Eeeeeeeeek (Got my first post-BK credit card)

[Flamingo]

Boy is this true!...and I had to (naturally) learn it the hard way.
I actually thought that $20,000K line of credit with AMEX was a 'safety net' ...

HA!, what a joke. The minute things got difficult it was yanked down overnight to $1,000 bucks----and I was up a creek.

A REAL safety net doesn't disappear overnight.

A safety net is one's own money saved. A credit card is a source to use someone else's money at a cost. It is NOT a safety net.

[brokejoker]

We opened two joint checking accounts. One for the paychecks to go into and the online bill pays to come out of and another that we manually transfer money into and use our debit card and checks with. Not only does it help with budgeting but if someone deos get ahold of our debit card or check info there is a limited amount of funds in that account and our major bills are already paid out of a different account.

[angles]

good idea Brokejoker, thanks.

[ohiogal]

I have to say that when you are rebuilding credit -- it is NOT good to pay it off every month. Rebuilders want to charge say 100.00 or whatever (10% of limit or so) and then make those payments and make them on time and every month - without fail. You must do this to rebuild. Lenders and FICO want to see your history. This history is what will eventually begin to build positive tradelines and thus scores and lenders will view you as less "risky".

Paying off and having zero balance every month does not show this.

Paying off every month is for people who have good credit and are not trying to rebuild.


ps: my post count isn't high as i just bumped in to this board. Have been doing this type of thing for quite some time though. hth

Must say, that's the first I've heard of this. So you're saying I should keep a balance on my credit card? That's OK as long as the interest rate is zero, but there's no way I'm carrying a balance on a card with a 22% interest rate!

Or am I looking at this wrong? What do the rest of you think? Is it bad to pay the card off every month when you're trying to rebuild credit?

[angles]

Its good and sort of bad. Good that you are making the payments, sort of bad that you are not caring a balance AND making payments. The credit reporting agencies use a formula for both cases and adjust your credit accordingly. Your credit score can go up more if you carry a reasonable balance and make consistent monthly payments.

I was thinking about credit and how it really costs us money to get. Some people get car loans or get these expensive credit cards after BK just to rebuild credit. And we are prayed on by those businesses. Really, the only reason I would like good credit is so my car insurance does not go up or I have to put down a big deposit when I turn on the utilities.

[ohiogal]

Its good and sort of bad. Good that you are making the payments, sort of bad that you are not caring a balance AND making payments. The credit reporting agencies use a formula for both cases and adjust your credit accordingly. Your credit score can go up more if you carry a reasonable balance and make consistent monthly payments

Thanks, Angles!

Sooo...let's say I get my card and the limit is $300. What percentage of that limit should I carry a balance on? I'm sure I shouldn't max it out, but how much is just enough to show I'm a good risk, but not SO much that it looks like I'm back to bad habits? $50? $100?? Any ideas?

[keptdigging]

Thanks, Angles!

Sooo...let's say I get my card and the limit is $300. What percentage of that limit should I carry a balance on? I'm sure I shouldn't max it out, but how much is just enough to show I'm a good risk, but not SO much that it looks like I'm back to bad habits? $50? $100?? Any ideas?

Are you sure about this? If you charge every month, the credit agencies WILL see/report/score a balance even if it gets paid off. But the credit score factors I know of are % of credit available used, and amount of credit outstanding. For both of those, higher is worse, not better.

A credit score isn't a measure of how profitable you are to a lender... it's a statistical predictor of whether you'll go delinquent.

The only advantage I can think of to carrying a balance is that the issuer might increase your credit line.

[ccsjoe]

Are you sure about this? If you charge every month, the credit agencies WILL see/report/score a balance even if it gets paid off. But the credit score factors I know of are % of credit available used, and amount of credit outstanding. For both of those, higher is worse, not better.

A credit score isn't a measure of how profitable you are to a lender... it's a statistical predictor of whether you'll go delinquent.

The only advantage I can think of to carrying a balance is that the issuer might increase your credit line.

I completely agree. If it takes carrying a balance to speed up, then I'll take longer. I honestly don't think it helps. Cards are reported paid on time, credit line usage minimal to none.

[momofthree]

Are you sure about this? If you charge every month, the credit agencies WILL see/report/score a balance even if it gets paid off. But the credit score factors I know of are % of credit available used, and amount of credit outstanding. For both of those, higher is worse, not better.

A credit score isn't a measure of how profitable you are to a lender... it's a statistical predictor of whether you'll go delinquent.

The only advantage I can think of to carrying a balance is that the issuer might increase your credit line.

This is correct. Even when you pay your balance in full each month, the credit bureaus will still report a balance. I paid my Chevron gas card in full every month for nearly 10 years and every time my credit was pulled, it showed a balance. The credit bureaus don't ONLY report on the day you make your payment.

Also, I worked in finance processing loan applications, and even doing some underwriting for years and had people tell me all the time that "that account is paid in full each month" even though it showed a balance on the credit report. Now, obviously, people lie all the time, but I also had the same experience with my Chevron card.

Further, I lived without credit cards (or any debt at all aside from my mortgage) for 3 years. I literally closed every single credit card I had, my car was paid off, etc. and after a couple years, my score was in the 800s, higher than it had ever been when I had credit cards. Credit cards are not necessary to maintain a high score. That is a myth that credit card companies like to feed people. Sadly, people buy into this myth much too frequently and then get sucked into the "I want it now" mindset (BTDT!) and then end up in BK. Obviously, I got sucked into the "safety net" theory after being debt-free for years, and look where it landed me!

Like someone else already said: Cash is King. I never plan to ever have another credit card again. In fact, I don't ever plan to finance a car again either. I'm done with credit except mortgages.

[df04527]

If you pay off in full and happen to have a creditor that reports the balance before it's paid -- consider yourself lucky. All creditor updates are on their own internal schedules of when they report to the bureaus -- could be before or after your payment reaches them.

I can't get the pie chart to paste in here but think of a pie chart:

35% of your scores is Payment History (how good are you at making an agreement to pay something back monthly)

30% of your scores is Amounts Owed

15% is Length of Credit History

10% is New Credit

10% is The types of credit used (mtgs, installments, revolving etc)


This is the anatomy of a credit score.....

I will always say -- rebuilders have to open new credit and then do what the agreement says, every month without fail, so you can begin to build NEW positive payment history. Do not go more than 30% of the limit -- less is better.

If they want 20.00 a month minimum -- send them a few bucks more and make sure it is IN their hands and processed BEFORE the due date. No excuses -- if you even think you may not be able to do that faithfully -- then your not ready.

This will get you miles ahead when it comes to rebuilding but can take several months to build that history so you have to be patient.

hth

[ohiogal]

Thanks everybody! You confirm what I thought already - I really don't want to carry a balance on this card, especially after the APR kicks in. My days of paying $60 for a $20 item are behind me. If I ever feel the tempation to use this card on something I can't pay off in a month, into the shredder it goes. I don't want a high credit score that bad.

[ccsjoe]

Credit card companies generally report to the credit bureaus on the billing date, not on the due date. Billing date is when your bill is generated. So, if you're one of those who feels strongly about a balance being reported to the bureaus, pay your bill in full by the due date, then charge a little before the billing date. Result = balance on report + no interest to pay. Takes timing for sure, but if you want it bad enough, that's the trick. I am ok with full payment period, no timing game for me. Still shows reported as "pays as agreed".

[JakeSmithson]

Like someone else already said: Cash is King. I never plan to ever have another credit card again. In fact, I don't ever plan to finance a car again either. I'm done with credit except mortgages.

Same here, although I don't plan on ever owning a home again. Having owned 2 and now going through this nightmare, I'll pass.

[TheFalcon]

(QR) Capital One is really good if you make all your payments on time, and keep your balances green.

a year ago, before i filed Chp13, i made 3 solid payments on time, and they lowered the interest rate 5%. the letter stated that if i continued with solid on time payments for another 3-6 months, it would lower even more. (unfourtunatly for me, it was after that that everything took a down turn in my income).

If your making payments, and theres no interest, just make a bit more than the minimum payment, our double if you can. just so long as you make them on time.

[Logan]

Build Credit With A Balance

One of the most popular credit score myths is that you need to carry a balance in order to build credit. Fortunately, that's not true. In reality, 35% of your credit score is based on your payment history and creditors don't care whether you carry a balance or not. In fact, your credit cards will report your statement balance each month with no other information. No one knows, or cares, whether you've carried a balance from month to month or just racked up the charges on the statement in the last month.

You are building credit, based on your payment history and your balance, regardless of whether or not you pay interest to the credit card companies. The effect on your credit remains the same.

Source: http://money.usnews.com/money/blogs/...ore-myths.html