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post #1 of 45 (permalink) Old 01-09-2003, 04:13 AM Thread Starter
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Question about credit cards

Hey guys. I'm 20 and trying to build some credit. I have a student Citibank card that I've had for about 3 months. I keep it out of my wallet mainly because I'm afraid of it. I've read quite a bit online about credit and it seems that the longer you have the card, the better it looks, which makes sense.

I talked to my dad about it and he said the credit report guys only keep tally if you do something wrong, not if you make payments. He doesn't claim to be an expert, though, so if anybody could confirm or deny that statement would be helpful. If it is true, my thought is just let this card collect dust and rack up the good credit.

With that said, if one card is good for getting credit, is 2 better? I'm not talking about going out and getting 15 credit cards because I've read plenty of literature that says if you have too many that will definitely hurt your credit.

I pay for things in cash so I don't need credit cards, but realize you can't do much in life without having good credit such as buying a house, getting car loans, things of that nature. It would be nice after I get out of school if I could finance a new car and buy a house.

Anyways, any help you guys could give would be appreciated all of my friends and family seem to have different opinions on what is right.
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post #2 of 45 (permalink) Old 01-09-2003, 06:19 AM
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What I have found is that you should use it atleast a couple times a month, like a couple tanks of gas or something. That will show good on credit reports. But like your Dad I am no expert, just my .02

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post #3 of 45 (permalink) Old 01-09-2003, 06:25 AM
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Like anything in life moderation is the best policy and like Mark said use it for small purchase, and ALWAYS pay it off. It takes awhile to build a credit line, and steady job and a place of your owns (apartment) helps I think.


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post #4 of 45 (permalink) Old 01-09-2003, 07:45 AM
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Really, credit cards don't really do much in terms of building credit. Until you take the plunge and buy something big (like a car) or get an apartment, you'll have virtually no credit. Not that it's a bad thing.

I'd buy some small stuff, pay it off in two months (fool the card company into thinking you pay it off every time). Remember, they don't earn interest on something you pay off. It pisses them off.

I'd watch yourself though. I found myself in some serious card debt after college ($3k), 1/2 of it was the guitar amp sitting in my spare bedroom. One of my roomates got one right when I was leaving, then maxed it out in two months. The good thing about the student cards is the low credit limit. But they also have super high interest rates and you don't have much leverage with the card company.

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post #5 of 45 (permalink) Old 01-09-2003, 07:53 AM
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Credit cards that are not used do not build credit. They can in fact lower your credit score if your open unsecured credit line exceeds a percentage of your income.

To build your credit, use it occasionally and pay off the balance. Make your payments on time.

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post #6 of 45 (permalink) Old 01-09-2003, 08:30 AM
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Quote:
Originally posted by BusaDave
Credit cards that are not used do not build credit. They can in fact lower your credit score if your open unsecured credit line exceeds a percentage of your income.

To build your credit, use it occasionally and pay off the balance. Make your payments on time.

Dave's right. It also helps to build your credit score if you carry a small balance and make minimum payments for a few months at a time. They like to see you can handle payments, or make interest money off you. more than paying off balances.

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post #7 of 45 (permalink) Old 01-09-2003, 08:53 AM Thread Starter
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It's better to carry a balance then pay it all off? I heard different.
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post #8 of 45 (permalink) Old 01-09-2003, 08:58 AM
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Quote:
Originally posted by crazeinc
It's better to carry a balance then pay it all off? I heard different.

It's good to pay it off, but the cc co's will give you higher ratings as you make payments. It sounds weird, but as time goes on you will realize that cc companies will favor those that carry balances. It makes them money. They will build your credit score and give you a higher max.

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post #9 of 45 (permalink) Old 01-09-2003, 09:28 AM
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Think of it from the creditor's perspective....who do they want to extend credit to?
1. People that use the card so they collect money from the vendors where you used it.
2. People that pay on time so that their cash flow models and predictions are accurate.
3. People that carry a balance so that they collect interest.

All of these characteristics contribute to a solid credit score.

You will have trouble buying a house or renting an apartment without a solid credit score. Credit cards are a great way to build this up using the methods I described.

A word of caution though.....do not miss/send late a payment. Do not go over your limit. Do not get in over your head in carrying a balance. As your score increases you will recieve better offers from competiting CC firms.

Most important....make sure you understand the opportunity cost when you allocate your finances. Paying off a depreciating secured asset like a car at a higher interest rate than say a CC at half the rate does not make any sense. Put your money to work for you.
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post #10 of 45 (permalink) Old 01-09-2003, 10:12 AM
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I'm probably just a little bit older than you....so i'll tell you about my experiences. i only have 2 credit cards. i pay them off at the end of each month. i use 1 of them ALOT. i'm more of a credit person than a cash person. i use the card for gas, food, shopping, etc. the only place i will NEVER use them at is bars. that can get dangerous cuz then you'd keep drinking.
anyway, when i applied for a bike loan at bank one last year, i got approved for the lowest rate they offered.
my recommendation would be to use it, pay it off monthly, and basically NOT carry any balances. i don't believe that its "good" to carry balances.....but that's just my opinion.
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post #11 of 45 (permalink) Old 01-09-2003, 10:27 AM
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Obtaining a motorcycle loan (recreational vehicle) is a little easier than securing a 0 down $250,000 mortgage. Trust me here, you want to build your credit score so that you have these options someday.

It's never good to carry balances UNLESS you can make more money than you have to pay in interest.

Ex. Johnny has $5000 cash. He can eithe pay off his CC balance which charges 3.9% a year, or invest that money with the thought he caand possibly earn 12% a year. Yes there is risk, but as long as he makes more than the 3.9% he is being charged it makes sense.

It's all boils down to using other people's money....to your advantage. Leverage baby!
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post #12 of 45 (permalink) Old 01-09-2003, 10:54 AM Thread Starter
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Thanks for the help guys, sounds like I should start using this thing to fill up the gas tank.
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post #13 of 45 (permalink) Old 01-09-2003, 10:58 AM
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using them?...ask my charge it crazy wife


but kruz has hit the nail on the head!



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post #14 of 45 (permalink) Old 01-09-2003, 11:16 AM
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Really the number of credit card that you have dont hurt your FICO(credit card) Score. What can hurt you is missing payments and having a balance over 1/2 of your credit limit. Have a few inquires on your report can hurt the rating but maybe by a point or two. Also never go into bankrupcy.. that will lower your credit card score by 200 points at a minumin. So charge a few things and pay them off as fast as u can... best advise.

For intrest rates on a card, it all depends if you are a tranactor, relover, or an inactive + credit score and how long your loan is on the books. Inactive accounts usaully get lower rate and balance transfer rates. Transactors, those who buy and pay off every month get a good rate too. Relovers, those who make payments get the worst rates.

I can give you more info.... i just dont want to seem long winded.
post #15 of 45 (permalink) Old 01-09-2003, 11:46 AM
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I second what Dave and hayabusa_z said...

I want to emphasize that if you have a LOT of inquiries in a short period of time that will negatively affect your credit rating for the period in question.

Rule of thumb: only charge it if you can afford to pay in full when the bill is due (emergencies are a separate case, so leave yourself some "wiggle room"). That way you will not start the cycle of getting over your head in debt.

And avoid those cards that charge an annual fee.

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post #16 of 45 (permalink) Old 01-09-2003, 11:48 AM
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Quote:
Originally posted by Kruz
or invest that money with the thought he caand possibly earn 12% a year
Where are these 12% investments? I'd love to find them in this market

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post #17 of 45 (permalink) Old 01-09-2003, 11:50 AM Thread Starter
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When I start using this thing, how soon do I get my balance sheet in the mail? For now I'm gonna pay it off every month, I don't like owing anything to anybody and wanna make sure I don't have to pay interest on the purchases.
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post #18 of 45 (permalink) Old 01-09-2003, 11:53 AM
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I just asked my wife's friend who works a trw. to build credit you should have a balance but do not pay it off every month because it shows no credit history. charge $50.00 pay off 25 this month and 25 next month. Try to double or triple the minimum without paying it off monthly. continue the cycle for 6 months on a card or 2 cards. you will build up some type of credit score. then when you purchase a large item ie.. car bike house what ever that is when you really lift the scores.

MOST IMPORTANT..............do not miss or be late! it shows on your report and lowers the scrore rating.

secondly....if you have 5 cards with a 5,000 limit apiece thats 25,000 potential credit even if you are at a zero balance. not good if your income dosent fall in the debt to income ratio scale.

very important... Always close your cc accounts with a paper stating (please close account per customer request) This way when someone runs your report they know you closed the account and that it was'nt closed by instituition.

Finally.............the more times people run your credit the lower it will go. if you are thinking of buying a car and you go to 10 dealers.......do not let them run your credit period until you are sure that that is the vehicle you want. Good luck and hope i helped ya alittle...............

<--Kelly

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post #19 of 45 (permalink) Old 01-09-2003, 11:58 AM
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Quote:
Originally posted by crazeinc
When I start using this thing, how soon do I get my balance sheet in the mail? For now I'm gonna pay it off every month, I don't like owing anything to anybody and wanna make sure I don't have to pay interest on the purchases.
Find out when the monthly billing cycle date is, it normally will take about a week. Based on my experience, the billing due date is 3-4 weeks after then.

Example: my Discover card normally has it's "end of month" as the tenth. Within a week I normally get my statement. Due date is normally the ninth of the next month.

I have a Citibank Mastercard I use when the ice rinks do not accept Discover for their rentals, so I can check when I get home what the cycle is.

One other thing. Make sure you pay on time; late fees can be a killer ($25 per occurrance).

Oh, another thing. If you can go pay your bill in person and get a receipt, do it, that will help if there is a screw-up in processing the payment.

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post #20 of 45 (permalink) Old 01-09-2003, 12:02 PM
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Crazeinc,

I checked with Citibank and they said they report every month on your credit report if you make on-time payments or not. The other thing is you can go online with Citibank to check your balances, make payments and dispute any charges.

As far as I know, the other credit cards that report like Citibank are Providian and Credit First.

I also agree with Labdog. Payoff your balances and watch out on the inquiries. I know first hand how inquiries can lower your score.

Good luck on your credit card...

What were you thinking??? You can't catch me!
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post #21 of 45 (permalink) Old 01-09-2003, 12:04 PM
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Quote:
Originally posted by Labdog
I just asked my wife's friend who works a trw. to build credit you should have a balance but do not pay it off every month because it shows no credit history. charge $50.00 pay off 25 this month and 25 next month. Try to double or triple the minimum without paying it off monthly. continue the cycle for 6 months on a card or 2 cards. you will build up some type of credit score. then when you purchase a large item ie.. car bike house what ever that is when you really lift the scores.

MOST IMPORTANT..............do not miss or be late! it shows on your report and lowers the scrore rating.

secondly....if you have 5 cards with a 5,000 limit apiece thats 25,000 potential credit even if you are at a zero balance. not good if your income dosent fall in the debt to income ratio scale.

very important... Always close your cc accounts with a paper stating (please close account per customer request) This way when someone runs your report they know you closed the account and that it was'nt closed by instituition.

Finally.............the more times people run your credit the lower it will go. if you are thinking of buying a car and you go to 10 dealers.......do not let them run your credit period until you are sure that that is the vehicle you want. Good luck and hope i helped ya alittle...............
I've seen alot of people pay them off every month for a couple of years and think they have built a good credit score, then apply for a car and get rejected. YOU NEED TO CARY A BALANCE. Don't get carried away though!!!!! This is the way I've done things and my score was 760 the last I checked, 2 1/2 years ago.

Brian (F.K.A. Crazy)

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post #22 of 45 (permalink) Old 01-09-2003, 12:44 PM
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Quote:
Originally posted by Labdog

Finally.............the more times people run your credit the lower it will go. if you are thinking of buying a car and you go to 10 dealers.......do not let them run your credit period until you are sure that that is the vehicle you want. Good luck and hope i helped ya alittle...............
Pay attention to this one! I almost got screwed on my mortgage because I did some comparison shopping by going through an on-line loan broker. They shotgunned my information to several companies who ALL ran my credit report.

They all came back with non-competitive rates but almost screwed me with a real mortgage house because of the inquiries. One or two more inquiries and I would not have qualified for the loan.

Dave
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post #23 of 45 (permalink) Old 01-09-2003, 12:47 PM
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Quote:
Originally posted by BusaDave


Pay attention to this one! I almost got screwed on my mortgage because I did some comparison shopping by going through an on-line loan broker. They shotgunned my information to several companies who ALL ran my credit report.

They all came back with non-competitive rates but almost screwed me with a real mortgage house because of the inquiries. One or two more inquiries and I would not have qualified for the loan.

I was told, at a car dealership one time , they look for 3 or more inquiries in a months time.

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post #24 of 45 (permalink) Old 01-09-2003, 04:19 PM Thread Starter
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You guys have been extremely helpful I can't thank you enough. Sure enough Citibank has citicards.com to get all of the info I could ever want about my account.

Only thing I don't like about carrying over my balances is having to pay 17% on gas fillups
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post #25 of 45 (permalink) Old 01-09-2003, 04:41 PM
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everything costs! pay the 17% now and hopefully if you get a used car or new later down the road you will get 8-9% rather than 20 -21 %. Figure the 17% on $20 over 3 months and then figure 8% on $200,000 mortgage. better yet 20% on 20,000 used car loan opposed to 8% on a 20,000 loan!

A great credit rating is vital to getting what you want later in the game of life.

You have only just begun!!!!!!!


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post #26 of 45 (permalink) Old 01-09-2003, 05:10 PM
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i'm only 22 and i already have a platinum card with a limit of $14,000. What i did was use my credit cards like a debit card. i would pay them completly off evey few months. However don't have two many, maybe a dept. store card, visa, and MC. Now all my cards i recive have 0% intrests on them too.


The key to credit cards is, don't buy it unless you have the cash to back it up!
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post #27 of 45 (permalink) Old 01-09-2003, 06:10 PM
 
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Quote:
Originally posted by Crazy



It's good to pay it off, but the cc co's will give you higher ratings as you make payments. It sounds weird, but as time goes on you will realize that cc companies will favor those that carry balances. It makes them money. They will build your credit score and give you a higher max.
I am a prime example. Huge debt levels, but good income levels. I always make my payments on time and I have 2 credit cards. I think they even look at regular bills also. When I went to buy my car, I was suprised to find that my credit ratign was fairly high.

I am the model customer for the CC companies. I carry a large balance and usually just make the minimum payment.

The best way to go is to be patient. Come up with a big down payment.

Or 2, get married. That is a huge boost to the credit ratings... and you get better insurance rates
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post #28 of 45 (permalink) Old 01-09-2003, 06:33 PM
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Yes.... just be CAREFUL and keep self control!!! You do NOT want to get in over your head. I had a little bit of a head-start over you, as my dad put me down as an "authorized user" on his CC when I was 16. So I've been building credit since.

I've managed to keep my credit score up in the 650s, even with a bad decision to co-sign on a loan for a friend of mine a few years back (he defaulted - that is BAD.) Without that ugly mark on my record, I'd be well into the 700s. I'm 25, and between my mortgage, CCs, truck, etc, I have probably over $200k in credit now. If I did not build my credit when it was early, I wouldn't be even close to where I am now.

Just be careful. It is terrifying once you realize how much your credit score can rule (or ruin) your life. Maintain it, take it seriously, and you can wind up with some cool toys

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post #29 of 45 (permalink) Old 01-09-2003, 11:25 PM
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I got out of school with only 1 credit car that I paid off every month. 1 month later I bought my car. I had no problem securing a loan. I did have to supply paystubs to establish my income. Ended up borowing 24k.

Paid the car off in 4 years kept the one card with 0 balance a month but wife had 2 with balances and then went to buy house. I was told the card(s) could actually hurt you in that its available debt at anytime. Our loan officer recommended paying down the cards and not to buy anything large b4 we close. After the closing it would be ok to buy stuff for the house, just had to wait.

I dont think credit cards help your credit all that much, but if not kept in check you can really get into some trouble with them.

NESBA #456 Intermediate
Always 1 step ahead of Lupi. 1:24:7 BHF
And 1 step behind Kimmy

"SoB gets to spend yet ANOTHER season faster than me." -LUPI-
Champ91 is offline  
post #30 of 45 (permalink) Old 01-10-2003, 07:00 AM
 
Join Date: Apr 2002
Posts: 3,495
 
Try using the credit card for all of your purchases. It's safer, faster, traceable. Then like everyone else said, don't pay it all off. Also, try getting financing for soemthing you were going to buy cash for anyway. Such as a TV or computer. Watch out though for early pay off penalties.

I also took two of my higher rate credit cards last year and transfered them to a personal loan with a lower rate.
cherrypicker is offline  
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