation:

I have a decent job so there's never a chance I won't have 250 in a pinch. But, this card, being for low/no credit folks like myself, has an $8/month fee. Obviously it's the only one I could get (I've applied for a few over the years) and I know the fee is not good, but how long should I keep this card before dumping it for one with no fee if I'm steadily charging 25-75$ per month and paying it off the next month?
 
hobbbz said:
Some more background on my situation:

I have a decent job so there's never a chance I won't have 250 in a pinch. But, this card, being for low/no credit folks like myself, has an $8/month fee. Obviously it's the only one I could get (I've applied for a few over the years) and I know the fee is not good, but how long should I keep this card before dumping it for one with no fee if I'm steadily charging 25-75$ per month and paying it off the next month?
Click to expand...

Get another as soon as possible, keep applying for cards, before Christmas is best, they think you'll overspend and stick you with the fees.
 
if you don't mind me asking...what card do you have and from what bank? i've never heard of student/introductory cards carrying monthly fees.

hobbbz said:
Some more background on my situation:

I have a decent job so there's never a chance I won't have 250 in a pinch. But, this card, being for low/no credit folks like myself, has an $8/month fee. Obviously it's the only one I could get (I've applied for a few over the years) and I know the fee is not good, but how long should I keep this card before dumping it for one with no fee if I'm steadily charging 25-75$ per month and paying it off the next month?
Click to expand...
 
iphone.luke said:
I'm saving $5000 for this and getting a $2000 loan: Emmm Turbo charged AWD
Click to expand...

Congrats on keeping your credit in order! Two things: your insurance on the Eclipse could ruin you and if not that, the repairs; get a higher credit limit for those.

Gas hog, definitely. The Eclipse, however, will get equal or worse mileage. Guaranteed.

hulugu said:
Ironically, if you allow a balance to carry for one month, and thus incur some interest, this will give you a better credit rating.
Click to expand...

God awful advice.
 
hobbbz said:
Some more background on my situation:

I have a decent job so there's never a chance I won't have 250 in a pinch. But, this card, being for low/no credit folks like myself, has an $8/month fee. Obviously it's the only one I could get (I've applied for a few over the years) and I know the fee is not good, but how long should I keep this card before dumping it for one with no fee if I'm steadily charging 25-75$ per month and paying it off the next month?
Click to expand...

That's offensive. Get rid of that card as soon as possible.

No credit is better than $100 a year in fees.

The credit score hit isn't worth that monthly theft.

Find a credit union in your area, you should be able to be eligible by merely opening a $5.00 savings account.
 
hobbbz said:
It's an "Access Visa" from Plains Commerce Bank.
Click to expand...

6 months of paying in full will get you some invites into a higher limit. A great way to get your current limit raised is to spend 99% of the limit and pay it off that same month. Then call Customer Service and request an increase so as to not hit the limit again.
 
hobbbz said:
has an $8/month fee.
Click to expand...

That's frightening. Here's why...

Its a 38.4% APR on your $250 limit even when you pay in full!

$250 x (0.384/12MONTHS) = $8.00

You're paying them an atrocious amount because a high APR is 28%

Please cancel that card immediately and contact your local CREDIT UNION.
 
hobbbz said:
I've heard the 'carry a balance' advice multiple places. I'm not saying it's right but if it's not what is your suggestion?
Click to expand...

Credit Score goes from 500-860. This method 'may' give you a 810 rather than an 805 when you're 25. So you pay a few dollars of interest EVERY month for 7 years for 5 points when all you needed was a 720 to get a new home.

$2 x 12 MONTHS x 7 years = $168 for 5 mundane points?!
 
Please cancel that card immediately and contact your local CREDIT UNION.
Click to expand...

Trust me, I've applied at a credit union, made my $5 deposit, and all I got was big fat 'not approved' on a loan.
 
hobbbz said:
Trust me, I've applied at a credit union, made my $5 deposit, and all I got was big fat 'not approved' on a loan.
Click to expand...

On a loan, or on a credit card application?

How long have you been working at your job? Is it a consistent paycheck or does it fluctuate? Does somebody in your immediate family have serious problems with credit?

Have you run your free credit reports to ensure nobody opened credit in your name and that's the reason you're being blocked?
 
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