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How Exactly do I Build Credit with Credit Card?


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Hello:

 

 

I have never had a credit card before, paying everything with cash via debit card. I would like to build my credit and have been told a credit card is a fairly good way to do this. So I got a Quicksilver Capital One 1.5% moneyback card. My current credit score is 737 according to CreditKarma. I have a reservoir of debit card cash that is significantly larger than the $2000 Credit Line of the new card. I have few bills and those are payed for automatically, drawing from the debit card cash.

 

I have been told to basically, "go buy gas with the credit card, then pay it off." But I was hoping that someone could quantify exactly what that means on a step by step basis. If I buy gas that's $50 out of $2000, leaving me with $1950 credit limit to spare. Would it be better to spend more than $50? How much more? And what exactly does "pay it off" mean? Pay off the interest? Or the entire thing, leaving me with a limit of $2000? What exactly do the credit card companies want to see? More expenditures? Fewer expenditures? Do they want to earn some interest for themselves?

 

Please keep in mind that I am pretty much using this card without duress or need, I'm only using it as a method of building credit, and there's is no danger of me getting carried away or me forgetting a payment. So what do I do with this thing?

 

 

Thanks very much

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1) Use your credit card instead of your debit card for all purchases where it's feasible (i.e. gas, groceries, odds/ends, etc)

2) Check to see what your closing date is for your card statement.

3) Pay your card in full a few days before that, so that when your credit card posts to your credit reports, it shows no credit being used. You can also leave a few dollars on the card, so that $1 or $2 reports, as this has been shown to increase your credit score (but it's pretty negligible)

4) Over time, your credit card reporting to the credit bureaus will show positive history (i.e. payments made on time, low usage, etc)

5) That's how you build credit.

 

When you pay your card, you'll see "Statement Balance", which is how much you owe for that statement. If you pay that amount, you will not incur any interest.

However, you should pay off "Total Balance" - which is the total amount charged to your card, including that which is from other statements.

Edited by moadikum
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Welcome to CB, Unfolder!

 

Steer clear of using your debit card for purchases. If your account number or card is stolen, then that is actual cash that takes much longer to get back than if the same happened to your credit card. It can take weeks for a case to be resolved and your accounts and money is returned.

 

If I remember correctly, you will need a minimum of (3) revolving accounts to build your credit file. Pay on time each month and always try to pay it off in full or up to 10% of the card's limit. (ex. $2k limit = $200 max reporting) So if you make a purchase of $300, only allow a maximum of $200 to report. Ideally, you want to get as close to 1% reporting on one account/month. (hope I didn't confuse you)

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When you're building credit, start with 3 credit cards, then work your way up to 5-8. That suffices for most folks. If possible, I suggest you get an American Express card. Not a third party AmEx but from the list at americanexpress.com

 

Get cards that offer rewards and sign up bonuses that fit your spending pattern.

 

Use your cards regularly. For those cards that don't offer much rewards, use them periodically to prevent closure.

 

Use credit, instead of debit, for your own protection. PAY YOUR CC BILLS ON TIME. Avoid paying interest.

 

Over time, your credit history will be fantastic.

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I think Gudziel meant to say A $300 purchase only allow a maximum of $30 to report basically 10% or less to report.

:good:

 

Well.... kinda.

 

I meant that if you make a $300 purchase on a $2k limit card, as long as you pay off enough to get to $200 or below, that is 10% of the card's limit.

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1) Use your credit card instead of your debit card for all purchases where it's feasible (i.e. gas, groceries, odds/ends, etc)

2) Check to see what your closing date is for your card statement.

3) Pay your card in full a few days before that, so that when your credit card posts to your credit reports, it shows no credit being used. You can also leave a few dollars on the card, so that $1 or $2 reports, as this has been shown to increase your credit score (but it's pretty negligible)

4) Over time, your credit card reporting to the credit bureaus will show positive history (i.e. payments made on time, low usage, etc)

This is an example of how to use credit, with the exception of #4. Although #1 and 3 are very strong contributors to credit building.

 

Step 1: Eliminate/prevent any negatives from reporting to your credit report. Cultivate your FICO score.

 

Step 2: Research potential creditors and their products. Find out if you would qualify BEFORE APPLYING! For example, don't app for top tier rewards cards as your very first card usually. Make sure you are not surprised by any annual fees or other charges. READ the T&C first!

 

Step 3: Use current or previous CC's to springboard to better/more useful CC's with higher rewards and higher limits.

 

Step 4: TIME, regular use, and strong payment history.

 

Rinse, repeat daily.

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building credit can be as simple as getting a couple of credit cards and letting them sit for 6 months, rinse and repeat.

 

time is the overwhelming factor to building credit.

 

use is a minor aspect and doesn't really factor into things until you're talking about CLIs to high levels.

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Creditors need to see that when you borrow on credit, you are trustworthy to pay the money back as agreed. Trust. I can't be defined any simpler than that.

 

I think simple answers are most helpful. Your credit limit is a little smallish to really implement it as a financial tool, because you shouldn't get in the habit of spending anywhere near your credit limit. I would use your card as much as you can, but keep spending below $500 a month (don't exceed 25% ever). Show a pattern of spending and paying off, spending and paying off. ALWAYS pay off your credit card each month, or this is a game you shouldn't play.

 

In time (4 months? 6 months?), you will be in a position to request a credit limit increase. Get that $2K up to $5K or better. Now it becomes a matter of how much TOTAL credit can be extended to you based on your income. Maybe you get your card up to $10K credit limit, maybe you apply for 2-3 more cards, which will increase your total credit available to you. Now creditors will be looking at your income to see if it justifies the amount of credit you have.

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Creditors need to see that when you borrow on credit, you are trustworthy to pay the money back as agreed. Trust. I can't be defined any simpler than that.

 

I think simple answers are most helpful. Your credit limit is a little smallish to really implement it as a financial tool, because you shouldn't get in the habit of spending anywhere near your credit limit. I would use your card as much as you can, but keep spending below $500 a month (don't exceed 25% ever). Show a pattern of spending and paying off, spending and paying off. ALWAYS pay off your credit card each month, or this is a game you shouldn't play.

 

In time (4 months? 6 months?), you will be in a position to request a credit limit increase. Get that $2K up to $5K or better. Now it becomes a matter of how much TOTAL credit can be extended to you based on your income. Maybe you get your card up to $10K credit limit, maybe you apply for 2-3 more cards, which will increase your total credit available to you. Now creditors will be looking at your income to see if it justifies the amount of credit you have.

That's bad advice. As long as you pay off your balance before your statement cuts, using near your limit will not affect your credit score. It will also demonstrate to your creditor that you're responsibly using your available credit, and that you're a candidate for an auto credit line increase.

 

Spend as much as you can, pay it off before the statement cuts, and you'll be in great shape.

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Creditors need to see that when you borrow on credit, you are trustworthy to pay the money back as agreed. Trust. I can't be defined any simpler than that.

 

I think simple answers are most helpful. Your credit limit is a little smallish to really implement it as a financial tool, because you shouldn't get in the habit of spending anywhere near your credit limit. I would use your card as much as you can, but keep spending below $500 a month (don't exceed 25% ever). Show a pattern of spending and paying off, spending and paying off. ALWAYS pay off your credit card each month, or this is a game you shouldn't play.

 

In time (4 months? 6 months?), you will be in a position to request a credit limit increase. Get that $2K up to $5K or better. Now it becomes a matter of how much TOTAL credit can be extended to you based on your income. Maybe you get your card up to $10K credit limit, maybe you apply for 2-3 more cards, which will increase your total credit available to you. Now creditors will be looking at your income to see if it justifies the amount of credit you have.

 

That's bad advice. As long as you pay off your balance before your statement cuts, using near your limit will not affect your credit score. It will also demonstrate to your creditor that you're responsibly using your available credit, and that you're a candidate for an auto credit line increase.

 

Spend as much as you can, pay it off before the statement cuts, and you'll be in great shape.

. It's actually not bad advice. Spending up to your credit limit is fine until you find out your job is having a mass layoff. If I wasn't at 50% UTI when I lost my job in 2009 I wouldn't have to rebuild my credit now.
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Creditors need to see that when you borrow on credit, you are trustworthy to pay the money back as agreed. Trust. I can't be defined any simpler than that.

 

I think simple answers are most helpful. Your credit limit is a little smallish to really implement it as a financial tool, because you shouldn't get in the habit of spending anywhere near your credit limit. I would use your card as much as you can, but keep spending below $500 a month (don't exceed 25% ever). Show a pattern of spending and paying off, spending and paying off. ALWAYS pay off your credit card each month, or this is a game you shouldn't play.

 

In time (4 months? 6 months?), you will be in a position to request a credit limit increase. Get that $2K up to $5K or better. Now it becomes a matter of how much TOTAL credit can be extended to you based on your income. Maybe you get your card up to $10K credit limit, maybe you apply for 2-3 more cards, which will increase your total credit available to you. Now creditors will be looking at your income to see if it justifies the amount of credit you have.

That's bad advice. As long as you pay off your balance before your statement cuts, using near your limit will not affect your credit score. It will also demonstrate to your creditor that you're responsibly using your available credit, and that you're a candidate for an auto credit line increase.

 

Spend as much as you can, pay it off before the statement cuts, and you'll be in great shape.

 

 

We can agree to disagree, but I don't think you are considering the original poster's comment:

 

"I have never had a credit card before, paying everything with cash via debit card. I would like to build my credit and have been told a credit card is a fairly good way to do this."

 

 

This is not someone that you encourage to spend to their max. I'll say it this way: that is not very responsible advice in my humble opinion. I don't find your comments to be based in much experience. I received my first credit card in 1988, and have had very many cards over this time, so I think I know something about credit cards. Paying your credit balance before the statement date, while I've done it myself, is merely a gimmick method to fool credit reporting agencies. Spending up to your max consistently does not make you look responsible to your creditor; it makes you look like you like to spend money and can be a potential risk.

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Creditors need to see that when you borrow on credit, you are trustworthy to pay the money back as agreed. Trust. I can't be defined any simpler than that.

 

I think simple answers are most helpful. Your credit limit is a little smallish to really implement it as a financial tool, because you shouldn't get in the habit of spending anywhere near your credit limit. I would use your card as much as you can, but keep spending below $500 a month (don't exceed 25% ever). Show a pattern of spending and paying off, spending and paying off. ALWAYS pay off your credit card each month, or this is a game you shouldn't play.

 

In time (4 months? 6 months?), you will be in a position to request a credit limit increase. Get that $2K up to $5K or better. Now it becomes a matter of how much TOTAL credit can be extended to you based on your income. Maybe you get your card up to $10K credit limit, maybe you apply for 2-3 more cards, which will increase your total credit available to you. Now creditors will be looking at your income to see if it justifies the amount of credit you have.

 

That's bad advice. As long as you pay off your balance before your statement cuts, using near your limit will not affect your credit score. It will also demonstrate to your creditor that you're responsibly using your available credit, and that you're a candidate for an auto credit line increase.

 

Spend as much as you can, pay it off before the statement cuts, and you'll be in great shape.

We can agree to disagree, but I don't think you are considering the original poster's comment:

 

"I have never had a credit card before, paying everything with cash via debit card. I would like to build my credit and have been told a credit card is a fairly good way to do this."

 

 

This is not someone that you encourage to spend to their max. I'll say it this way: that is not very responsible advice in my humble opinion. I don't find your comments to be based in much experience. I received my first credit card in 1988, and have had very many cards over this time, so I think I know something about credit cards. Paying your credit balance before the statement date, while I've done it myself, is merely a gimmick method to fool credit reporting agencies. Spending up to your max consistently does not make you look responsible to your creditor; it makes you look like you like to spend money and can be a potential risk.

+1

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Creditors need to see that when you borrow on credit, you are trustworthy to pay the money back as agreed. Trust. I can't be defined any simpler than that.

 

I think simple answers are most helpful. Your credit limit is a little smallish to really implement it as a financial tool, because you shouldn't get in the habit of spending anywhere near your credit limit. I would use your card as much as you can, but keep spending below $500 a month (don't exceed 25% ever). Show a pattern of spending and paying off, spending and paying off. ALWAYS pay off your credit card each month, or this is a game you shouldn't play.

 

In time (4 months? 6 months?), you will be in a position to request a credit limit increase. Get that $2K up to $5K or better. Now it becomes a matter of how much TOTAL credit can be extended to you based on your income. Maybe you get your card up to $10K credit limit, maybe you apply for 2-3 more cards, which will increase your total credit available to you. Now creditors will be looking at your income to see if it justifies the amount of credit you have.

That's bad advice. As long as you pay off your balance before your statement cuts, using near your limit will not affect your credit score. It will also demonstrate to your creditor that you're responsibly using your available credit, and that you're a candidate for an auto credit line increase.

 

Spend as much as you can, pay it off before the statement cuts, and you'll be in great shape.

We can agree to disagree, but I don't think you are considering the original poster's comment:

 

"I have never had a credit card before, paying everything with cash via debit card. I would like to build my credit and have been told a credit card is a fairly good way to do this."

 

 

This is not someone that you encourage to spend to their max. I'll say it this way: that is not very responsible advice in my humble opinion. I don't find your comments to be based in much experience. I received my first credit card in 1988, and have had very many cards over this time, so I think I know something about credit cards. Paying your credit balance before the statement date, while I've done it myself, is merely a gimmick method to fool credit reporting agencies. Spending up to your max consistently does not make you look responsible to your creditor; it makes you look like you like to spend money and can be a potential risk.

+1

 

Nobody would advise someone to spend to their limit, without already having access to the funds they will pay it off with. That goes for any credit card usage.

 

If you're not disciplined enough to do that, stick to cash/debit. However, if you can pay off your balance in full each month, then use my advice.

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