Some Non-Car Advice on Credit?

"PelicanHazard" (pelicanhazard) 10/24/2013 at 09:16 • Filed to: Off topic, money

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Would any of you open up a credit card even if you're not going to use it right away? I've heard upping your total credit limit looks good on your credit report and helps build credit faster, so I was considering opening another credit card and just letting it sit unused.

Tom McParland > PelicanHazard 10/24/2013 at 09:18

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It depends on how many credit cards you already have. If only one or two, you should be ok and yes you are correct the available credit/balance ratio is beneficial. However, if you are going to get a new one, get one with some perks. I use the Capitol One Venture card, and have had several vacations paid for due to the points.

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CalzoneGolem > PelicanHazard 10/24/2013 at 09:19

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This definitely helps. Some people use cards to pay bills and immediately pay off the cards so that they build a history of on time payments. Applying for a bunch of cards is bad for credit and closing cards is bad for credit.

Jagvar > PelicanHazard 10/24/2013 at 09:20

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I'm not sure about merely upping your credit limit, but it does look good if you show that you're consistently paying your bills on time. So even if you're just putting 20 bucks on the card per month and paying it off by the due date, you're boosting your credit score much more than you would by owning an inactive card.

PelicanHazard > Jagvar 10/24/2013 at 09:23

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...I'm going to go ahead and blame my illness as to why I didn't think to do that. For some reason when I posted this I was thinking credit cards were either "buy everything for a month on one" or "don't use it at all" devices. Your plan is much better.

MIATAAAA > PelicanHazard 10/24/2013 at 09:24

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Getting a new credit card and just sticking it in a closet and never using it isn't going to do anything worthwhile for your credit score.

If you get one, at least use it a little bit, and consistently pay the balance monthly. That will help.

davedave1111 > PelicanHazard 10/24/2013 at 09:25

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Are you in the US? The US has some really bizarre credit-rating system, so from what I've heard that might actually work, perverse as it seems. In the UK, it'll lower your credit score.

PelicanHazard > Tom McParland 10/24/2013 at 09:27

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I only have two at the moment, from different companies (plus a store card not stamped by any of the 4 card companies like Visa), and both of them have different rewards. This popped into my head because I got a mailer offer for a pretty damn good deal on a rewards card by a third company. On top of earlier in the year being removed as authorized cardholder on one of my dad's cards, which had both a credit limit higher than my other two cards combined and was the oldest account on my credit report by years.

Tom McParland > PelicanHazard 10/24/2013 at 09:27

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Yes Jagvar is right...it is consistency that matters. Take gas for instance, you have to fill your car up. If you are hesitant about racking up too much credit card debt, just use it for gas. As long as you pay it off every month, you will boost your credit.

Tom McParland > PelicanHazard 10/24/2013 at 09:28

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That store card, still counts to your available credit/balance ratio. Seems like a decent plan just be careful.

PelicanHazard > CalzoneGolem 10/24/2013 at 09:29

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And that puts me in a small pickle, as earlier this year I was taken off my dad's card which had a super-high credit limit and was the oldest account on my credit report by years. Still, I had good enough credit before then to open two cards on my own and get a neat car loan, so opening one more card would help more than hurt, no?

Desu-San-Desu > davedave1111 10/24/2013 at 09:31

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As a U.S. citizen, I can truthfully attest to this fact. Our credit system is fuuuuuucked up.

PelicanHazard > davedave1111 10/24/2013 at 09:31

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Yes, I'm in the US.

How does the UK do it? Does opening a card lower your score until you start using it regularly?

deekster_caddy > PelicanHazard 10/24/2013 at 09:33

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I have one debit card and one credit card. Having a card with a major bank (Chase, BofA, etc), using lightly and paying it off can help your credit rating.

When it comes to financing a house, A good credit rating is a good thing, but more credit is not necessarily a good thing. The more 'credit' you have, the more liability you have as far as they are concerned. Mortgage financing has tightened up quite a bit in the last few years, they go through any recent major money shifts with a fine tooth comb.

Yowen - not necessarily not spaghetti and meatballs > PelicanHazard 10/24/2013 at 09:33

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On top of that, having an inactive card can actually hurt you. Which is why it is smart to close credit accounts you haven't used in maybe 6 months.

At one point I bought a new tv, I could've bought it outright but used their 0% interest deal instead, had 18 months to pay it off and it helped me build credit.

CalzoneGolem > PelicanHazard 10/24/2013 at 09:33

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It should help a little. I doubt being taken of your Dad's card will hurt your credit score much. Credit scores are a bit of a black art and really only make sense to people who geek out hard about them. Always pay your bills and don't apply for a load of cards and you should be good. We had to do some major surgery on my credit score after we got married. I hated paying bills so I just didn't.

Yowen - not necessarily not spaghetti and meatballs > PelicanHazard 10/24/2013 at 09:34

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Find one of those cards that gives you 3% back on gasoline, on $3.30 of gasoline that saves you 10 cents per gallon.

I have my credit card at the same bank as my debit/checking account and can log in online and pay it off very quickly and as often as I want.

Yowen - not necessarily not spaghetti and meatballs > davedave1111 10/24/2013 at 09:35

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Inactive cards won't help your credit here either.

Yowen - not necessarily not spaghetti and meatballs > Tom McParland 10/24/2013 at 09:35

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Yep and I get 3% back on all gasoline purchases, which equals 10+ cents per gallon.

PelicanHazard > deekster_caddy 10/24/2013 at 09:40

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Good to know, I'm investigating buying a house within 2-3 years.

deekster_caddy > PelicanHazard 10/24/2013 at 09:45

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By "too much" I mean like 5 cards with $15,000 limits, etc. You probably wouldn't have a problem with 2 cards open.

Jayhawk Jake > PelicanHazard 10/24/2013 at 09:48

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Yes. Even if you don't use it, it contributes to your available credit, and the longer you own it the more history you have.

It also would help to use the credit card for small purchases and pay it off every month.

I actually use my credit card for EVERYTHING, and pay off the balance at the end of the month. Builds credit history, and it gives me cashback rewards. Basically every month I get 10 or 20 bucks in cashback just for doing daily things like grocery shopping, restaurants, paying bills, etc. Not to turn into an ad for Discover, but I use Discover, who lets you redeem cashback directly on amazon. Normally with cashback you can only redeem in $10 increments, but I can redeem however much I want on Amazon. Every month or so I basically buy a blu ray for free, it's nice.

MontegoMan562 is a Capri RS Owner > PelicanHazard 10/24/2013 at 10:05

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From my experience (and everyone has an opinion on this) the higher your available credit the better your credit score can be. I have 2 credit cards I don't use at all, I HAVE used them though, they are just paid off and I have no interest in using them now.

My advice for picking a card to go with would be to make sure you find a FIXED rate card, the variable interest can kill you down the road if you have to use it.

BugEyedBimmer - back in the Saddle Dakota Leather > PelicanHazard 10/24/2013 at 10:06

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I think the ROI of that would be not enough. And sometimes there are fees or other hidden issues with having an unused card. For a nice bump in credit I'd try to get a small personal loan (1-2k) and just pay it off over the next year. You can spend it or not, up to you. And the only downside is the little bit of interest you'd have to pay.

themanwithsauce - has as many vehicles as job titles > Tom McParland 10/24/2013 at 10:11

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If he is younger, like I am, when building credit you can often forego the "perks" for a lower rate. When it came time to end my first credit card and get a new one I had a choice between low APR or "bonus points" but since I really only use my cards to buy car parts and gas, the points weren't adding up mathematically for me. I have a visa and a mastercard that both have decent limits and are around 15% APR. You're not getting much lower than that until you've got a healthy amount of credit history.

Tom McParland > themanwithsauce - has as many vehicles as job titles 10/24/2013 at 10:12

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This is true.

Straightsix9904 > PelicanHazard 10/24/2013 at 10:24

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Get ONE with a few hundred dollar limit, put a tank of gas on it every month and pay it off RELIGIOUSLY. It will boost your credit which is beneficial when you have to buy a house or a car or some bitchin jet skis. If you DON'T use it, it can actually hurt your credit, and if you have too many open ones it still hurts (something about income to potential debt ratio). Use it at least once a month, if you go longer that 6 months (I think) it will pull your credit down.

When it comes to credit, it isn't the amount, it is the predictability that you will pay.

Straightsix9904 > MontegoMan562 is a Capri RS Owner 10/24/2013 at 10:25

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Not always, you have to be worried about income to potential debt. No creditor wants to give somebody a $10K loan to somebody that makes $40K and has the ability to rack up $30K in credit card debt. They will make you close some credit cards.

BJ > PelicanHazard 10/24/2013 at 10:29

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Remember that having a combined credit limit of, for example, $25000 on your credit cards is equivalent to having an outstanding debt of $25000. You might not actually owe that money right now, but at some point in the future you could - this represents a risk for other lenders because it may affect your ability to service all of your debts. This may or may not impact your credit score negatively, but it will factor into the calculation when you go to get a car loan, home improvement loan, or mortgage.

Having a reasonable credit limit that fits your lifestyle and income (and covers you short-term in a true emergency situation) while making payments immediately if - and only if - you use your card, is a much better way to manage your credit score.

Volvosaurus-Rex > BugEyedBimmer - back in the Saddle Dakota Leather 10/24/2013 at 10:31

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This is a stupid waste of money. Are you seriously suggesting to buy a better credit score with a small personal loan when you can just use and pay off a credit card monthly for the stuff you would buy anyways without any fees?

maximillious > PelicanHazard 10/24/2013 at 10:56

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Give yourself some incentives too. Go for credit card with High frequent flyer mile rewards. They usually have a spending requirement. For example.. I just finished a deal with AMEX where I spend 2k in three months. After doing so they give me 30k points. Those points translated to 400$ in travel money. I combined that with another points card I had and I just booked two round trip flights to denver from milwaukee and a Swanky apartment on Air BNB for 5 nights and I am only out 130$ out of pocket. In total without the points the business class flights and hotel would have cost me over 1500$.

My point here is, you can build your credit score and actually get something in return. Seriously research your options on cards and find one that offers the most valuable rewards to you. Some may be travel, gas, hotels, groceries, whatever it is u may want the most. There are even cards that give you points for Cabelas or with auto part stores or with amazon.

MontegoMan562 is a Capri RS Owner > Straightsix9904 10/24/2013 at 11:11

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I actually just refinanced my wife's jeep. The Credit Union I do everything with expanded my credit limit to help lift me up into the top credit rating bracket so i could get their best rate. I had to wait until the score recalculated at the first of hte next month (happened to be 4 days away). he said it wasn't gauranteed to work, but it had good odds.

It worked. Moved me up 16 points or so and I only needed 3.

Like I said in the first post, no one has a clear and defined definite answer to the credit score question, some things work for me some will work better or different for others.

Straightsix9904 > MontegoMan562 is a Capri RS Owner 10/24/2013 at 11:23

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Yeah, sometimes it works, sometimes it doesn't. Every situation is unique, and another reason we don't exactly know is because there is racial and other discriminatory biases.

MontegoMan562 is a Capri RS Owner > Straightsix9904 10/24/2013 at 11:32

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Yup.

One quick thing on the discriminatory biases. In my opinion(obviously just an opinion). They should take names, gender, and race off of all documents used to approve you for anything. Why does a college need to know my gender or race? Look at my grades. Why does a bank need my gender or race? Here's my bank account and credit statements.

I think its all easily solved, we're using our social security number on everything anyhow, so why not just make it so people can't see who you actually are?

BugEyedBimmer - back in the Saddle Dakota Leather > Volvosaurus-Rex 10/24/2013 at 12:23

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It's the Murican way :D

davedave1111 > PelicanHazard 10/25/2013 at 08:53

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Most places have a system like the US system, where having a good track record of making payments is generally seen as positive - but unlike the US, the best credit score normally goes to people who have substantial assets and have never borrowed a penny before in their lives.

Other things being equal, having more credit available clearly makes you a worse risk, not a better one, because you can't max out credit you don't have.