2 myths on credit cards?

[Extrememustang]

Ok I have heard 2 things about whats the best to do. One is have a credit card and buy something and pay it off at the end of the month. THEN I have heard keep 33% on there so on a $1000 card make sure you always have a balance of 300 something on there. Now I do know if you know someone with a cc and they have had it a LONG time and pay on time get them to make u a user on the account. Tell them dont give me a card just let me be a user so then ALL of their credit history on that card goes on your credit now.

[AirMax95]

I know that the latter part is correct. You have to make sure that the credt lender reports for both of you and not just the primary user. Also, make sure that they dont stop paying, lol!

[Extrememustang]

lol

[Jaimecbr900]

#1. They're not myths.

#2. You misunderstood what I told you.

There are multiple possible scenarios and they all affect your credit differently.

Scenario #1. You get a credit card and you charge on it and pay the balance in full at the end of the month. This scenario will only "build" your credit IF the creditor reports the balance and then subsequently you paying it off. Most creditors don't necessarily do that because their reporting cycles are beyond their billing cycles. In other words, some creditors do not report anything to the credit bureaus until AFTER your billing cycle has come and gone. So if you have a balance one day and then none the next, by the time they report there is nothing to report. Follow?

Scenario #2. Same as above. Some creditors will keep increasing your credit limit when you pay everything off at the end of the month. This sometimes helps your score because part of your score is derived from available balance to actual balance ratio. So the more UNUSED amount of credit you have compared to what you owe, the higher your score will be.

Scenario #3. The 33% rule is very much a reality. As stated above, the scoring of your credit comes in part from that ratio of high credit to actual balance. If that ratio exceeds 33%, you are NOT getting your FULL credit EVEN IF you pay your bills on time. The way it works is that according to their credit score model if you are over 33% of your available credit limit they consider that account to be "over extended" or "maxed out". You actually can get negative scoring if all or most of your accounts are like this. So you can technically be a stellar payer, yet have a relatively low credit score if you are maxed out on everything. THAT is how the 33% rule comes into effect.

So in conclusion, credit scores can sometimes be deceiving. Someone may pay all their bills perfectly on time everytime, yet still have a lower score than someone that merely has a lot of unused open credit. Is it fair? Most of the time, yes. I've seen where someone with very new credit has a stellar score, yet I wouldn't lend them a dime. Why? Because they haven't proven themselves a worthy borrower. Anyone can open an account and pay on it good for a month. Can you do it for a year? 10 yrs? THAT is the difference and that is how when you go get REAL loans like a mortgage it really weighs heavily and most lenders have a minimum 12 mo tradeline requirement.

So if you want to "build" credit, get credit you can easily manage. Credit card, gas cards, and even small loans are good for this. Buy something, remember the 33% rule, and pay it back on time EVERYTIME and your credit will be "built" in no time. Whatever you do DON'T get over your head and screw it up. It's exponentially easier to build it up than it is to REbuild it up.

[Extrememustang]

That I have had gas card, small loans,furntiure loans,car loans,motorcycle loans,credit cards. I have paid well on all of them. Then after a divorce in 03 I didnt know my ex was using my name. SO I checked my credit recently and I saw some charge offs,. but what really make me wonder is she had some stuff that she put in my name. SHe would make the payments on them for awhile then just quit. So Im trying to dispute some stuff which isnt a easy process. I went from VERY high beacon to like a 570. I know want anthoer motorcycle but Im not going to goto the motorcycle store with this beacon. So I did get approved for a new 30k honda ridgeline and got one of those credit cards with a $300 limit but they go ahead and charge $150 on there. Just trying to dispute stuff and rebuild my credit, I also went to Farmers furniture and they said they would give me credit of 2k. So that also will rebuild my credit.

[Turbo04]

those cards where they charge you like 150 to open it are horrible. I paid mine off about 2 months ago and closed it. I had it for about a year and paid ungodly amounts of interest on it, not to mention the 150 plus monthly fees for nothing. After all was said and done it went from a 300 limit to 1200 and no way in hell I was going to put any more money on that POS card.

[Jaimecbr900]

That I have had gas card, small loans,furntiure loans,car loans,motorcycle loans,credit cards. I have paid well on all of them. Then after a divorce in 03 I didnt know my ex was using my name. SO I checked my credit recently and I saw some charge offs,. but what really make me wonder is she had some stuff that she put in my name. SHe would make the payments on them for awhile then just quit. So Im trying to dispute some stuff which isnt a easy process. I went from VERY high beacon to like a 570. I know want anthoer motorcycle but Im not going to goto the motorcycle store with this beacon. So I did get approved for a new 30k honda ridgeline and got one of those credit cards with a $300 limit but they go ahead and charge $150 on there. Just trying to dispute stuff and rebuild my credit, I also went to Farmers furniture and they said they would give me credit of 2k. So that also will rebuild my credit.

Sounds like you're doing it correctly. Make sure you follow up and follow thru with the disputed accounts. Once you get those taken off, it should be smooth sailing from there.

[Extrememustang]

those cards where they charge you like 150 to open it are horrible. I paid mine off about 2 months ago and closed it. I had it for about a year and paid ungodly amounts of interest on it, not to mention the 150 plus monthly fees for nothing. After all was said and done it went from a 300 limit to 1200 and no way in hell I was going to put any more money on that POS card.

Yea I think its like $150 a year and the interest is 19.99%. I did see that they are reporting on my credit so thats good.

[phongt12]

If you open up a credit account, how long should you wait to cancel it? Let's take a Best Buy or Target Credit Card for instance. I've heard that if you sign up for the card to reap the benefits, like say 10% off all purchases, and then pay off your balance and cancel the account, will that lower your credit score?

[tony]

Don't cancel the account, the longer you have a good paying history the better your score is. I think lenders want to see that you consistently pay your bills on time over a extended period.. I doubt paying on a card for two months then closing it tells very much.

[Extrememustang]

Yea like I bought a car and paid it off in 5 months once and that fucked me. Also keep one regualr card and one dept card if you like. Like a capital one and a best buy. Best buy has good credit cards becasue there always having some deal going on, unlike Fry's credit card where the % keeps going up, think 22% right now and they do not have any deals.

[Jaimecbr900]

Don't cancel the account, the longer you have a good paying history the better your score is. I think lenders want to see that you consistently pay your bills on time over a extended period.. I doubt paying on a card for two months then closing it tells very much.

Exactly.

I said that earlier up above. Most lenders of any substantial credit, i.e. loans, mortgages, etc., want to see long term stability. Anyone can get a card and pay on it for a month or two. The real question is can you pay for it for 10 yrs?

Length of open accounts is one of the other things that factor in your credit score.

[Extrememustang]

So if you have a chargeoff like a credit card or a ultlty bill and down the road it gets paid off does it get taken off your credit? Also I disputed something that wasnt mine that was put on there from 04, It said would ocme off in 2010. Now I disputed it and they said it is mine which I KNOW its not says since re verfied will come off in 2014!!! Wtf man.

[OUTLAW]

yo extreme u live n dekalb round stone mountain side. could have sworn i saw tht mustang on memorial dr couple days ago

[Extrememustang]

Nope