Help me with my credit card

[Anonymous]

I was finally approved of a credit card, after always getting denied for having no credit history, with a limit of 500 dollars. How do I start building credit and maintain good credit? Please advise me on how much I should spend, what I should spend it on, when should I pay it back and how much I should pay back. Thank you.

[Anonymous]

It shouldn't matter what you spend it on. If I were you, I would just use it a little for the first several months and only up to the amount you could pay off in full. The best credit histories are those with on-time payments and not going up to the full amount available. Please do not start running a balance so that you have to pay interest!!! Good luck!

[Anonymous]

Anonymous wrote:It shouldn't matter what you spend it on. If I were you, I would just use it a little for the first several months and only up to the amount you could pay off in full. The best credit histories are those with on-time payments and not going up to the full amount available. Please do not start running a balance so that you have to pay interest!!! Good luck!

Op here. Thanks! So you are suggesting that I always pay off in full?

[Anonymous]

You MUST always pay it off in full, unless you want to have real trouble come your way. We no longer use credit cards but if you are determined to, just charge one or two expenses each month - something predictable like the cable bill or some other regular, reoccurring expense, so you can budget for it. Then pay it off in full every month without being late.

Use cash or debit cards for things like groceries, eating out, entertainment, etc. so you can keep a budget and stick to it. With credit cards, it's just way too easy to spend more than you intended.

FWIW, I think this is a dangerous road. Be very careful. So many people have charged their way into serious debt, and all they have to show for it is a history of dinners out, movies, and things they wish they hadn't bought. Be wary. Good luck OP.

[Anonymous]

Anonymous wrote:You MUST always pay it off in full, unless you want to have real trouble come your way. We no longer use credit cards but if you are determined to, just charge one or two expenses each month - something predictable like the cable bill or some other regular, reoccurring expense, so you can budget for it. Then pay it off in full every month without being late.

Use cash or debit cards for things like groceries, eating out, entertainment, etc. so you can keep a budget and stick to it. With credit cards, it's just way too easy to spend more than you intended.

FWIW, I think this is a dangerous road. Be very careful. So many people have charged their way into serious debt, and all they have to show for it is a history of dinners out, movies, and things they wish they hadn't bought. Be wary. Good luck OP.

Op here. I appreciate this advice very much. As of now, I only use it to fill up the gas tank about twice a month and pay it off in full. May I ask you though, what do you do to build your credit? Mind you, I have nothing in my name. Not a car, not a house, etc.

[Anonymous]

Set up online debit for at least about $50 per month so even if you forget to pay it on time at least the minimum will always be paid and you won't be late.

[Anonymous]

If you want to build up your credit score, never let the balance on the card go to more than about 20 percent of the credit limit, which in your case would be about $100. Lenders like to see people who have credit but don't use it all. They get worried if you run your card up to your credit limit. Pay it off in full each month to avoid fees and interest.

[Anonymous]

If your limit is $500, the best way to start to establish an excellent credit profile is to (1) use your card every month, (2) ONLY charge 25% of your total available limit every month max or less, AND (3) pay your card off in full, on time, every month.

(1) is necessary for your credit company to report to the credit reporting agencies monthly/as often as possible. (2) is necessary for all creditors to see that you are responsible with your credit and don't charge (or overcharge) to the hilt as soon as you are afforded the opportunity. (3) is necessary to avoid ruining your credit rating and, equally importantly, to avoid financially idiotic mistakes like paying late fees and paying credit card-level interest rates on monthly balances you carry forward.

Never think of your credit card as a loan. Never charge more than you have. Set up automatic pay from your checking account so you ensure you always pay on time. After you do that, STILL check your account online and check your monthly statements to make sure there are no incorrect charges/fees, and that your payments are being credited to your account.

If you charge responsibly and stay with your means, after several months to maybe a year, you should be offered the opportunity to increase your credit limit, which will in turn positively affect your rating. If they don't offer it, you can call and ask them if you qualify for a limit increase without running a consumer-requested credit check. But if you do get an increase, always continue to follow (1)-(3) above!!

Last, now that you have this card, focus on building a very positive credit history using it responsibly and savvily. Do not go out and continue to apply for credit cards or loans for as long as possible. The more credit you apply for, the more often creditors will have to pull and check your credit rating, and these consumer-requested credit applications ding your credit score, so you may undo some of the good you'll be doing by using the credit you do have responsibly.

[Anonymous]

Pay it off ON TIME and in full.

[Anonymous]

Anonymous wrote:If your limit is $500, the best way to start to establish an excellent credit profile is to (1) use your card every month, (2) ONLY charge 25% of your total available limit every month max or less, AND (3) pay your card off in full, on time, every month.

(1) is necessary for your credit company to report to the credit reporting agencies monthly/as often as possible. (2) is necessary for all creditors to see that you are responsible with your credit and don't charge (or overcharge) to the hilt as soon as you are afforded the opportunity. (3) is necessary to avoid ruining your credit rating and, equally importantly, to avoid financially idiotic mistakes like paying late fees and paying credit card-level interest rates on monthly balances you carry forward.

Never think of your credit card as a loan. Never charge more than you have. Set up automatic pay from your checking account so you ensure you always pay on time. After you do that, STILL check your account online and check your monthly statements to make sure there are no incorrect charges/fees, and that your payments are being credited to your account.

If you charge responsibly and stay with your means, after several months to maybe a year, you should be offered the opportunity to increase your credit limit, which will in turn positively affect your rating. If they don't offer it, you can call and ask them if you qualify for a limit increase without running a consumer-requested credit check. But if you do get an increase, always continue to follow (1)-(3) above!!

Last, now that you have this card, focus on building a very positive credit history using it responsibly and savvily. Do not go out and continue to apply for credit cards or loans for as long as possible. The more credit you apply for, the more often creditors will have to pull and check your credit rating, and these consumer-requested credit applications ding your credit score, so you may undo some of the good you'll be doing by using the credit you do have responsibly.

OP here. Very helpful response, thank you so much!

[Anonymous]

Anonymous wrote:

Anonymous wrote:You MUST always pay it off in full, unless you want to have real trouble come your way. We no longer use credit cards but if you are determined to, just charge one or two expenses each month - something predictable like the cable bill or some other regular, reoccurring expense, so you can budget for it. Then pay it off in full every month without being late.

Use cash or debit cards for things like groceries, eating out, entertainment, etc. so you can keep a budget and stick to it. With credit cards, it's just way too easy to spend more than you intended.

FWIW, I think this is a dangerous road. Be very careful. So many people have charged their way into serious debt, and all they have to show for it is a history of dinners out, movies, and things they wish they hadn't bought. Be wary. Good luck OP.

Op here. I appreciate this advice very much. As of now, I only use it to fill up the gas tank about twice a month and pay it off in full. May I ask you though, what do you do to build your credit? Mind you, I have nothing in my name. Not a car, not a house, etc.

Hey OP, I'm the person who posted this. I don't worry about my credit score - it's just a measure of how much money you borrow, not how much money you have. I don't put any stock in it (and I've purchased five houses in the last 12 years). As a landlord and don't put any stock in it either - if a tenant showed up with a score of 0, I'd be happy to rent to them. I look for bankruptcies, foreclosures, and criminal record.

I admire your desire to be more financially savvy. Please check out DaveRamsey.com for some great advice on money and finances in general. I follow his advice about 98%. Ignore the Evangelical tilt and read it for the financial info - it's worth it, I promise. Good luck to you OP!