Credit Card question

[LauraDP 10]

Hi, everyone.

I was hoping I could pick some more experienced brains on the subject of Credit Cards.

My husband just applied for the Capital One credit card that he can hold here in the UK and then transfer with us to the US. It's the secured one, which is fine with us for now at this early stage in the process. (I cannot apply for one because I don't have a SSN number). Neither my husband or I have any credit history in the US as he has not been resident in the US as an adult.

I have had conflicting information about what is the best way to build up a credit rating using a credit card. On the one hand I have been told to pay it off in full (which is what we have always done with our UK CCs) but I have also been told that it is best to leave a small balance on the card at the end of each month.

Which approach is best?

Thanks in advance for any and all responses.

Best wishes

Laura

[Harpa Timsah 13,258]

Pay it off in full; the keeping a balance thing is a myth

[Harsh_77 718]

Pay in full.

[LauraDP 10]

Pay it off in full; the keeping a balance thing is a myth

Really? See, it makes much more sense to me that paying off in full each month would demonstrate my ability to be a good creditor. Other than my student loans, we have never had a debt here so it made no logical sense for us to start creating a debt for no reason other than to build a credit history. However, the niggle I had was that maybe by paying off in full we would not appear on the credit history radar at all. So we should just do with that card what we do with our UK one then and spend on it but pay off in full each month?

Thanks for your reply, Harpa Timsah!

Pay in full.

Thanks!

[Harpa Timsah 13,258]

You will still appear in the credit history; my husband did the same thing. If you search on VJ there are some links to official FICO score myths. You could look at the website myfico.com.

[LauraDP 10]

You will still appear in the credit history; my husband did the same thing. If you search on VJ there are some links to official FICO score myths. You could look at the website myfico.com.

Thanks! I will follow the link.

[keziah90210 12]

Hi laura!

I started here in usa without any cc at all. I was an immigrant for 5 yrs now. Had to start out from scratch with my credit card. It takes some time to build your credit score. My score is now on the 700s. I never got capital one coz they have a high apr. you get better interest rate from credit union. Usually they will range from 8-10% apr only. Make sure you get the ones without any annual fee!

Anyhow, i always pay the credit card on time and in full. Thats very important. You get better score if you pay it in full but if you cant for some reason, make sure you pay it on time and at least more than the minimum amount. Also, use only less half of what your credit limit is. So if your credit limit is 1000, try to spend less than 500. If it happens that you paid your card late, call them and let them know what happened so they can waive your late fee.

Hope this helps! Let me know if you got any questions.

[F & J 21]

The best thing to do is to pay it off in full every month. If you do carry a balance, make sure it doesn't go over 30% of your credit limit.

Also, our credit union told us that a better option compared to a secured credit card is a secured loan. I think the one they were telling us about in particular is called a Shares Secured Loan where they hold a certain amount from your savings account (minimum $1,000) and as you pay off the loan every month, those shares become available again. This is better than a secured credit card because once you cancel it, they said your credit score takes a hit and for the entire duration that you have the card, the amount in your account equal to your credit limit will always be unavailable.

Edited August 16, 2012 by F & J

[LauraDP 10]

Hi laura!

I started here in usa without any cc at all. I was an immigrant for 5 yrs now. Had to start out from scratch with my credit card. It takes some time to build your credit score. My score is now on the 700s. I never got capital one coz they have a high apr. you get better interest rate from credit union. Usually they will range from 8-10% apr only. Make sure you get the ones without any annual fee!

Anyhow, i always pay the credit card on time and in full. Thats very important. You get better score if you pay it in full but if you cant for some reason, make sure you pay it on time and at least more than the minimum amount. Also, use only less half of what your credit limit is. So if your credit limit is 1000, try to spend less than 500. If it happens that you paid your card late, call them and let them know what happened so they can waive your late fee.

Hope this helps! Let me know if you got any questions.

Thanks for that advice. We will definitely follow the tip to spend under half of our limit. We have taken on a card with a small limit and with no annual fee. Right now we are in the UK so our options for CCs were limited to those that allowed us to have a UK address for residency but use a US address(our good friend and co-sponsor) for the administration. We will look into better options once we are over in the US.

Cheers

Laura

[LauraDP 10]

The best thing to do is to pay it off in full every month. If you do carry a balance, make sure it doesn't go over 30% of your credit limit.

Also, our credit union told us that a better option compared to a secured credit card is a secured loan. I think the one they were telling us about in particular is called a Shares Secured Loan where they hold a certain amount from your savings account (minimum $1,000) and as you pay off the loan every month, those shares become available again. This is better than a secured credit card because once you cancel it, they said your credit score takes a hit and for the entire duration that you have the card, the amount in your account equal to your credit limit will always be unavailable.

Thanks for your advice, F&J. I don't know that we would be eligible for a loan (and by we I mean my husband since I don't have a SSN) since we are resident in the UK at present. We are effectively trying to get a head start on our credit rating by getting the CC now, a year in advance of our planned immigration, and also because having a US bank account and US credit card will help contribute towards our evidence of intent to establish domicile in the US.

[Harsh_77 718]

Credit history is not just your Credit Card payments but also things like your utility payments too.

It will take time for you to build the credit history its a slow moving thing you build your credibility over number of years.

[JoannaV 174]

Just make a small purchase each month, wait till you get your bill, then pay it off each month.

Once you get to the US, try to do any credit acquisition in concentrated spurts. In order to build your own credit score you should probably have 3 accounts (or at least 2...I know one of the "bad" things on my credit report was that I only had one account, can't remember if it said "one or two" or just one, but you get the idea). So when you get your first credit card you should probably get a second one at the same time.

[LauraDP 10]

Credit history is not just your Credit Card payments but also things like your utility payments too.

It will take time for you to build the credit history its a slow moving thing you build your credibility over number of years.

Thanks for your reply, Harsh 77. I realise that other things will contribute to our credit history and that it will take some time to build up a decent score - even more so for me than for my husband - but we are just trying to get a head start now on this and do the limited things we can do while still based in the UK. We plan on obviously paying rent and utilities once we are in the US and will also do things like get mobile phones on contract and look into financing a car, if possible, to build up our score. Right now we are limited to the Credit Card option but it is better than nothing and will also hopefully add a little something to our evidence of intent to establish domicile, not a lot but something.

[TimeTravel 78]

Pay it off full before due date! If you get Amex charge card, then they will give you excellent spending power as they will see that you pay off your balance on time.

[Harpa Timsah 13,258]

I thought that utilities was a part of the credit score, but it's not. After over a year of paying utilities with my husband's name on the account, he still had no score. It's only credit.

You've got a good plan, Laura.