Credit don'ts?

[Reediculous]

I have a couple questions for anybody that knows more than me about credit......and that can't be hard! I have listened to my friends for years, and just never really, paid that much attention. I pretty much pay my car and credit cards on time, and i don't have anything in collections. My credit seems to be ok, anything i have applied for i have gotten, interest rate my have been a little high but i got it. I plan on buying a house someday, so i figured why not post my questions here!

1. When is the right time to cancel a credit card if you are not using it? I heard if you cancel it will hurt you!

2. Whats the best way to pay a card? For example, if i buy gas with my visa card and i spend 30$, when the bill comes should i pay it all off, or just half, or what?

3. I really just use cards for emergencies now. how many cards should one really have?

4. Is there anyway to build credit without using credit cards, or will you always need to use them?

5. Any other tips?

Thanks in advance guys!


Tyree

[Freakie_frog]

1. When is the right time to cancel a credit card if you are not using it? I heard if you cancel it will hurt you!

Your credit score is based on many things. The Fed changed the way banks and lenders look at your debit to income ratio. They no longer look at the amount of money you owe but rather the amount of revolving debit you have access to. So if you have 5 credit cards with 3000.00 limits each, lenders will see that as you having 15000.00 in revolving debit. They then take that and figure you score on a 10-15% basis so even if all 5 cards have no balance they will still figure you owe between 2250.00 and 5000.00

If your not using it close it

2. Whats the best way to pay a card? For example, if i buy gas with my visa card and i spend 30$, when the bill comes should i pay it all off, or just half, or what?

If your trying to build credit or rebuild your credit pay off the owed balance every billing cycle. The credit reporting agencies like Equefax look at your use of the credit as much as the misuse. Responsible use of credit is as helpfull and misuse is hurtful

3. I really just use cards for emergencies now. how many cards should one really have?

Idealy 0. In a perfect world you should have a cash emergency fund. But not everyone can swing that so I'd say one card that if maxed out could be paid off in 3-6 months would work just fine

4. Is there anyway to build credit without using credit cards, or will you always need to use them?

Yes despite what the people that call during dinner will tell you, you can build credit with out a credit card that you pay an ass load of interest on! Cell phones, car loans, small personal loans with a cosigner, apartments, utility's all these can build credit. Credit can build quickly and crash just as quickly

5. Any other tips?
Thanks in advance guys!
Tyree

Before you go down the credit road know the difference between a need and a want.

[Brimstone111888]

I am still young so I am no expert, but Ill share a few things I have learned.

Paying everything on time is a must. Always have manageable debt. What I mean is don't spend what you don't have(obviously if its an emergency you can)

On canceling cards. If you have a lot of open credit it will become hard for you to get a bank loan. If you can borrow $200,000 in open credit a bank is going to be hesitant to give you a $200,000 dollar loan, since you can already get one without asking the bank. I wouldn't think canceling is bad. I could be wrong, but this is what a professor has told me.

It is always good to be consistently building credit. So always having debt is ok.

I'm not sure about building credit any other way.

Also when paying cards I heard that you never pay the minimum.

[elevatethis]

1. When is the right time to cancel a credit card if you are not using it? I heard if you cancel it will hurt you!

I don't know if it hurts you directly, but I do know that the total amount of available, unutilized credit can affect your ability to get additional lines of credit. Freakie Ed explained it better above.

2. Whats the best way to pay a card? For example, if i buy gas with my visa card and i spend 30$, when the bill comes should i pay it all off, or just half, or what?

In full, every month. Paying interest on a credit card is literally flushing money down the toilet.

3. I really just use cards for emergencies now. how many cards should one really have?

Your credit score takes a small hit every time you apply for new credit. Having multiple cards is probably not the best idea for most people...choose one or two...I have one with a low limit/low interest rate for everyday type stuff and another with rewards/cash back set up for bigger purchases.

4. Is there anyway to build credit without using credit cards, or will you always need to use them?

Auto loans, students loans, etc, are all things that will build your credit if you pay consistantly and on-time. Credit cards help too but aren't necessary. I still think its a good idea to use them if you can manage it - getting a card that pays cash back for things you would have bought anyway is free money.

5. Any other tips?

Don't charge anything that you eat, drink, or burn. Things like groceries, restaurant meals, alcohol, cigarettes, gas....nothing sucks more than having a huge bill for a bunch of stuff that you have nothing to show for.

[Freakie_frog]

Brad did bring up one good point that I didn't mention. Every time you apply for credit (card regardless of type ie GAP or plain ole visa, Bank loan, apartment, cell phone ect) it reports on your credit even if you don't get the card or loan, and stays for 6-12 months depending on what type of credit you are applying for. To many of these "false positives" and your score will take a nose dive.

Also not every reporting company( anyone that reports to a federal credit group) updates their credit reports like they should so if you do have a credit problem and get it worked out and the company doesn't update their Equefax reports like they should, that issue could follow you for months or even years. You can get a free copy of your credit score and any thing one it from your bank.

[littleindiangirl]

I recommend reading "The young, fabulous and broke." By Suze Orman. It's geared towards college kids and up, but it lays everything out so damn well. She really knows what she's talking about, and she gives easy to understand lowdowns on the whole credit card scene, buying a car, buying the first house. Just oodles of information that I would have never known. I highly recommend it, its such an easy read, and again, very informative and just a wealth of knowledge.

[Reediculous]

Your credit score is based on many things. The Fed changed the way banks and lenders look at your debit to income ratio. They no longer look at the amount of money you owe but rather the amount of revolving debit you have access to. So if you have 5 credit cards with 3000.00 limits each, lenders will see that as you having 15000.00 in revolving debit. They then take that and figure you score on a 10-15% basis so even if all 5 cards have no balance they will still figure you owe between 2250.00 and 5000.00

If your not using it close it



If your trying to build credit or rebuild your credit pay off the owed balance every billing cycle. The credit reporting agencies like Equefax look at your use of the credit as much as the misuse. Responsible use of credit is as helpfull and misuse is hurtful



Idealy 0. In a perfect world you should have a cash emergency fund. But not everyone can swing that so I'd say one card that if maxed out could be paid off in 3-6 months would work just fine


Yes despite what the people that call during dinner will tell you, you can build credit with out a credit card that you pay an ass load of interest on! Cell phones, car loans, small personal loans with a cosigner, apartments, utility's all these can build credit. Credit can build quickly and crash just as quickly



Before you go down the credit road know the difference between a need and a want.

Thanks man for this break down! the last part is crucial! know the difference between a need and want! boy is that true!

Thanks again man!

[Reediculous]

I recommend reading "The young, fabulous and broke." By Suze Orman. It's geared towards college kids and up, but it lays everything out so damn well. She really knows what she's talking about, and she gives easy to understand lowdowns on the whole credit card scene, buying a car, buying the first house. Just oodles of information that I would have never known. I highly recommend it, its such an easy read, and again, very informative and just a wealth of knowledge.

I'll check that out! thank you

[Reediculous]

Thanks Brad!

[Nate]

I love listening to advice from Suze Orman..she freakin rocks!

And, sorry Ed, she totally contradicts you...

She says that you do not close credit cards, even if you don't use them because of your credit to debt ratio.

It's a good thing to have a LOT of credit, but very low debt. So, if you have 5 credit cards open, then you have more credit...if you have a zero balance on all of them, then you have a big credit to debt ratio, which is a good thing.