Credit Card Advice

[zogster]

I have pretty much no credit history. I've made 3 car payments on my car loan. I'm an authorized user on one of my parents' cards but never use it (only for use in case of emergency).

I'm hoping to get a better interest rate on my loan at some point, and would like to establish more credit. I think that using a credit card on a few items a month and paying it off on time, in addition to my car loan, will help me to establish credit faster than just the car loan.

What credit cards would be good to look into?

Do all credit card companies report monthly to credit bureaus? For instance, apparently Orchard Bank reports monthly, as it's one of the pluses for Orchard Bank cards that I have found.

It seems there are lots of Capitol One cards that are available for someone with little or no credit history, but I have been told to steer away from Capitol One cards. $39+ annual fee on something I don't plan to charge much on is not too appealing either. Most of Capitol One cards seem to have some sort of annual fee.

Ideally I would like no annual fee. I really don't care about rewards because I don't plan to spend enough money on the card to get much back from rewards. Of course if there was some way to get a Chase Freedom card or similar that gives me $200 back if I spend $500 in the first 3 months, that would be awesome, but it's not going to happen with very little credit history from what I have seen.

Suggestions? The credit union that I have my car loan at has a Visa card available. Would this be a good route to go, or would having multiple lines of credit from multiple sources be better?

[TOMS1SS]

Get a credit card from your bank and from a major credit card company, never open more than 4. Avoid credit cards from retailers since they have the highest interest rates. Keep at least a 20% usage balance on your total credit limit to see the maximum benefit on your credit report. Other than that keep your accounts open for a long time, you see a major benefit for 5 years plus.

[hotrodsally]

I also suggest that you get a credit card from the bank who holds your car loan. However, I suggest you start with only 1 card from a traditional Bank versus a non-traditional lender. This is important because banks are regulated which affords you the consumer, some protections.

Once you get you card, use it, pay your bill religiously on or before the due date and don't exceed your credit limit. Do this for a year or better yet 2.

The reason you should keep the number of cards to a minimum is that what you know as your credit limit, is known as "Open to Buy."

If you have 2 cards both with a 2K credit limit, you have a 4K "Open to buy" which is a risk, as there is nothing to prevent you from running up 4K in debt. This becomes a factor for your credit rating.

If you decide to apply for more than 1 card, stagger the application 6 months after your get your first card and have established some credit history.

Applying for multiple cards form multiple issuers all at once looks suspicious to card issuers.

If you want more info, please PM me.

Good luck.

HotRod

[The Blue Angel]

At one point I had no car payment and credit cards!! So I then had no credit for anything!! Zero!!! So I got back on car payments and applied for a credit card!! I saw Orchard Bank and went with them!! After 6 months my credit score sky rocketed!! I'll put items on the credit card but I make sure I stay $50 from the limit!! When the time comes for payment I pay minimum charge then at the beginning of the month I pay it off!! With those 2 things my credit stays strong!!

[sneakypete]

There are better ways to build your credit than a Credit card. Just keep plugging away on your car loan and in a year or so go refinance it. Credit cards are only good for emergencies and getting people in trouble. If your hell bent on improving your credit set a side extra money for something you want, take out a small loan for said item and then make double or tripple payments on it and pay it off quickly. Do this a few times and your credit will improve drastically.

[el ess A]

Stay away from credit cards if you can. Get a debit card if you don't like carrying cash or a checkbook. They work just like a credit card to pay for things, but it's tied directly to your bank account so you pay for stuff just like cash. You don't get as much "protection" as it were than a credit card, but if you're careful and frugal, you won't notice. Just don't get a Bank of America debit card, as they want to charge you $5 every time you use one.

[USMCSSGT-RET]

A credit card is a great tool to build credit. By using it every month and paying it off in full, you won't pay any interest charges, and you'll be building credit extremely fast. This is because credit card companies report your activity to the three credit bureaus every month, as long as you're using them. You need to keep your balances low though. There's something called a debt-to-credit-limit ratio. This is the ratio between what you owe vs. how much credit you have available. For instance, you owe $500 on a $2,000 credit card. You're sitting at 25%. You don't want this number to be more than 30% too often. This shows that you rely on credit which isn't good to a potential lender.

As for getting a credit card, you can go through your current auto loan holder or a credit union if you can. Don't get too wrapped around the interest rate if you plan on paying it off every month. Basically all credit cards have a 25-day grace period, meaning the due date of your bill will be 25 days after the end of the statement cycle. If the balance is paid by then, you pay no interest charges, so it's basically a free loan.

I use my CapitalOne credit card every month and like it a lot. Just got $300 in free gift cards for redeeming points, and no annual fee.

If you have any specific questions, let me know.

Background - I work as a financial presentation specialist for the largest credit union currently and I'm starting a new job as a personal financial management specialist soon. I also hold a BS in management/finance and I'm four classes away from my MBA.

Joe

[BowtieBelle]

I like my Capital One card. No annual fee, interest isn't THAT bad.

[rachykells]

I have a Capital One card that I've had for 6-7 years. It's a great card and my interest rate is really low. I really don't use it unless there's a dire emergency.

Last year I signed up for a Discover Card. Interest rate is a little higher on that card, but i love their cashback rewards program. I use the card to accumulate cashback on things I always buy, like gas and groceries, then pay it off in full every month or even right after I make the charges. I have no credit card debt because I am responsible about it. But I do agree it can get you in a lot of hot water if you have no self control.

I also am building credit from my car loan, paying student loans and paying all my bills on time. You can definitely build credit over time with things like these.

Building great credit is so important. It makes life so much easier if you need a credit check to buy something, etc.

[The Stig]

I have 1 credit card, and I use it for all my car related purchases. BUT, I only buy things when I can afford them. Basically I'll buy an item online via my credit card. Wait a day or two and then pay the whole balance off via their website.

I could never understand why people have to spend beyond their means. I wanted LT headers, so I saved and counted pennies for 6 months. IMO it's better to wait and teach yourself delayed gratification than to just charge it to a piece of plastic.

[smokingcamaro]

Good advice, I am going the same thing right now and it sucks!!! I really want a SS camaro But when I tried to get one they quoted me like 6.49% and I think that I can do better than that!!

[Rogue Leader]

I can echo the sentiment of choosing a bank backed card. Hit up your local Citibank, Chase, even your credit union (who usually has the best rates as well) and get yourself one of their cards.

Then you can do what I do. Basically I just never carry much cash and I charge everything I'd normally buy and pay it all off at the end of the month. I've NEVER carried a balance on my credit card, nor have I ever paid a finance charge. In fact being that I have cash back on my card I actually make $300+ a year in rewards doing this.

Watch your card, use a site like mint.com to manage your accounts/finances.

[wylde1]

There are a couple different kinds of credit that they watch and use to calculate your score. I didn't find out about this until I went for a mortgage but basically there is term commitment credit, and consumer credit. (may not be the correct terms but that's how I remember them) Long term commitment credit is a fixed amount with agreed upon monthy payments, like a car loan, or mortgage. And a consumer credit is like a credit card or line of credit that is just a set maximum amount with a floating balance that you can use. If you have one of each of these types of credit you will be cranking up your credit score, provided you pay them on time.

You've got a car loan, so that's one type taken care of. Then just get a credit card, even if it's a small one like $500 or $1000 limit, so you can't get into too much trouble with it, and buy things like gas/groceries with it. Then pay it off at the end of the month. I happen to have an airmiles rewards card so I buy just about everything with the card, and pay it off monthly. By the end of the year I have a free flight home for Christmas, it's been that way for the last 3 years anyway. Last time I checked was when we got our mortgage about 6 months ago but I got my credit score up to like 710 doing this. Although my wife beat me with a 715..... still not living that down haha.

you're on the right track. Just try to find something that doesn't hurt you with fees, and a decent interest rate, although the interest rate matters less if you're paying it off regularly anyway.

[zogster]

Thanks for the help guys. I stopped by the credit union I have my car loan at and they said I should be able to be approved for their card. They have a rewards system where I get one point per dollar spent, and can use the points on a lot of different things.

Hopefully in about 6 months I will be able to refinance my car with them at a better rate. I will then have made 6 credit card payments and 9 car payments.