Credit Card Options

[Spectatrix]

To clarify, I don't think that carrying a small balance is *bad*, per se, but it doesn't help except in coercing your card company to give you a higher limit because they think they can make money off of you.

[impala454]

it definitely matters how much credit you have available. if you're a college student just getting out and don't want to get shafted at the dealership, do not have a huge amount of available credit.

as far as carrying a balance, it's not necessary all the time, but if you're planning on buying a car in the next six months, having about 5-10% of your available credit as a recurring balance is a good thing.

your credit report most definitely shows previous accounts and balances.

[impala454]

"You don't need to carry a balance on a credit card to have a good credit score. Paying your bill off in full is the best way to keep your finances in shape and build your credit at the same time."

this is what I read from the personal finance writer from MSN, and based on the rest of her credentials, I think I'd believe her over you

that's great. enjoy your 12% auto loan then.

[GOB]

I'm sorry but you're just wrong. If you have held credit cards, make purchases, and pay the full balance every month, your credit will be shit. You have to carry a balance at one point or another if you want a halfway decent interest rate on a car or house later.

this is absolutely untrue

the breakdown that spectatrix posted is how it's done, straight from fair isaac. nothing else. they can't throw in bullshit rules like how much money you have to spend and how long you have to make payments, it's all completely subjective. what if you bought a $3000 tv every month and paid off the balance? why would it matter if you paid off the balance every month if you are making the payments on time? it might not be the smartest thing to do, depending on what rate you can get, but it's not "wrong."

My guess is you've never purchased a house or car before? The whole idea is they want to see that you've proven you can make large, recurring payments over a long period of time. It may not be financially responsible to carry a large credit card balance all the time, but carrying a decent balance will help your credit. So will buying a car or other large, financed item.

really? so then there's no need for subprime or adjustable rate mortgages? because the only people that would need those would have weak credit history and possible liens/bankruptcies/foreclosures.

virtually anyone can get a mortgage, just as long as you have income.

and I dunno where this "closing accounts is bad" is coming from. if you go to buy a car and have $10-20k in available revolving credit, you're not gettin a good rate.

closing accounts is bad when you don't already have an established credit history (although, depending on the bank your card is through, the closed account can affect your credit for years).

[Spectatrix]

that's great. enjoy your 12% auto loan then.

I got 9.1% with a pretty weak credit history...

[impala454]

this is absolutely untrue

the breakdown that spectatrix posted is how it's done, straight from fair isaac. nothing else. they can't throw in bullshit rules like how much money you have to spend and how long you have to make payments, it's all completely subjective. what if you bought a $3000 tv every month and paid off the balance? why would it matter if you paid off the balance every month if you are making the payments on time? it might not be the smartest thing to do, depending on what rate you can get, but it's not "wrong."

if you can afford to buy a $3000 tv every month you won't be applying for much credit. what she posted is absolutely correct, look at the numbers: 35% of your credit score is payment history. if you are not making payments then how do you have payment history?

really? so then there's no need for subprime or adjustable rate mortgages? because the only people that would need those would have weak credit history and possible liens/bankruptcies/foreclosures.

virtually anyone can get a mortgage, just as long as you have income.

well of course, it's the interest rate that depends on your credit

closing accounts is bad when you don't already have an established credit history (although, depending on the bank your card is through, the closed account can affect your credit for years).

if you have a ton of available credit when you go apply for an auto loan or mortgage, especially if you're young, you will get screwed on the interest rate. the only way to bring that number down is to either call them all up and lower your available credit (which is pretty fruitless because they'll just raise it again without your permission), or close unnecessary accounts (like store CCs).

[impala454]

I got 9.1% with a pretty weak credit history...

right but the going rate is about 7%

i'm not tryin to be mean, but i hate to see you guys coming out of college with zero credit. imho the best thing you can do coming out of college is go find something for about $1000-2000 and buy it, ASAP. go to best buy or some other store where you can buy an item for about this amount and get it interest free. you will pay no interest, and build up some good credit. people think they're building up good credit by paying for a $50 item once a month with their credit card and it just doesn't do anything.

[cmac]

wow, i didn't mean for this to turn into an argument.
regardless, i went with a capital one no hassle card.

now let the argument continue....

[Spectatrix]

if you can afford to buy a $3000 tv every month you won't be applying for much credit. what she posted is absolutely correct, look at the numbers: 35% of your credit score is payment history. if you are not making payments then how do you have payment history?

Uhhh... you charge a bit each month and pay it off each month? That 35% is concerned with punctuality, not the amount you paid. From wiki:

35% — punctuality of payment in the past (only includes payments later than 30 days past due)
30% — the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
15% — length of credit history
10% — types of credit used (installment, revolving, consumer finance)
10% — recent search for credit and/or amount of credit obtained recently

if you have a ton of available credit when you go apply for an auto loan or mortgage, especially if you're young, you will get screwed on the interest rate. the only way to bring that number down is to either call them all up and lower your available credit (which is pretty fruitless because they'll just raise it again without your permission), or close unnecessary accounts (like store CCs).

Where are you getting this from? I've read lots of financial articles on MSN, Motley Fool, and other sites and I've never heard this.

[GOB]

if you can afford to buy a $3000 tv every month you won't be applying for much credit. what she posted is absolutely correct, look at the numbers: 35% of your credit score is payment history. if you are not making payments then how do you have payment history?

people who have more than $3k of discretionary monthly income apply for credit every day. believe me, i deal with it every day. also, you said this earlier:

If you have held credit cards, make purchases, and pay the full balance every month, your credit will be shit. You have to carry a balance at one point or another if you want a halfway decent interest rate on a car or house later.

which completely goes against you making note of the 35% pmt history fact. all else equal, the guy who pays off his balance every month is going to get the exact same rate as the guy who gradually pays it down.

if you have a ton of available credit when you go apply for an auto loan or mortgage, especially if you're young, you will get screwed on the interest rate. the only way to bring that number down is to either call them all up and lower your available credit (which is pretty fruitless because they'll just raise it again without your permission), or close unnecessary accounts (like store CCs).

lots of available credit is just one of many factors. what matters more is that you have a low balance relative to availability, as spec said several times.

[Seeker]

The world is coming to an end because I'm going to have to side with Impala on this argument.

[Seeker]

I have that card as well and a little secret for you, if you want them to waive the fee, call and threaten to cancel because the fee is just too much and they'll probably work with you to drop the fee. Worked for me at least.

The reason they have the fee is that some people use the card and get reimbursed by their parent company so that it doesn't hold a balance so they want to make something from it since they aren't getting interest.

Thanks, I'm gonna try that.

[moebary]

that's great. enjoy your 12% auto loan then.

haha, it's less than half that

there are better ways to have good credit, if they're available

This post has been edited by moebary: Aug 20 2007, 11:38 AM

[impala454]

Where are you getting this from? I've read lots of financial articles on MSN, Motley Fool, and other sites and I've never heard this.

from the mouths of the people who you get your loan from.

wow, i didn't mean for this to turn into an argument.
regardless, i went with a capital one no hassle card.

now let the argument continue....

eh that's every thread

[impala454]

lots of available credit is just one of many factors. what matters more is that you have a low balance relative to availability, as spec said several times.

it's a lot bigger factor than you're giving it credit (hah pun intended) for. when someone looks at giving you a loan, they're assessing risk. if you have not made any purchases or had other loans which involve some risk, they have nothing to go on. it doesn't mean you have to go out and run up 50k of CC debt, it just means you have to be able to show these people that you have paid for something more than the $50/month people charge to their CCs thinking they're improving their credit.

The world is coming to an end because I'm going to have to side with Impala on this argument.

holy cow i got my eye out for the incoming asteroid