Fed cuts rates... again Options

[Spectatrix]

Yes, the carrying a balance thing. Like I said before, your credit report and credit score don't differentiate between carrying a balance and paying off the card every month. Granted, if you only put $50 on your card each month, you're not going to build credit very quickly. Putting a high balance on a card can be good whether you pay it off at the end of the month or pay it down gradually (obviously you wouldn't want to do this unless it's at 0% interest). But most important is simply paying your bills on time and not maxing out your cards.

But if you have an aggresive IRA you are invested in the stock market.

Which is why I said I don't deal with the stock market otherwise.

This post has been edited by Spectatrix: Jan 24 2008, 05:13 PM

[impala454]

Yes, the carrying a balance thing. Like I said before, your credit report and credit score don't differentiate between carrying a balance and paying off the card every month.

Of course paying bills on time is what it's about. But so is available balance and past history. If for two years you buy something for $125 once a month and pay it off, you'll get nowhere near the credit as if you carried $3,000 over 24 months at 0% interest. It's all about taking risks. If you've never bought something expensive on some type of credit or loan before, how does the lender know you're good for that $100,000 home loan? I'm apparently bad financial advice though so no need to answer that question.

Which is why I said I don't deal with the stock market otherwise.

Well that's not what I was talking about. I personally don't buy and build a stock portfolio either. All I was getting at is that people our age need to be putting more money into riskier investments, and through the past few posts it's obvious that you are, which is good. I was dissing the CDs because I think they're pretty lame for young people. Tying up $5000 in order to make a couple hundred IMHO is pretty worthless. Especially when regular old savings accounts are in the 4%+ range anyways and you can do whatever you want with your cash then. But again, I'm apparently bad financial advice.

[Spectatrix]

If you've never bought something expensive on some type of credit or loan before, how does the lender know you're good for that $100,000 home loan?

Payment history. As in, whether you pay on time or are late. I'm not trying to troll you or anything, but if you have a credit report handy, go take a look at it. For revolving credit, they show credit limit, max balance, current balance, and most recent payment. For installment accounts, they show the loan amount, monthly payment, and most recent payment. As far as the lender is concerned, previous installment accounts are a good gauge because they know you've been making at least the minimum monthly payment, but the revolving accounts don't give enough information for them to determine much about your payment history (other than late or not). If your credit reports have shown differently, I'd be interested to know.

This post has been edited by Spectatrix: Jan 24 2008, 06:42 PM

[Spectatrix]

I was dissing the CDs because I think they're pretty lame for young people. Tying up $5000 in order to make a couple hundred IMHO is pretty worthless. Especially when regular old savings accounts are in the 4%+ range anyways and you can do whatever you want with your cash then.

The reason I was considering CDs is because I am finding rates that are higher than regular savings rates (though not by much) and at least you get the rate locked in for X number of months. Reg savings have been spiraling down because the Fed is making rate cuts every other week.

I'm in no particular rush, though, so long as I'm under the max for the good interest rate on my checking. It would just be nice to have a separate account to earmark funds with, without losing out too much on interest. *shrugs*

[pysex]

Both of you are right.

Paying your bill MORE than the minimum payment rings very well with the credit companies.

Paying on time every month is a very very good thing.

Carrying balances (not high) on your cards is also VERY good.

The only problem with credit cards is that it takes a while to establish a good history. You have to have a history greater than 5 years before anyone considers you a low risk. Starting out with a car payment is the best way to go.


And DO NOT...I repeat DO NOT get a card say with a 5000 dollar limit and charge it up to 4500 and think that looks good in your history. That's actually a very big no no.


American Express is by far the best credit card company.

[Spectatrix]

AmEx has been good to me thus far. They gave me a card with a far higher limit than the paltry college credit card I had through Wells Fargo.

[impala454]

Payment history. As in, whether you pay on time or are late. I'm not trying to troll you or anything, but if you have a credit report handy, go take a look at it. For revolving credit, they show credit limit, max balance, current balance, and most recent payment. For installment accounts, they show the loan amount, monthly payment, and most recent payment. As far as the lender is concerned, previous installment accounts are a good gauge because they know you've been making at least the minimum monthly payment, but the revolving accounts don't give enough information for them to determine much about your payment history (other than late or not). If your credit reports have shown differently, I'd be interested to know.

I don't have a copy handy, but most of them I have seen will show "high balance" as well. usually over the previous year. No worries about trolling, it's a good conversation to have.

[impala454]

The reason I was considering CDs is because I am finding rates that are higher than regular savings rates (though not by much) and at least you get the rate locked in for X number of months. Reg savings have been spiraling down because the Fed is making rate cuts every other week.

I'm in no particular rush, though, so long as I'm under the max for the good interest rate on my checking. It would just be nice to have a separate account to earmark funds with, without losing out too much on interest. *shrugs*

It probably just depends on when you catch them. A quick search gives an example here: http://www.hsbcdirect.com/1/2/1/

Where they advertise a standard savings acct at 4.25%, and CDs at 3.2%. You probably save your money better than I do so locking up $5,000 for six months at a time may not be as big a deal to you as it might be to me.

[impala454]

AmEx has been good to me thus far. They gave me a card with a far higher limit than the paltry college credit card I had through Wells Fargo.

Seconded, amex is awesome.

[Hartmann]

The point of CDs is not to lock up your money but they're great for taking excess or extra savings and making a little cash on them while injecting investment dollars into the market.

[Spectatrix]

I don't have a copy handy, but most of them I have seen will show "high balance" as well. usually over the previous year. No worries about trolling, it's a good conversation to have.

Yeah I know, that's what I meant by "max balance". My point is that doesn't differentiate between a big balance that you paid off the same month or one that you made multiple payments on, so carrying a balance isn't necessarily beneficial as far as credit report/score is concerned. Now as far as your creditor is concerned, they might view that as incentive to give you a higher limit. *shrugs*

So summary:
1) Pay bills on time.
2) Don't max out your cards, but put a healthy balance on them from time to time.
3) If you have 0% interest, it might be best to carry a balance for a bit to coerce a credit limit increase out of your bank, but if not it's better to pay off the balance every month.
4) Don't have exorbitant amounts of available credit or more than 30% (approx) of your credit being used at the time you're applying for a loan.

Would you agree with all that, Impala?

[impala454]

Yeah I know, that's what I meant by "max balance". My point is that doesn't differentiate between a big balance that you paid off the same month or one that you made multiple payments on, so carrying a balance isn't necessarily beneficial as far as credit report/score is concerned. Now as far as your creditor is concerned, they might view that as incentive to give you a higher limit. *shrugs*

Right, it doesn't show for certain that you carried any balance. But if your high balance shows as $5,000, it's pretty obvious that you carried it and made the payments at least for a few months. If you paid off a $5,000 balance in one month, then you probably aren't that strapped for cash in the first place On the other hand if your high balance is $200 then you haven't shown them that you can handle a large loan amount over a long period of time. Can you "trick" them and save up $5,000, buy something on credit, then pay it off on the first bill? I dunno maybe (although you gotta be careful, some cards will add up 1/2 the month's interest bi-weekly). I'd just assume keep doin what I'm doin and buy something nice for myself on some 0% interest deal every now and then.

So summary:
1) Pay bills on time.
2) Don't max out your cards, but put a healthy balance on them from time to time.
3) If you have 0% interest, it might be best to carry a balance for a bit to coerce a credit limit increase out of your bank, but if not it's better to pay off the balance every month.
4) Don't have exorbitant amounts of available credit or more than 30% (approx) of your credit being used at the time you're applying for a loan.

Would you agree with all that, Impala?

Sure thing, but on #3, it doesn't really matter if you pay off a 0% interest card every month. Although most of the time 0% is just a deal for a fixed amount of time.

[Spectatrix]

Question for you, Impala: did your mortgage lenders give you a ballpark estimate for how much available credit is ok and how much is too much? I presume it depends partially on how big a mortgage you're trying to get, but some guidelines would be nice.

[impala454]

Question for you, Impala: did your mortgage lenders give you a ballpark estimate for how much available credit is ok and how much is too much? I presume it depends partially on how big a mortgage you're trying to get, but some guidelines would be nice.

My mortgage lenders didn't, but my vehicle loan people did. I don't recall exactly the number he gave me, but he said they tend to weigh the amount available as much if not more than the % available, if that makes sense. They also mentioned it is definitely a factor but not nearly as much as previous vehicle loan experience. Which kinda sucks when you get your first one .

The mortgage lender didn't give me a ballpark figure of what % is good, but she did mention that closing a bunch of accounts just before going to get a home loan isn't a good idea. She said if you wanted to get available balance down just lower your limit by a decent amount. I.e. maybe take a $10,000 limit down to $6,000 - 7,000. She said if you have a ton of accounts then yeah closing some is ok, but start with "store" cards first.

Most of this is no big deal to people like us. The dealership loan guy mentioned my credit "problems" (as I had called them, had about $3k on a card at the time) were laughably small compared to anything that would hurt a person getting a decent rate. He said the bad rates tend to start when people have $20k+ in revolving debt. He said he actually had a couple come in once with over $200k in combined revolving debt (like $150k for the wife and $50k for the husband ). The mortgage people had similar stories.

[Spectatrix]

Well I only have the one card (AmEx). I closed my Wells Fargo card even though I knew it would ding my credit score a little, just because I didn't want to deal with them anymore. Just paid off my car loan last month, never had a late payment on anything, and I'm not carrying a balance, so I'm doing good.

Just wanted to make sure that my CL wasn't too high before applying for mortgages a year+ from now. It's 8k currently.