Credit Card Thread

I just got my first credit card from my bank ans was looking for some advice on using it and I saw this post on an online forum that I frequent. Just wanted to ask here if its accurate?

Here are the posts:
http://i50.tinypic.com/2sbrd5g.png
http://i47.tinypic.com/2pydmh1.png

Quote from tadc : I know it's fun and makes you feel good to tell people they are wrong on the internet, but lets try to put our egos 2nd to giving a good answer to the question. I was intentionally vague when I said "several months" because I didn't know the exact number. As long as we're cataloging "wrong information"... Wrong information... max 1 year. Or "relatively quickly" as some might put it... http://ficoforums.myfico.com/t5/G...d-p/634822 Let's include a bit more of the page you quoted... http://www.myfico.com/crediteduca...score.aspx So most people will lose less than 5 points for an inquiry... and the gentleman above will presumably lose a bit more. Either way it's probably not a big deal if he wants to take a chance on getting a 2nd card.

Don't take it personally, we can't all be right 100% of the time. I was simply giving specifics so readers can make a more informed decision, but if your claim is that "decline rapidly over several months = 1 year, constant effect", sure, sure... ok. I'll even ignore the fact that I also stated Vantage is 2 years, and unless you're blind, creditors are clearly exponentially relying on Vantage after only a short existence.

But I digress... let's put your astute internet advice/research into perspective here, since, after all, you've already acknowledged that's why we're here (even though it's very obviously you're trying to make this a pissing contest).

Said case above is a student. Junior actually. He just received his first credit card. For all intensive purposes, he should be 20 years old. This means he's been in the bureau for 2 years. This is extremely limited credit history. He JUST applied for his first card. Let's go ahead and avoid the expanded quote from FICO you included because it does not apply to his individual criteria, making it useless information. A single inquiry is going to have a larger more resounding effect on his credit. Now, it's not going to destroy it, but it would be ignorant to give the impression that it doesn't matter. I stick by my advice for him to establish 6 months of payment history, then apply.

But hey, what do I know? I've only been a manual underwriter for 4+ years. And you, well... yeah....

Quote : pissing contest

No pissing here. I am more concerned with your attitude and tone than your interpretation of the facts (except as specifically noted above). I concede your opinion is valid as the most conservative approach, and I think it would be reasonable for you to concede mine as valid for someone willing to take on slightly more risk.

My impression of the info from FICO is that a single inquiry:

A) won't hurt you at all if you have extensive history
B) will take off less than 5 points "for others"
C) will have "greater impact" if you have limited history.

They don't define what "greater impact" is, but they certainly don't make it sound like a big deal. As an underwriter, what would you expect the impact to be?

I would assume that even if the impact was "double" (10 points), that still isn't going to greatly effect his chances of getting a 2nd card. i.e. if he got the 1st card, lowering his score by 10 likely will not prevent him from getting a 2nd card with similar requirements.

Either way we're in basic agreement, the safest course would be to wait; the slightly more risky but still no-big-deal course would be to try for another.

As you stated:

Quote : I advise only to apply to those creditors you feel somewhat confident about the approval.

In other words, another student card...

And just because it's one of my pet peeves:

Quote from bigemu1 : For all intensive purposes

Quote : Another example of the oral transformation of language by people who don’t read much. “For all intents and purposes” is an old cliché which won’t thrill anyone, but using the mistaken alternative is likely to elicit guffaws.

http://public.wsu.edu/~brians/err...nsive.html

Quote from tadc : No pissing here. I am more concerned with your attitude and tone than your interpretation of the facts (except as specifically noted above). I concede your opinion is valid as the most conservative approach, and I think it would be reasonable for you to concede mine as valid for someone willing to take on slightly more risk. My impression of the info from FICO is that a single inquiry: A) won't hurt you at all if you have extensive history B) will take off less than 5 points "for others" C) will have "greater impact" if you have limited history. They don't define what "greater impact" is, but they certainly don't make it sound like a big deal. As an underwriter, what would you expect the impact to be? I would assume that even if the impact was "double" (10 points), that still isn't going to greatly effect his chances of getting a 2nd card. i.e. if he got the 1st card, lowering his score by 10 likely will not prevent him from getting a 2nd card with similar requirements. Either way we're in basic agreement, the safest course would be to wait; the slightly more risky but still no-big-deal course would be to try for another. As you stated: In other words, another student card... And just because it's one of my pet peeves: http://public.wsu.edu/~brians/err...nsive.html

That's actually very embarrassing about all intents and purposes, lol. I have never known about that Idiom. Although, I've never purported myself as a great speller or linguist (I actually had to google astute - yeah, I muddled it that badly).

There is no perfect way to gauge the exact numerical impact anything will have on your credit. But I can answer a few of your questions, because I agree that FICO is very vague on their website.

There is never a time an inquiry will not have a negative impact on your credit... with one exception. FICO actually caps the effect the inquiry variable has on your credit score. So if you've ever taken econometrics or a stats course, you could think about it like a regression, where the coefficient has a limit. Or like Excel, (x percentage if not greater than y). So basically this will only apply to those who are reckless with their credit; Those with several, several inquiries, and have already reach the maximum threshold. Kind of ridiculous without knowing, because one would only naturally assume FICO states it "may have no effect" to imply those with extensive history, as you mentioned.

As for gauging the rest... this is where it gets tricky ("for other", "greater impact"). I would think about it like the function X squared. The first few inquiries have a more resounding effect (move along the x-axis) than if you already have a few. And simultaneously, those with less established credit are further effected. If you get too far (tons of inquiries) you hit a cap (tail of the function), and any further inquiries will not matter.

Do not quote me on this, but as a very, very rough example the groupings would be: inquiry (1) - 35%, inquiry (2) 25%, inquiries (3-5) 18%, inquiries (5-8) 10%, inquiries (8-12) 5%, etc, etc.

For our friend, I think it's really not a matter of classifying one approach as risky and the other conservative . There is really no need for him to apply immediately for another card. He is in prime position to establish a slight payment history and avoid risking an unnecessary inquiry that will hang around for 2 years and effect his future chances of approval. Especially with deferred student loan debt, and no established revolving credit lines. If his utilizations remain low reports 6 months of consecutive, good payment history, I can almost guarantee he would qualify (or could appeal to get) a second credit card.

Think about credit like a child. You have to be very, very careful/calm/calculated with it when it's an infant. But once it gets to be about 12 or so, you can start smacking it around a bit without risking too much damage. After all, you're in it for the long-term results and trying to build some character.

Quote from paperfc : I just got my first credit card from my bank ans was looking for some advice on using it and I saw this post on an online forum that I frequent. Just wanted to ask here if its accurate? Here are the posts: http://i50.tinypic.com/2sbrd5g.png http://i47.tinypic.com/2pydmh1.png

I don't have time to read the second link, but the first is excellent advise.

1. Secured credit is a great way to put your income to use to build guaranteed credit.

2. While establishing installment history, I actually did the first thing mentioned. I secured a low interest, reverse equity car loan with my local credit union. I actually use the proceeds from the loan to begin investing in a Roth IRA account. The theory was to gain, essentially, free credit history. Although you will have to pay interest, given today's interest rates, you could easily get a secured rate with a car title for significantly less than the rate of return in an indexed mutual fund under the umbrella of a Roth IRA. For example, a secured simple interest loan of 2.5% vs the average rate of return of the U.S stock market (approx 10.37%). You will have made money, and built credit! If you want something more liquid (not an IRA), you could consider a high yield CD, etc.

Both are great ways to use equity to build credit.

Edit: My client just rescheduled. I read the second link and it's not very accurate. Actually it's terrible, lol. There is no benefit of a charge account (i.e. JCpenny, what he refers to as retail) vs. a credit card. They both effect your revolving history the same. If anything, I would highly advise again a charge account vs. a credit card because you're less likely to have consistent, monthly payment history, unless you shop there constantly. And if they go inactive for far too long (let's say, 18 months without a purchase), the credit grantor might close the account (more negative than if you closed it yourself). His advise to only have 2 major CC's is also not true. There's a good article from a finance professor I read once (ill try to find it), who was an expert with his revolving history. He held some 25+ credit cards, including several rare AmEx's with an unlimited credit line. All he did was maintain constant payment history on all his cards, keep low utilizations, and hold on to as much credit as possible. He also had a great blend of installment/revolving history.

Also, jointly borrowed account vs individual accounts is of no consequence to your score or FICO.

I'm pretty bored, so I thought I'd point out a few flaws in FICO's advise section, which do not focus on long-term credit building:

Quote : Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years.

Actually, you can bargain. Request a deletion letter from the collection agency. Agree for them to remove it if you pay the account off.

Quote : Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix – it probably won't raise your credit score.

Not immediately, but how else do they expect you to build history? This is actually bad advise if you have a long-term goal in mind, especially if you have none or limited history of either.

Quote : Don't open a number of new credit cards that you don't need, just to increase your available credit. This approach could backfire and actually lower your credit score.

Again, bad advise in the long-run. Having multiple accounts just broadens your overall age of accounts as they establish. So adding 1 new account will dilute the pool much less than if you had fewer.

Also they do mention that consumer credit counseling has no effect on your score, but this has a HUGE impact on manual underwriting. Very vague/risky advice from them.

Quote from bigemu1 : That's actually very embarrassing about all intents and purposes, lol. I have never known about that Idiom. Although, I've never purported myself as a great speller or linguist (I actually had to google astute - yeah, I muddled it that badly). There is no perfect way to gauge the exact numerical impact anything will have on your credit. But I can answer a few of your questions, because I agree that FICO is very vague on their website. There is never a time an inquiry will not have a negative impact on your credit... with one exception. FICO actually caps the effect the inquiry variable has on your credit score. So if you've ever taken econometrics or a stats course, you could think about it like a regression, where the coefficient has a limit. Or like Excel, (x percentage if not greater than y). So basically this will only apply to those who are reckless with their credit; Those with several, several inquiries, and have already reach the maximum threshold. Kind of ridiculous without knowing, because one would only naturally assume FICO states it "may have no effect" to imply those with extensive history, as you mentioned. As for gauging the rest... this is where it gets tricky ("for other", "greater impact"). I would think about it like the function X squared. The first few inquiries have a more resounding effect (move along the x-axis) than if you already have a few. And simultaneously, those with less established credit are further effected. If you get too far (tons of inquiries) you hit a cap (tail of the function), and any further inquiries will not matter. Do not quote me on this, but as a very, very rough example the groupings would be: inquiry (1) - 35%, inquiry (2) 25%, inquiries (3-5) 18%, inquiries (5-8) 10%, inquiries (8-12) 5%, etc, etc. For our friend, I think it's really not a matter of classifying one approach as risky and the other conservative . There is really no need for him to apply immediately for another card. He is in prime position to establish a slight payment history and avoid risking an unnecessary inquiry that will hang around for 2 years and effect his future chances of approval. Especially with deferred student loan debt, and no established revolving credit lines. If his utilizations remain low reports 6 months of consecutive, good payment history, I can almost guarantee he would qualify (or could appeal to get) a second credit card. Think about credit like a child. You have to be very, very careful/calm/calculated with it when it's an infant. But once it gets to be about 12 or so, you can start smacking it around a bit without risking too much damage. After all, you're in it for the long-term results and trying to build some character.

What about the part where he says that you should only use 49% and to leave %15 of the balance each month? Thanks for your reply.

In general, the lower your debt-to-credit ratio, the better. Your goal should be to spend as little as possible on the card, and ALWAYS pay it in full each month. Keeping a balance from month to month will lower your score, not improve it.

The general consensus that I've seen is that at a minimum, stay under 50% utilization of your credit. Under 30% is better, under 15% is even better, and under 7% is the best possible. I try to stay under 10%, but that's hard to do if you don't have high credit limits.

Quote from bigemu1 : Think about credit like a child. You have to be very, very careful/calm/calculated with it when it's an infant. But once it gets to be about 12 or so, you can start smacking it around a bit without risking too much damage. After all, you're in it for the long-term results and trying to build some character.

I think you neglected to add a "" at the end there...

Quote from paperfc : What about the part where he says that you should only use 49% and to leave %15 of the balance each month? Thanks for your reply.

Quote from DWad : Keeping a balance from month to month will lower your score, not improve it.

There can be no impact to your score from carrying a balance, because this information is not reported.

Of course it's possible that carrying a balance could impact your relationship with that particular lender (they might decide to raise [or not raise] your limit based on that information for instance), but it's impossible for it to impact your score as it's not information that is reported. (I'm sure *someone* will correct me if I'm wrong about this! )

As can be seen here [creditinanutshell.com]: they report your balance that month, the highest historical balance (or your limit), and your payment history. Nothing about carried balance or how much your monthly payment was.

I got these 2 offers in the mail:

Visa Signature : $500 GC or equal to $625 in airfare. It also mentioned free companion air ticket every year (through spiritincentive or something similar). Is this a good deal? Anyone else got this as well?

Also got another offer : I think it was BOA : $400 GC + 15 month 0% APR for purchases/BT. I pay off each month. This is a $0 annual fee card.


I have taken a loan & got another credit check for Fios recently. So please let me know if any of these 2 offers is worth going for. Sorry but I don't have much info on them.

Thanks so much

Quote from tadc : I think you neglected to add a "" at the end there... There can be no impact to your score from carrying a balance, because this information is not reported. Of course it's possible that carrying a balance could impact your relationship with that particular lender (they might decide to raise [or not raise] your limit based on that information for instance), but it's impossible for it to impact your score as it's not information that is reported. (I'm sure *someone* will correct me if I'm wrong about this! ) As can be seen here [creditinanutshell.com]: they report your balance that month, the highest historical balance (or your limit), and your payment history. Nothing about carried balance or how much your monthly payment was.

Okay, okay... I'll do it.

There are 3 main credit reporting agencies - Equifax, Experian, and Transunion.

I've cut and pasted this snippet from my Experian credit report, in regards to my Capital One credit card:

So as you can see, the info is right there for any potential lenders to see. Equifax and Transunion reports aren't quite as detailed when it comes to this particular info, but the bulk of it is there.

I can tell you from my own experience that keeping your credit utilization lower will improve your score. However, you don't want to have a zero balance on your reports because it isn't as beneficial to your score as a small balance being reported.

Quote from DWad : In general, the lower your debt-to-credit ratio, the better. Your goal should be to spend as little as possible on the card, and ALWAYS pay it in full each month. Keeping a balance from month to month will lower your score, not improve it. The general consensus that I've seen is that at a minimum, stay under 50% utilization of your credit. Under 30% is better, under 15% is even better, and under 7% is the best possible. I try to stay under 10%, but that's hard to do if you don't have high credit limits.

I agree, staying under 10% is soooo hard. And it is good for your credit score.

But here's a trick for that. Most credit card companies report your balance to the credit reporting agencies on the day that your statement cuts (or within a few days after). If you pay them before the statement cuts then you can keep your reported balance low, thus your score isn't dinged for high balance / utilization %.

This can be helpful if you want to take advantage of rewards, cash back, etc. but you don't want a high balance reported to the agencies which can negatively effect your score.

This tip is probably more relevant for the "advanced" credit card user. Your average credit card user might feel that paying beforehand is too much hassle.

Quote from WinkyMcGee : Code: Balance History - The following data will appear in the following format: account balance / date payment received / scheduled payment amount / actual amount paid Jan 2012: $210 / December 19, 2011 / $25 / $100 Dec 2011: $274 / November 18, 2011 / $25 / $105 Nov 2011: $270 / October 18, 2011 / $25 / $50 ... I can tell you from my own experience that keeping your credit utilization lower will improve your score. However, you don't want to have a zero balance on your reports because it isn't as beneficial to your score as a small balance being reported.

Interesting, thanks for sharing. This is the first time I've seen a report showing payment amount. Last time I pulled my reports that wasn't included.

Which CC would be best for a college student that requires no co-signer? I'm leaning towards citi because of their virtual cc feature.