Best Way to Build Credit

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Jessetaylor
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Best Way to Build Credit

Postby Jessetaylor » Wed Jul 30, 2014 7:54 pm

Right now I mainly use my TD Bank debit card for most purchases and only use my Gold AMEX Charge card for larger purchases.

What's a better way to build credit?

1. Continue using Debit card for most purchases, only using my charge card for certain purchases (This would make for a lower utilization).

or..

2. Charging almost everything on my charge cards and paying them off immediately after / or at least on time each month?
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MemberSince99
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Postby MemberSince99 » Thu Jul 31, 2014 5:53 am

Jessetaylor wrote:Right now I mainly use my TD Bank debit card for most purchases and only use my Gold AMEX Charge card for larger purchases.

What's a better way to build credit?

1. Continue using Debit card for most purchases, only using my charge card for certain purchases (This would make for a lower utilization).

or..

2. Charging almost everything on my charge cards and paying them off immediately after / or at least on time each month?




Depends on what you mean by "build credit". As far as your score is concerned, it doesn't matter one bit which one of those methods you use to pay, assuming of course you aren't carrying balance on your Amex charge which is unlikely.


In terms of being smart, you are MUCH better off to use the Amex for several reasons. First the fact you get rewards on everything you buy with it. Way more important yet, you are MUCH more protected against fraud with your Amex than you are with your debit card. Do you want to risk thieves draining your bank account? With your debit card, they could. Not with your Amex. Then there is the fact that the more you use and pay your Amex, the higher your internal score with them. So that "builds" your credit though that won't by itself show when you go to apply for other credit, except with Amex.


If you are worried about your score, to get the "best" score you might want to diversify a bit and add an Amex revolver and say a Visa to the mix. That gives you a few cards, one of which you can let a small amount report on each month, and a Visa for when Amex isn't accepted, and you never have to (or should) pull out that debit card.

Jessetaylor
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Postby Jessetaylor » Thu Jul 31, 2014 6:09 am

True, but wouldn't be constantly using my visa or AMEX card and having balances on them each month raise my utilization, vs having no balance (or low) and having a lower utilization?
AMEX Premier Rewards Gold
Chase Sapphire Preferred $9,000
Discover $6,000
Visa Ban. Republic $4,800 - This was a mistake.

MemberSince99
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Postby MemberSince99 » Thu Jul 31, 2014 9:59 am

Jessetaylor wrote:True, but wouldn't be constantly using my visa or AMEX card and having balances on them each month raise my utilization, vs having no balance (or low) and having a lower utilization?



Yes, but that assumes you leave a balance on the cards. Nothing says you have to do that. You are free to pay all or most of your balance before the statement date, let a small amount typically 1-4% report for optimal score, then pay the rest right after the statement cuts. Typically your score is highest if you do that for one card and don't have a balance on the rest, but like everything else in life nothing is absolute.


So would it be smart to have 50% of your balance report? Nope. But again nothing says you have to do that either.



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