Conflicting info on building credit.

[Athens 101]

Hi , please move to the right forum, if this is not the right place. 

I joined a conversation about a week or two ago, where I got some vital information about applying for a secured credit card, it’s usage and payments. Well it’s been approved and I will receive it by next week according to my USPS informed delivery. 

The problem is, I am getting a conflicting information about how to pay each month I use the card. I intend to set up an auto pay and pay the complete money on due date but some friends who has been in US for a long time told me not pay in full each time I use it. I must allow the credit card company charge me interest by scheduling a payment and pay the money spent twice. In that way, my credit will increase fast. Please confirm if this information is true and correct.

i am getting a discover secured credit card with $200 limit and I intend to spend at least $20 to $25 every month. Please also confirm if the amount I intend to spend on the $200 card each month is good enough to build my credit. Thank you. 

Edited October 31, 2017 by Athens

[Hypnos 6,578]

No, paying interest will not do anything for you. Charging a moderate amount to the card and paying in full every month is the best way to develop a new credit profile.

 

Over time, as your payment history builds, lenders will increase your credit limit. Discover was also one of my first cards, and began only at a $500 credit limit. It's now just short of $20,000.

[Crazy Cat 42,032]

Credit is built on Repayment history, not the amount of interest you pay........paying the full amount every month is a good thing..

Edited October 31, 2017 by missileman

[IcezMan_IcezLady 582]

Quote

i am getting a discover secured credit card with $200 limit and I intend to spend at least $20 to $25 every month. Please also confirm if the amount I intend to spend on the $200 card each month is good enough to build my credit. Thank you. 

Answer to this part ^^ if you have a big purchase like $150 or up to the entire credit limit, use the credit card and pay 90% to 98% before the end of the cycle.

 

To clear this up for you.. To build your credit fast, you must not pay the entire amount but dont leave a substantial balance either.

For example, you spend $19 on your credit card, you pay $17  and leave the $2 (dont worry too about the interest on a $2).

This practice helps to keep your credit in revolving mode (not sure if that's the correct word).

It tells the credit card people that you are responsible  meanwhile they can make small money off you. So you give them what they want  and you get what you want back. But this way ensures that you dont give them more than you want to give.

 

This practice will get you an increase in credit limit without you having to request the credit card company. Remember that whenever you make the request, the credit card company or the bank does a "hard pull" on your credit report. hard pull will always cost you points off your credit score. Avoid multiple "hard pulls" as much as possible..especially when shopping for a car. 

 

Another thing is to be added as an authorized user to someone with good standing account. An authorized user doesn't have to be given a credit card. But if you get a credit card through this process, the primary account holder is responsible for the charges on AU card.

 

 

 

[Suudsu 66]

One of the most frustrating things about building credit is that no-one who knows anything about it will ever give you anything that could be construed as advice.

 

Pay the card off in full every month.

 

EDIT: For what it's worth, the 'journey' to build credit could be as long or longer than immigration...

Edited October 31, 2017 by Suudsu
Added opinion

[Ebunoluwa 6,136]

It's perfectly ok to pay the full balance off every month. Your friends are mistaken.

[Athens 101]

Thank you all for your contributions. Your kind advise are welcomed and well understood. I have always had in mind paying all in full and on due date too. I will diffinitely go that part. 

what icezman said is exactly what my two friends told me thereby making me not to know which mode of payment works perfectly well. I acknowledge his contribution but I prefer to always pay all on due date not before due date because I feel in that way, they will see me as someone who is up to date with payments. Auto pay and full payment on due date will be the best. Thank you all once more

[Ebunoluwa 6,136]

30 minutes ago, Athens said:

Thank you all for your contributions. Your kind advise are welcomed and well understood. I have always had in mind paying all in full and on due date too. I will diffinitely go that part. 

what icezman said is exactly what my two friends told me thereby making me not to know which mode of payment works perfectly well. I acknowledge his contribution but I prefer to always pay all on due date not before due date because I feel in that way, they will see me as someone who is up to date with payments. Auto pay and full payment on due date will be the best. Thank you all once more

There is nothing wrong with paying before the due date either.

[N-o-l-a 7,168]

You already got your answers, but for anyone else who is curious, this is really the best way to do it.

 

Husband came, got a secured credit card and that opened his credit file.  Then, his joint credit cards (that existed before) showed up after the secured credit card was opened.  We pay the full balance every month and his credit score was amazing in no time.  Make sure to not use too much of the credit, like less than 10% or lower, and pay it off every month.  Your silly friends are just wasting money by paying interest.

[N-o-l-a 7,168]

18 hours ago, IcezMan_IcezLady said:

 

It tells the credit card people that you are responsible  meanwhile they can make small money off you. So you give them what they want  and you get what you want back. But this way ensures that you dont give them more than you want to give.

 

This practice will get you an increase in credit limit without you having to request the credit card company. 

 

 

We pay off our balance in full every month on multiple credit cards and always get credit card limit increases without asking.  We could buy cars with the limits on most of them now and our available credit is way more than our yearly income (which of course we always use responsibly).     What seems to trigger the credit card limit increases is big purchases - like I paid for the damage after a car accident with one or plane tickets for the whole family, etc.  Just an observation on my part.

[C-ma'am 684]

**Post moved from AOS from family visas to Tax & Finances During US Immigration

[Richard Purves 58]

The best advice I've ever seen is on NerdWallet.com. The short version is:

1. If you've an Amex card direct from Amex, they have a Global Transfer scheme that can help a lot.
2. Look up secured credit cards. You'll have to put down some money and that's held in reserve. Spend no more than 30% per month and pay in FULL every month.
3. Look up credit builder loans. I had no idea these things even existed. You apply to your bank, borrow a sum of money and make loan payments in FULL every month. The catch? You don't get the loan amount UNTIL you've finished paying it off.
4. Authorised user on someone else' card, co-signer on a loan. (these are kinda dangerous in my unprofessional opinion as it involves others and could hit them).
5. See if there are any reporting services for rental payments. This is your last resort, because not everyone accepts those kind of reports but it could help.

I'm planning to do the first three after I get over.

[zilchfox 296]

Paying off your card in full is good, but I will just say this: 0% utilization is worse for a credit score than 1% - 10%, because it shows you do not use or actually need your card, however 30% or more is worse than 0%, so don't fall into unnecessary debt, either.

 

Try this instead:

Let's say you have only one credit card (a $500 card), and you currently owe $290 on it, and the due date is November 20 2017. Sure, you can pay off the whole $290 and be done with it, however that will bring you down to 0% utilization, and since it's below the 1% usage, it will bring your credit score down. Here's what you do instead; pay off $280, leave a $10 balance. When November 21st comes around, pay off the remaining $10 immediately so you're actually at 0% again.

 

What happens now?
The creditor will report on the 21st to the major bureaus that you still owe $10, thus you'll be at around the 1-2% utilization (which is excellent in the eyes of the bureaus), thus a small boost in your credit score. By paying off that remainder 1-2% after the due date will also ensure that you do not rack up any interest on your card. If it's reported as 0%, the bureaus will assume you don't actually use your credit cards or even need them, thus they will give you a lower score -- the only things they care about is what the % of utilization is on each card, the age of the card, and if your payments are current, nothing else matters.

 

What if I have multiple cards?

You only need to do this to one card, as it's calculating the 1% of your TOTAL utilization throughout your entire available credit of all cards combined, not each card. If you have three cards all $500 limits each, then your total available credit is $1500. Calculate 1% from $1500 (approx. $20), pay off two of your cards in full and pay off the last card up until you only owe $20, and that's your 1%.

 

I moved here in October 2016, however I didn't get my first SECURED credit card until March 2017, which means I have ONLY 9 months of credit history in the U.S. at this point, and by doing the above, I've been able to accomplish the following:

- Gain $500 SECURED credit card at 27% APR

- Gain $300 UNSECURED credit card a few months later at 29% APR

- Gain $500 UNSECURED credit card a month afterwards at 25% APR

- "Graduate" my $500 SECURED credit card, it turned into a $1000 UNSECURED credit card, still at 27% APR

- The $300 card automatically upgraded to a $500 card, still at 25% APR

- Approved for AT&T NEXT at 0% APR WITHOUT a downpayment required

- Obtain approval for a $22,000 car loan at 5% APR WITHOUT MY USC SPOUSE NEEDING TO COSIGNING, this was entirely based solely on my own individual income and credit score, with a $1000 downpayment

- Gain a $3,000 UNSECURED credit card at the same time as the car loan with a 10.5% APR

- Approved for iPhone Upgrade Program through Apple at 0% APR with no down payment

 

I now have $5,000 in available credit, 0% utilization as all cards are paid off, a $22,000 auto loan installment that I plan to refinance next year to bring the APR down, two phones, and I actually never became an authorized user for any of my partner's cards at all, so I didn't hitch off his credit score at all. Yes, the APR% on the first three cards are ridiculously high, however as long as I keep them paid off and never incur interest, it doesn't matter what the APR is. 

 

Despite all that and all the hard inquiries I have on my credit profile, my credit score sits at a nice, healthy 745 FICO Score, all from absolutely having no credit on file just 9 months ago. I don't plan on having any more inquiries for the next 12 months until it comes time to refinance my vehicle, so I will just continue to do the aforementioned which I expect my credit score to skyrocket to around 800 by this time next year as all the inquiries I did this year begin to fall off.

Edited November 12, 2017 by zilchfox

[N-o-l-a 7,168]

40 minutes ago, zilchfox said:

Paying off your card in full is good, but I will just say this: 0% utilization is worse for a credit score than 1% - 10%, because it shows you do not use or actually need your card, however 30% or more is worse than 0%, so don't fall into unnecessary debt, either.

 

 

 

I can assure you that paying off your credit cards every month does not leave them at 0% utilization, unless you do not use the card at all the next month.  What happens is that you are paying off the statement balance, so on your hypothetical $290 statement, you are paying off $290, but your card balance on that date might in fact be $350, however you are not being charged the interest on the $60 left because it is on the next statement.  So, yes, you should always pay the statement balance in full, but not the actual balance on that date (unless it is the statement balance).   For the record, I have several credit cards that I don't use at all with high limits - that doesn't hurt my score in the least.  

Edited November 12, 2017 by N-o-l-a

[Suss&Camm 2,213]

4 hours ago, zilchfox said:

Paying off your card in full is good, but I will just say this: 0% utilization is worse for a credit score than 1% - 10%, because it shows you do not use or actually need your card, however 30% or more is worse than 0%, so don't fall into unnecessary debt, either.

 

Try this instead:

Let's say you have only one credit card (a $500 card), and you currently owe $290 on it, and the due date is November 20 2017. Sure, you can pay off the whole $290 and be done with it, however that will bring you down to 0% utilization, and since it's below the 1% usage, it will bring your credit score down. Here's what you do instead; pay off $280, leave a $10 balance. When November 21st comes around, pay off the remaining $10 immediately so you're actually at 0% again.

 

 

You are mixing up closing date and due date.

 

If you pay before the closing date of a billing cycle it will not report. If you pay between the closing date and the due date it will report. If you pay AFTER the due date all you do is GIVE money to the creditors.