Credit Options

[Jb1210a]

Hey guys, giving a quick update on my current situation that I posted back in October, and with that, I want to ask a question about improving my credit score.

My financial situation was tight as my income barely overcame my expenses on a month to month basis so as was suggested by this board, I started picking up shifts at my old job to make ends meet and to buy necessary essentials (A bed for instance). Since then, with essentials bought and paid for, I've been making an effort to be smart about my money since I haven't had time to work at the restaurant with the holidays and my travel schedule. My credit score (according to Credit Karma) took a hit last month as I am very close to the threshhold on my limit on my one credit card. I know that my score is affected by the use of available credit, so I know I need to pay this down. With the holidays approaching however, I won't be able to pay anymore than thr $50 I've been paying (which is 20 more than the minimum) but I really want to improve my score.

So my question is, if I apply for a credit card with a low balance (something like Orchard Bank) and keep a very minimal balance on it, will that help improve the threshhold? Should I even bother applying for it and just work on paying off my current one? According to Credit Karma, my score is 575 so I assume I should just forget about it, I just wanted to ask first to be sure this was a bad idea before I went and applied.

Thanks in advance!

[bjl584]

I wouldn't be concerned about my credit score. I would be concerned about getting your credit card paid off. Your score will fix itself. Opening up more lines of credit won't fix your overall situation.

Why do the approaching holidays have anything to do with your ability to pay down your debts? Don't make the mistake of buying gifts for people if you can't afford it. You aren't obligated to go into debt further just because it's the holidays. If you can't afford it, then you can't afford it.

[disneysteve]

If you are nearly maxed out on the card you have, the last thing you need is another credit card.

Why are you so concerned about your credit score? I'd suggest that you focus your attention on your finances and the credit score will improve with time as your situation improves.

[Jb1210a]

I'm concerned since it's something I've had a problem fixing my entire adult life and I want to learn now to make it work. My other concern is that (as I mentioned in my other thread) that my car is on it's last legs and I don't want to get screwed with a bad interest rate in the even that I HAVE to buy a new car. Making sound financial decisions is my new mantra and I intend to be successful at it, which is why I'm asking you guys, you definitely have the know-how. Thanks for the confirmation!

Oh yeah, and just one more question, once this credit card is effectively handled, when is the appropriate time to get another line of credit? What score is a safe score to obtain before I apply?

[bjl584]

Originally Posted by Jb1210a

I'm concerned since it's something I've had a problem fixing my entire adult life and I want to learn now to make it work. My other concern is that (as I mentioned in my other thread) that my car is on it's last legs and I don't want to get screwed with a bad interest rate in the even that I HAVE to buy a new car. Making sound financial decisions is my new mantra and I intend to be successful at it, which is why I'm asking you guys, you definitely have the know-how. Thanks for the confirmation!

Oh yeah, and just one more question, once this credit card is effectively handled, when is the appropriate time to get another line of credit? What score is a safe score to obtain before I apply?

I wouldn't worry about opening up another card right now, period. But a "good" score to get an optimal interest rate would probably be anything over 700.

Just focus on getting your current card paid down. How much do you owe? What is your current interest rate?

Do you have any savings at all for a replacement car? If you must finance a replacement car it isn't the end of the world. Just make sure that your monthly payment isn't more than 10% of your monthly take home and that the term of the loan isn't more than 36 months. That rule applies regardless of interest rate. That guideline will give you your pricerange for a different car.

[disneysteve]

Originally Posted by Jb1210a

when is the appropriate time to get another line of credit? What score is a safe score to obtain before I apply?

Of course, the higher your credit score before you take a new loan, the better your rate will be but I think you are focusing on the wrong things. Rather than being concerned with when you can take on more debt, work on cleaning up your finances so that you don't have to take on more debt. Slash your expenses so that you can get the credit card paid off and start putting money aside for that next car. Buy something that you can afford with cash, or with the smallest loan you can get away with. If you do need to take a car loan, keep the expenses at the minimum and pay off that loan as soon as you can.

Remember that the recommendation for car loans is no more than 3 years with a payment of no more than 10% of your monthly income.

[Jb1210a]

Thanks for the input, I pretty much assumed that would be the answer, though you never know. My limit on that card is 1250 and I have 1200 tied up (I had it much lower but serious life changes made the use of a credit card my only option at the time) I also pay $50/month on it.

[JoshuaHeckathorn]

Originally Posted by Jb1210a

I'm concerned since it's something I've had a problem fixing my entire adult life and I want to learn now to make it work. My other concern is that (as I mentioned in my other thread) that my car is on it's last legs and I don't want to get screwed with a bad interest rate in the even that I HAVE to buy a new car. Making sound financial decisions is my new mantra and I intend to be successful at it, which is why I'm asking you guys, you definitely have the know-how. Thanks for the confirmation!

Oh yeah, and just one more question, once this credit card is effectively handled, when is the appropriate time to get another line of credit? What score is a safe score to obtain before I apply?

I think it's good that you're concerned about improving your credit scores, but I agree with the others that you're not going to fix the problem by simply applying for another credit card.

The positive thing you have going here is that you already have a open credit card. That's more than a lot of people have to work with these days. Focus all your attention on cutting expenses, increasing income, and paying down your existing credit card balance to zero. Once you get there, call your credit issuer and request a credit limit increase too. You can dramatically improve your scores by simply paying off your balance and increasing your total available credit.

Once you get your FICO scores into the "fair credit" range (650-699), then you may want to think about getting a better rewards card that you can use to build additional positive payment history while racking up some points as well.

[JoshuaHeckathorn]

Originally Posted by Jb1210a

Thanks for the input, I pretty much assumed that would be the answer, though you never know. My limit on that card is 1250 and I have 1200 tied up (I had it much lower but serious life changes made the use of a credit card my only option at the time) I also pay $50/month on it.

That's killing your credit utilization ratio. Focus all your attention on paying that balance down as fast as possible and your scores will dramatically improve.