Can't Decide What My First Credit Card Should Be

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carlito.bvb09
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Re: Can't Decide What My First Credit Card Should Be

Postby carlito.bvb09 » Mon Feb 15, 2016 5:27 pm

Vattené wrote:
carlito.bvb09 wrote:This is what had me confused. I was under the impression that utilization was what percent of credit was used between two billing cycles, and that paying off your balance before it gets reported has no effect on utilization. Thanks for clearing this up.

You are welcome. You were correct in that it's the percentage of credit used, but that's calculated by dividing the outstanding balance by the total credit limit. The outstanding balance is just what the lender will report to the CRAs monthly (again, most commonly the amount shown on your statement).

Utilization on individual accounts as well as overall utilization are factored, too. So down the road you may have a few accounts, but only be using one card. Your overall utilization (total balances divided by total credit limits) may be good, but a high utilization on one card could still be bad. It's not worth worrying too much over utilization IMO because it's a factor with no "memory." Once your outstanding balances are updated the next month, your credit scores will be updated based on those amounts. Unlike having a 30-day late payment, which will drag you down for years as it stays on your reports, utilization is just a snapshot in time. Since you are building and will likely get a low credit limit starting out, you may find it is worthwhile to manipulate your utilization (it's easy to look like you're near maxed out even if you pay in full if you only have a $1000 CL), but honestly if you won't be making any credit applications for the next month it won't have any real impact on you.

Good luck with the app! Let us know how it goes once you decide.


So really the trick is to pay off most, but not all of my balance a couple days before my bill arrives. Then pay off the remaining as soon as I get my bill. That way, it will show me at low, but no 0 utilization.


Kevin86475391
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Re: Can't Decide What My First Credit Card Should Be

Postby Kevin86475391 » Mon Feb 15, 2016 5:35 pm

Vattené wrote:Discover would be my first choice (I have been very pleased with Discover, so I may be biased here). Start earning rewards right away! IMO acceptance really shouldn't be an issue. International acceptance is a different story, so if you plan on using this card abroad a lot that might change things, but in the US I really don't think it will be a problem unless you know there are a lot of smaller mom&pop type places you purchase from that already don't take Discover. I used Discover as my sole credit card for a while and I could probably count on one hand the number of places I couldn't use it, in which case it wasn't really a big deal to use my debit card. It comes down to personal preference, but practically speaking having a Discover as your only credit card won't be too limiting.

I've never had a Capital One and I don't think it would be a bad choice, but I would rather go for something that would be more useful to me now. Discover is also good about growing with you. Anecdotes aside, Discover's customer service is clearly rated higher than Capital One's, if that's important to you.

I'd avoid Wells Fargo primarily because of the Annual Fee. With responsible use, your credit will soon place you in a position of having your pick of any prime card you want, and you won't want to be saddled with an account you have to pay for and that doesn't do anything for you. You can get better products now, so I don't see any value in settling for something worse just in the hopes that a banking relationship will do something for you later on.

Regarding utilization, for scoring purposes having a high utilization means you are using a lot of the credit that's been extended to you, which translates to risk for lenders. Even if you are paying in full it still looks like you are nearly maxed out, just because it is the mathematical result of the formula that determines your credit scores. This is why people recommend 30% utilization (and as mentioned 10% is even better, so long as it's not 0 lower is better). You don't need to, but if you want to you can manipulate the utilization that's reported on you by making a payment before the outstanding balance gets reported to the CRAs. The statement date is usually, though not necessarily, when balances are reported. So if you start out with a $500 secured card and have made $450 in purchases coming up on the close of your billing cycle, rather than let that $450 report (showing 90% utilization), you could make a payment of $400 and let $50 report (showing 10% utilization).

Making a small purchase once a month will build your credit just as fast. You'll still have payment history building up and account aging. There's no downside of doing this credit-wise, but many (around here, at least) like to use credit for nearly everything for rewards and for fraud protection reasons.


I wholeheartedly agree on every point.

Discover would by far be my pick of the three. I've had my Discover card for 6 or 7 years now and I'm barely counting on two hands the number of places that didn't take it. I guess it does depend on your location and the types of places you do business, but I really haven't seen an acceptance issue. Also, definitely of the three they have the best rewards and best customer service, and IMO are most likely to grow with you.

Wells Fargo would also be my last choice of the three. As stated, you can get a better card now that will have more use and won't cost you money down the road.

Capital One...well I personally don't like them and did not find their customer service or products very satisfactory, but that's my own bias. I'd still go with their secured card over Wells Fargo though.

Regarding utilization the main thing to focus on is how much reports. When you get the card make sure you find out the reporting date. For utilization purposes it won't matter whether you carry a balance of $500 all month and pay it down to $50 right before it reports so that only the $50 reports, versus only using $50 the entire month and letting that report.

In general make sure to pay in full every month to avoid interest charges and always pay on time.

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Vattené
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Re: Can't Decide What My First Credit Card Should Be

Postby Vattené » Mon Feb 15, 2016 6:00 pm

carlito.bvb09 wrote:So really the trick is to pay off most, but not all of my balance a couple days before my bill arrives. Then pay off the remaining as soon as I get my bill. That way, it will show me at low, but no 0 utilization.

You don't necessarily have to pay the remainder off as soon as the statement cuts. The most important thing is paying the full amount of the bill before the next month's statement (to avoid interest charges) and making payments before the due date (to avoid late payments reporting, though generally that won't occur until you're 30 days late).

If you're manipulating your utilization, and you take my example above, you could pay the $400 before the statement cuts. You'll report 10% utilization to CRAs and you'll get a statement for $50. You could pay $50 right way - no harm in it - or you could just wait until your next statement cutoff approaches. Say you've got $300 outstanding at this point. If you pay $250 before the due date (pay by the due date at this point, NOT the end of the cycle, to keep your account in good standing) you'll bring the utilization down to 10% again. You'll pay the $50 statement balance in full plus current outstanding charges for this cycle. And yes, if you bother manipulating utilization, you want something reporting. Bringing it down to $0, while adding to your positive payment history, will look like you aren't using the account for utilization measuring purposes, which won't help your score. Hopefully that wasn't too confusing!
-Vattené
FICO-8:
EX - 805 (2/17) | TU - 787 (2/17)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now

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Re: Can't Decide What My First Credit Card Should Be

Postby SUMMER78 » Tue Feb 16, 2016 7:39 am

Capital One was my first cc. (Non secured) Never had a problem with them. Pro is that they're very generous with their CLI. I would get an increase every six months if I was in good behavior.

Going with your bank would be a good option.

If it were me I'd probably go with discover. The only con for me is that it's not as widely accepted.

carlito.bvb09
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Re: Can't Decide What My First Credit Card Should Be

Postby carlito.bvb09 » Tue Feb 16, 2016 9:05 pm

So at this point I'm definitely leaning towards the Discover secured card. I'll probably apply within the next day or so. It also looks like they have a $50 sign-up bonus if you refer a new customer. If this applies to the secured card, would someone mind sending me a referral link?

carlito.bvb09
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Re: Can't Decide What My First Credit Card Should Be

Postby carlito.bvb09 » Thu Feb 18, 2016 10:58 am

I ended up applying for the Discover secured card and was approved! Wow. What a feeling. I was approved just like that. Thank you to everyone for all your tips and suggestions. I found out that the $50 bonus doesn't apply to the secured card, so that's unfortunate, but not really a big deal. I look forward to my future of responsible credit card use!

Kevin86475391
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Re: Can't Decide What My First Credit Card Should Be

Postby Kevin86475391 » Thu Feb 18, 2016 11:46 am

carlito.bvb09 wrote:I ended up applying for the Discover secured card and was approved! Wow. What a feeling. I was approved just like that. Thank you to everyone for all your tips and suggestions. I found out that the $50 bonus doesn't apply to the secured card, so that's unfortunate, but not really a big deal. I look forward to my future of responsible credit card use!

Congrats on the approval and the beginning of your credit journey! :cheers:

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Re: Can't Decide What My First Credit Card Should Be

Postby kcm7 » Thu Feb 25, 2016 10:30 am

thom02099 wrote:One intangible that should be mentioned, anecdotal reports indicate that Wells Fargo is more willing to issue cards to folks who have an existing banking relationship with them.


I can "confirm" this anecdotally. My boyfriend and his sister both had iffy/thin credit. Both have banked with Wells Fargo for years. Both got approved for Wells Fargo's no-annual-fee cash rewards card with rather high limits ($8k).

OP, you seem to be going straight for the secured cards, and that may be best for you (only you know that). But perhaps see if Wells Fargo will give you a regular credit card. If you go to a branch, you can see if you prequalify. With a regular card, you don't have to put down a deposit or annual fee. Once your credit is good enough, you can go for a better rewards card. In other words, you may qualify for a regular card and can skip the whole secured card thing.
Cards:

-Capital One Quicksilver
-Barclaycard Arrival (no AF)
- US Bank (no rewards)
-IHG



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