What Is The Fastest Way To Build Credit?

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Haloman800
 
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What Is The Fastest Way To Build Credit?

Postby Haloman800 » Tue Sep 17, 2013 11:07 pm

Hi, I recently turned 18 and was approved for a Platinum credit card. I applied for it solely to build credit (I eventually want to take out a home loan).

What's the fastest way to build credit? I was told paying a little above the minimum will build faster than paying it all off at once, and in fact doing the latter will hurt my credit score, is this true?

^ If so, how often should I pay above the minimum, the same day every month, or X number of days from every charge? That could get confusing..

And are there any other ways to build credit besides a credit card?

Thanks everyone.


Robrus1
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Postby Robrus1 » Tue Sep 17, 2013 11:22 pm

Haloman800 wrote:What's the fastest way to build credit?[/B] I was told paying a little above the minimum will build faster than paying it all off at once, and in fact doing the latter will hurt my credit score, is this true?



Hi, that's not true. Pay it off to avoid paying interest. Don't pay the minimum, always pay it off if you can. The best way to do it is to find out what day your statement prints and pay all of it off except for maybe $10 or $20. That way your statement will show and report that that's all you charged and all you owe, then pay that off before the due date. If this is your only card, that will help keep your utilization % low and will help when you eventually apply for another card/loan etc. As far as other ways to build credit, you could take out a small personal loan and not use the money for anything and pay it back over several months. After 12 months you may want to look at getting another credit card as well. Whatever you do, NEVER pay late. Hope this helps. Cheers.
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Haloman800
 
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Postby Haloman800 » Wed Sep 18, 2013 12:50 am

@Robrus, so you're saying to 1. Find out which day statement prints 2. Pay of all but $10-20 and 3. Pay the remainder ($10-20) before the due date?

If my statement printed on the 15th and the bill was due on the 20th & my balance was $100, I should pay $80 on the 15th and $20 on the 19th?

^^That would be more efficient at building credit than paying it off 100% as soon as it was charged?

Thank you very much for your helpful information.

takeshi
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Postby takeshi » Wed Sep 18, 2013 10:45 am

There's really no quick way to do it. It takes time so don't fixate on speed.

Read up on credit scoring so you understand what factors affect your credit and how they impact your credit. In a nutshell, it comes down to:

Payment history
Utilization
Average age of accounts
Number of accounts
Derogs
Inquiries, etc

There's no quick way to build payment history or average age of accounts. AmEx backdating can help a bit with AAoA but that also takes time and if you want to take advantage of AmEx backdating then you want to start building a relationship with them as soon as possible.

You can manage your utilization to keep it under 30% as is generally recommended but if you want to maximize scoring you'll want to keep it under 10% and above 0.

Diversity also matters. All else being equal, a person with one or several credit cards won't be looked on as favorably as a person with credit cards, auto loan, mortgage, student loans, etc.

It's really a bit much to expect to have respondents in a thread explain everything about credit to you but we're certainly happy to answer specific questions. You will, however, need to do some reading up on your own as well.

Haloman800 wrote:I was told paying a little above the minimum will build faster than paying it all off at once, and in fact doing the latter will hurt my credit score, is this true?

Nope. Again, read up and understand how scoring works. The minimum isn't really relevant. It's utilization that matters. What you're saying sounds like a skewed take on the recommendation to keep utilization above 0.

I'd also recommend not paying slightly more than the minimum as carrying a balance and accruing interest doesn't really help your credit. Let your balances report as needed and pay in full to avoid interest.

flan
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Postby flan » Wed Sep 18, 2013 6:09 pm

Haloman800 wrote:@Robrus, so you're saying to 1. Find out which day statement prints 2. Pay of all but $10-20 and 3. Pay the remainder ($10-20) before the due date?

If my statement printed on the 15th and the bill was due on the 20th & my balance was $100, I should pay $80 on the 15th and $20 on the 19th?

^^That would be more efficient at building credit than paying it off 100% as soon as it was charged?

Thank you very much for your helpful information.


If your statement cuts on the 15th, and is due on the 6th of the following month, he's saying "pay $80 on or before the 14th" and pay the statement balance before the due date. Also, note that your due date is fixed, but the date the statement is generated can change, depending on the length of the month.

The only reason to pay it off as soon as you make charges would be if it's a super lousy card with no interest free grace period, or if the credit limit is very low, and you can spend that much easily.

Remember that other people only see what the credit card company reports to the credit bureaus. That's almost always the statement balance. Another creditor can't see that you spent $500, paid it all off the next day, spent $30,000 the day after that, and paid $29,990 the day after that, leaving a balance when the statement cuts of $10. They just see the $10. Your credit card company can see that, and they may consider that when deciding to give you a credit limit increase, or if you apply for a different card or loan with them.

Really, though, if you're not planning to apply for another loan or card, just use the card, making sure you can pay the bill in full, and pay it when you get the statement. When you get ready for another application, then you can worry about utilization to increase your score.

Robrus1
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Postby Robrus1 » Thu Sep 19, 2013 6:15 pm

flan wrote:If your statement cuts on the 15th, and is due on the 6th of the following month, he's saying "pay $80 on or before the 14th" and pay the statement balance before the due date. Also, note that your due date is fixed, but the date the statement is generated can change, depending on the length of the month.

The only reason to pay it off as soon as you make charges would be if it's a super lousy card with no interest free grace period, or if the credit limit is very low, and you can spend that much easily.

Remember that other people only see what the credit card company reports to the credit bureaus. That's almost always the statement balance. Another creditor can't see that you spent $500, paid it all off the next day, spent $30,000 the day after that, and paid $29,990 the day after that, leaving a balance when the statement cuts of $10. They just see the $10. Your credit card company can see that, and they may consider that when deciding to give you a credit limit increase, or if you apply for a different card or loan with them.

Really, though, if you're not planning to apply for another loan or card, just use the card, making sure you can pay the bill in full, and pay it when you get the statement. When you get ready for another application, then you can worry about utilization to increase your score.


+1. Yeah regarding utilization, it's not really an issue that you pay off most of the balance before the statement prints until you're looking to apply for another card/loan etc. I would only worry about that a month or two before you gear up for something else. Until then, it doesn't really matter as long as it's paid on time. If you want to pay your balance in full when the statement prints and before the due date, that's fine, if you want to charge something and pay it off, that's fine too. There's really not a "fast" way to do it, just don't pay late and you'll be fine.
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Ikarus
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Postby Ikarus » Fri Sep 20, 2013 10:14 am

With that in mind...

I'm about to apply for my next round of cards. All cards are paid to $0, except my CitiForward, which carries a $1500 of $4000 balance. (I bought a laptop and the 0% intro APR just expired and I'd like to do a balance transfer to a new card.)

Will that balance hurt me in the eyes of new creditors?
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DoingHomework
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Postby DoingHomework » Fri Sep 20, 2013 2:19 pm

The most important thing to remember when building credit is that it is all about your long term history. It takes time to build a history. One screw up can hurt you for many years. But any positives you do are simply expected and have to be repeated every month in order to matter.

Never pay late. Never spend a dime on a credit card that you do not already have the cash to pay off. Always pay off the balance every month to save on interest.

That business about carrying a small balance is a lie that will cost you a lot of money.

flan
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Postby flan » Fri Sep 20, 2013 6:35 pm

DoingHomework wrote:That business about carrying a small balance is a lie that will cost you a lot of money.


No one here has suggested carrying a balance. They've suggested letting a balance report. Big difference. Any credit card worth having has a grace period, which lets you not pay interest until some period of time (21 or 28 days are typical) after the statement cuts. One of my cards will have its statement cut on Monday, and the due date is oct 20th. I could max the card out tonight, and as long as I paid it before the 20th, I owe no interest. If I wait until next tuesday to spend that, I have nearly two months to pay it, interest free.

There are crap cards from third rate sub prime lenders that have no grace period, but unless you have really, really crap credit you can do better.



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