Newbie (to Credit) Got a actual Credit Card (Not a "secured" card)

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Mitch
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Newbie (to Credit) Got a actual Credit Card (Not a "secured" card)

Postby Mitch » Wed Nov 12, 2014 10:23 am

I'M SO EXCITED :D

I got a phone call this morning from discover, asking me if I could log on to there website and upload a few documents. I did, and called them back, and I got approved for a Discover IT for students card.

I'm just so F**king happy, I don't have to get a secured card and start from there. I really am just, so happy, and proud of myself.

However, now that I have a card, I'm asking myself, what now? Could anyone direct me to some threads about building up credit?

A little background on me.

I tried applying for a bunch of cards, and did put a *few* inquires on my reports.
Transunion - 4.
Equifax - 3.
Experian - 0. (They can't find me whatsoever, in there system)

It's my understand, that'll be punished, if I choose to use more than 30% of my limit? Is that true, and I'll get dinged? Any advice here guys?
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Discover It $500 10/14. Capital One QS Visa $300 02/15, formerly Journey Visa Plat. 11/14.


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PlyrStar93
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Postby PlyrStar93 » Wed Nov 12, 2014 12:27 pm

Mitch wrote:I tried applying for a bunch of cards, and did put a *few* inquires on my reports.
...
Experian - 0. (They can't find me whatsoever, in there system)

As I have said before, even if they can't find your report, they can still add an inquiry on there. When you have enough history to request an Experian report then you will see the inquiries.

Mitch wrote:It's my understand, that'll be punished, if I choose to use more than 30% of my limit?

The best thing is to keep utilization low while >0. In terms of score, you will be punished if your reported utilization is >30%, but you can bring it down before it reports - just make payments before statement generates.

Even if you keep a >30% utilization, as long as you pay in full you know that's not too bad, but just have some adverse effect on scoring.

For right now just use the card the way you feel comfortable. Within a few months, don't try to app another.

If you want another card then you may have to wait at least 6 months, preferably more than 1 year. Let inquiries age, and try to bring utilization down by that time - see if there are prescreened offers at that time (essentially ads, doesn't mean a guaranteed approval, just means you meet certain criteria that help them make decision).
Citi Forward Visa $5000 10/2012 | American Express Blue Cash Everyday $8000 2/2014 | Discover it $7000 5/2014
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Mitch
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Postby Mitch » Wed Nov 12, 2014 2:56 pm

PlyrStar93 wrote:
The best thing is to keep utilization low while >0. In terms of score, you will be punished if your reported utilization is >30%, but you can bring it down before it reports - just make payments before statement generates.


Curious. So, are you saying, keeping a $0 Balance (non use of the card) would be bad? However, using more than 30% of a credit limit (even if you pay it off in full) is also bad? I don't plan to carry any sort of balance whatsoever.

Also - If I pay off any balance, in the middle of a billing cycle, would it be shown that I purchased something, and paid it off, on my credit report? Would it also show that I went over the 30% utilization?
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Discover It $500 10/14. Capital One QS Visa $300 02/15, formerly Journey Visa Plat. 11/14.

Mitch
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Postby Mitch » Wed Nov 12, 2014 2:58 pm

Also, I was finally able to pull my Experian Report. I have four inquires, but no accounts. :)
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Discover It $500 10/14. Capital One QS Visa $300 02/15, formerly Journey Visa Plat. 11/14.

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PlyrStar93
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Postby PlyrStar93 » Wed Nov 12, 2014 5:25 pm

Mitch wrote:So, are you saying, keeping a $0 Balance (non use of the card) would be bad?

If you only have that account and keep 0 balance, then it is bad. Other creditors regard that as you don't use the credit and may lead to adverse action. To have a 0 balance, you may not use the card, or may use the card and pay entire balance before statement.

If you actually don't use that card for a long time then the issuer can close it due to non-activity. This differs from using the card and pay all balance before statement generates.

In the future if you have other accounts and keep this account (or others, as long as not all) 0 balance, then it is fine (and usually good in terms of scoring). Just make sure there is activity if you don't want the lender to close the account.

Mitch wrote:However, using more than 30% of a credit limit (even if you pay it off in full) is also bad?

If it is reported to credit bureau, other lenders may view it as bad.

Generally banks only report the balance as of the statement date, so there is no problem to use more than 30% (while staying within your credit limit) during a billing period and bring the balance down (make payments) before statement.

If you don't want to get any other loans or credit cards, there usually is no big problem even if you have more than 30% reported. The score may not be good, but you can manage your debt responsibly and it's fine.

Mitch wrote:If I pay off any balance, in the middle of a billing cycle, would it be shown that I purchased something, and paid it off, on my credit report? Would it also show that I went over the 30% utilization?

Only the balance on statement date (or the day it gets reported, if not statement) is reflected on credit report. For Discover and most other lenders it is the statement date.

Example: Suppose your new billing period begins on 11/30/2014 at $10 balance. Your statement closes at 12/29/2014. You make the below purchases and payments.
Code: Select all
12/1   Purchase   $500
12/2   Purchase   $600
12/20   Payment      $1000

No other activities in this period. Then, your balance reported will be $110. From the credit report, it is impossible to find out you have had $1110 balance or have made what amount of purchases.
Citi Forward Visa $5000 10/2012 | American Express Blue Cash Everyday $8000 2/2014 | Discover it $7000 5/2014
Chase Freedom Visa Signature $7000 6/2014 | Citi ThankYou Premier Visa Signature $5000 1/2015
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flan
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Postby flan » Wed Nov 12, 2014 7:00 pm

Mitch wrote:Curious. So, are you saying, keeping a $0 Balance (non use of the card) would be bad? However, using more than 30% of a credit limit (even if you pay it off in full) is also bad? I don't plan to carry any sort of balance whatsoever.

Also - If I pay off any balance, in the middle of a billing cycle, would it be shown that I purchased something, and paid it off, on my credit report? Would it also show that I went over the 30% utilization?


Currently, banks only report once a month, almost always at the time the statement is cut. So only the balance on the statement is reported.

But this only matters when you're going to apply for credit. You shouldn't be doing that for six months or a year, because you've only got the one account, and a bunch of inquiries. Six months of an active account is the minimum required to generate a FICO score (and most other scores not aimed at brand new consumers), so that's to make sure you can get found and not just denied outright for insufficient history. A year will get you a longer history, and is the point at which inquiries don't count much. So for six months or a year, just use the card responsibly. Only spend what you can afford to pay back immediately, and don't worry about what the reported balances are. then, when you're ready to apply for something else, start worrying about playing the utilization game.

takeshi
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Postby takeshi » Thu Nov 13, 2014 1:22 pm

flan wrote:But this only matters when you're going to apply for credit.

That's really the other end of the spectrum from the myFICO obsession over utilization. If you want to rely on generalization then optimizing utilization (1 balance reporting at 10% or less) only matters when applying. However, utilization still matters at other times as creditors can and do SP. Short term high utilization isn't an issue but prolonged high utilization can lead to adverse action such as balance chasing and closure. Either of those will make already high utilization even worse.

flan
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Postby flan » Fri Nov 14, 2014 9:00 pm

takeshi wrote:That's really the other end of the spectrum from the myFICO obsession over utilization. If you want to rely on generalization then optimizing utilization (1 balance reporting at 10% or less) only matters when applying. However, utilization still matters at other times as creditors can and do SP. Short term high utilization isn't an issue but prolonged high utilization can lead to adverse action such as balance chasing and closure. Either of those will make already high utilization even worse.


If you've only got one account, your lender knows damn well how much you're spending. They don't need to see your reports to know that.



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