So I got my first credit card without a cosigner with a limit of $1200. I am not planning on using my card if I don't have the money in the bank. I am planning on using it only for groceries and gas.

Here is my question. I have it linked to my online bank account. What is the best payment option? If I send money within a few days of using the card, would that still build my credit?

My friend said I should always let about $10 roll over to the next month so I can pay it off to build credit. That seems odd to me, because wouldn't that show you are late with your payments?

Please give me credit 101 on building credit as soon as I can.

Whenever I get a bill, which is infrequently, I pay it in full. I assume that helps me build my credit. I get letters frequently offering to increase my limit. I've only accepted once when I was going to Europe as I thought it would be good to have enough for a big emergency. I've also had a small loan for a car through my bank which I paid off 6 months early, that also helped me to gain status with my bank.

Good question, I'm really not sure if the things I've done/do have helped me.

Do you have any bills in your name like electricity or cable or anything like that? I"m pretty sure that builds credit too, when you pay on time of course.

^ Thats all included in my rent. Does that count? I live in student housing, so I pay directly to the school and not a "real landlord".

If you can use your credit card with the realization that it really isn't credit...you're using it as currency, and pay it off right away, you will build your credit. Carrying over a balance will just gives the card company interest needlessly.

Part of credit history is...well...history! It takes time. Do you have student loans? Paying them off early is a good way to improve your score. Be patient. If you are still a student, you have lots of time to build a nice score without even thinking much about it.

Be careful. Just because you can establish a line of credit doesn't mean you should.

Keep On Dancing*

It might not then if its part of your tuition. But as mentioned paying back student loans does help increase your credit. What about a cell phone bill or car payments? Do you have anything like that in your name? That should increase your credit too.

My car has been paid for in cash and I am on the family plan with my BF for the cell phone. I can't pay back student loans, because I am in the process of borrowing them!

I went to buy groceries today and used my card.

I am wondering if I should pay off the balance tonight or at the end of the month?

I read that you aren't supposed to use more then 30% of your limit. Advice on that?

I also need help on what this means.

Credit Line= $1200 and Available credit= $1139.

www.creditnet.com . . .
www.kiplinger.com . . .
thesmarterwallet.com . . .

We pay our cards off monthly, but we are on a specific budget. The bill should fall into a certain range, if it doesn't (for instance if our doggie needed emergency surgery again) then we assess why and readjust our finances accordingly. It won't kill you to let part of a balance carry over to the next month, however getting in a habit of thinking, "I'll pay that off later," is how people end up nose deep in debt.

From my impression of you, I think you'll sleep better if you pay your card off as you go. I think that knowing that the money in your account is available spending (verses the money in your account as potential spending) will help put your mind at ease. That way you don't look at your bank account, see you have $XXX.XX and forget that you paid $YY.YY because you had to get new windshield wipers and spark plugs for your car. Then thinking you have that extra money, you end up overspending and being short $ZZ.ZZ. Even if you do pay it as you go, set an alarm somewhere to remind you to check the balance and make a payment when it gets close to the due date.

And as your credit improves you'll be able to renegotiate your credit interest rate and spending amount. Definitely stay on top of your credit history with the credit bureaus.

Credit Line= $1200 and Available credit= $1139.

Did you spend $61.00 on your groceries? That calculation usually reflects the money you already owe "on account". If you pay your bill, the credit line goes back up to its limit.

Another thought...when you faithfully pay off your balance every month, the company will increase your line of credit. If you are able to keep paying the card off as soon as you use it, you will be happy with the results regarding your credit history.

Once a year you are entitled to a free credit report from the credit reporting agencies. Mark your calendar, and make sure you get it. I think you'll be happy with the report if you stick to your plan of pay as you go.

Welcome to the grown up world!

Keep On Dancing*

Yes, I just spend $61 on groceries. Would it be subtracting the amount instead of adding it to the 1200?

^Right. Those numbers mean you started off the month with $1200 to "borrow" from; you've used $61 of that $1200 since the month started, so they subtract it from your total line of credit.

I have a student credit card from my credit union, and I use it every month, but only for buying things online and/or things I know I'll be able to pay off later. My balance never goes above $30 or $40, and I always pay it off in full at the end of the month. I'm sure I'd be fine if I let some of the balance roll over to the next month, but I always thought it was best to pay in full unless you absolutely can't--and I'm paranoid about going into debt anyway, lol.

Ok, here I go with my horrible math again! I didn't realize that 1139 is smaller then 1200. For some reason, I read it as 1319....DOH


I swear to god I have no idea how I got through my calc series when I keep reading numbers backwards all the time.

I realize I am in a somewhat different situation from Jazzy and most of you, but here is how we do our credit cards. BTW, we have credit lines of several tens of thousands of dollars, but we've been at it a long time. We also have predictable sources of income, and visible assets (house and rental property.)

We pay off the ENTIRE balances when we get the bill in the mail. We routinely use two cards (Master and AmEx.) We last paid interest on our credit cards in 1986. That was $1.56. Paying a bill piecemeal when you buy something won't help you...as long as you pay it within the grace period after getting the bill. I'm not sure how leaving a balance figures into one's credit rating. I guess it shows you can manage money, but paying it off monthly has not hurt us at all. The credit card companies may not like it that they make no interest income from us (and we make sure we have "no fee" cards) but they keep offering to raise our credit limits pretty regularly. Don't weep for the credit card companies...they are also making money from their "swipe fees" that merchants pay when they accept credit cards for payments.

We do use our credit cards for nearly everything...restaurants, gas, everyday purchases, and seldom have much more than $50 in cash on our persons. (I'm including my wife here.) We circulate things through the card because we get a 4% rebate on gasoline purchases (AmEx "business" card through Costco), 3% on restaurants and lodging and 1% on everything else. We just did a kitchen remodel on our house for over $50,000. We ran it all through credit cards (watching our timing carefully and negotiating our payment with our vendors) and have received over $500, in rebates. We've even bought a car with credit cards, and of course paid it off as soon as the bill came, and received a couple hundred dollars in rebates.

My wife and I are obviously not on student budgets anymore and have a six-figure income. We didn't do this sort of thing in our 20's. There weren't even national credit cards when we were in our 20's other than AmEx and they were only issued to business travelers then. But even then, we did everything possible to get reporting to build credit. (Fortunately for me, at the time my mom was a credit manager for a department store and educated me on the ropes AND on the pitfalls. She also was in charge of collections when people got in arrears.)

Virtually any short term credit and repayment to any sizable firm will build (or destroy) your credit rating. Things like utilities probably won't count as much as credit purchases because credit raters recognize that people will pay the electric bill before they pay a lot of other things, but get behind on a utility bill it will hurt immensely. If you can't pay a utility bill, people know you are in desparate straits.

With my own kids, I had co-signed for their credit cards when they were in their mid-teens. I did this with my credit union where they had accounts since they were infants. They had established credit ratings in their own names by the time they went to college. We even circulated some of their college expenses through their credit cards (even though we were paying) specifically with a goal of building their ratings. In college, they lived in an apartment I had bought for their use and we had other kids renting space in it. So, we had our kids collecting the rental checks and we had the place jointly in our names with them. By doing this, they were able to buy their first houses almost immediately after college with only a couple months of employment. This obviously won't work if parents have a lousy rating. Unfortunately we don't get to pick our parents.

So the key is you must be educated on how all of this works and once you understand how it works, you have to have both a short term and a long term strategy on how to make it work for you.

Jon

If your card has some rewards program, don't be tempted to put a lot of money on the card just to get the rewards, that can get you in trouble. Also, you don't really need more than one credit card at this point in your life, so stick with just one for now.

I have a very good credit score, and I got that by paying off my credit card within a couple days of putting money on it. Usually I will make a purchase (gas, groceries, phone bill) with the card, and the same day, transfer money from my bank account to the card to pay it off. It helps your credit because you never owe anything.

I have only used my card maybe 30 times in the past four years, but it has given me a great score. Just because you have a credit card doesn't mean you need to use it.

Don't be late on rent payments, don't overdraft your bank accounts, don't let a check bounce, don't spend more than you have.

Some people will put money on a credit card because they have money coming to them in the future, and they plan on using that money to pay off the card. That can be really bad news. Never spend money that you don't have yet, because so many things can go wrong. Even if it looks like you're guaranteed to get the money, don't charge for what you don't have.

My credit cards have a "statement closing date" and a "due date" that's a couple of weeks after the closing date. On every closing date, they tally all the charges you made in the last month. Those charges are due by the due date. So I pay off my credit card bills once a month, in between the closing date and due date. This way I don't accrue any interest charges.

The more you spend on a credit card and pay off, the more it'll improve your credit score. For example, if someone spends $1000 every month and pays it off by the due date, they will have better credit than someone who spends only $10 per month and pays it off (all other things being equal, of course). The key here is to pay it off by the due date. If you spend a lot and can't pay it off, it will hurt you in the long run.