My First Credit Card, Newbie Questions...

[indelibo]

I'm a student and have been using a debit card for about 2 years. My first credit card came in today and I have a $700 credit limit. What is the best strategy to improve my credit score as fast as possible? Obviously, I should never run into credit card debt. But should I pay all my monthly balance at once at some specific time or should I pay immediately after each credit card purchase? How often and how much should I spend with my credit card each month? I am not a big money spender and my parents give me cash anyway. I can very easily not use my credit card at all but I'm guessing that I should use somewhere between 0 and 50% of the credit each month just to increase my credit score? So should I pay in full or pay a little bit more than the minimun payment? I have heard both are good, but for 2 different things: one, if you always pay in full you get an excelent statement on your credit report from banks, it will also improve your credit score or give you the best possible; two, if you dont pay in full your credit card limit is likely to increase as a convenience to the bank because they see possibly gain in money from you. I have also heard that it is good to have less than 50% of the total limit charged to the credit card at a time. But what if you have more? How badly will it affect you? or will it affect you at all?

[34saving]

I guess I might not be thinking about this enough, but my approach would be: Use your card to buy things that you would buy anyway and be certain not to exceed the credit limit. Pay it off completely when the bill comes and never ever ever pay late. If you want a higher credit limit ask for one in a few months and you'll probably get it. The key to a high fico score is more about NOT doing bad things than doing "good" things. BTW, this has been my approach to credit my whole life and I was able to get a mortgage right out of college. Now I'm 31 and have credit that's good enough to do . . . .everything I've ever tried to make it do . . .

[locolorenzo24]

I'm a student and have been using a debit card for about 2 years. My first credit card came in today and I have a $700 credit limit. What is the best strategy to improve my credit score as fast as possible? Obviously, I should never run into credit card debt. But should I pay all my monthly balance at once at some specific time or should I pay immediately after each credit card purchase? How often and how much should I spend with my credit card each month? I am not a big money spender and my parents give me cash anyway. I can very easily not use my credit card at all but I'm guessing that I should use somewhere between 0 and 50% of the credit each month just to increase my credit score? So should I pay in full or pay a little bit more than the minimun payment? I have heard both are good, but for 2 different things: one, if you always pay in full you get an excelent statement on your credit report from banks, it will also improve your credit score or give you the best possible; two, if you dont pay in full your credit card limit is likely to increase as a convenience to the bank because they see possibly gain in money from you. I have also heard that it is good to have less than 50% of the total limit charged to the credit card at a time. But what if you have more? How badly will it affect you? or will it affect you at all?

Hmmm...How familar does this sound? College, first week, credit card offers swarming the campus, and freebies all around. "Of course I'll cancel them all!" I thought. Why go into debt?" The thing is...as a student, you will see others with nicer things/clothes/belongings/etc. and feel that you deserve them to. Or the paycheck will be wrong/short/etc. You will charge to make up for the shortfall, due to you not having a budget. And when one maxes, you may try to transfer it to get an interest break. Then, you keep going farther and farther, and find yourself 5 years later still in debt as you are only 3500, but only make 1500 a month. With this story in the background, here's what I wished I would have known, and a few answers that have come around through learning.

1. You always need to pay on time and in full. PERIOD!

2. Ask yourself why you are worried about improving your credit score. Is it to get a big loan, or is it just to make things better on later in your life?

3. Make a budget with your money. It's never too early to make a plan. That's what I wish I would have done. Sometimes you look back and go, "where's my money??"

4. Use your credit card wisely and pay it off as soon as you get the bill.

5. Have access to cash for emergencies...I mean cash YOU can get your hands on, not in the mail, not the ATM, etc. Sometimes, Life happens on a Sunday.

6. Eat out less, use your dining plan more. (off-campus, plan a menu for each week. I'm still trying to do this one!)

7. Limit increases will occur as you prove you're a customer who pays on time and in full. Do you want to give money to someone paying 5% of what she owes you, or someone who always pays you back every month? Most of the time, you won't even have to ask. But don't fall into the trap of "I have more credit, so I can spend more."

8. Remember, college is a time to explore. But it can also be a time where you fall off the path into quicksand and need to have someone throw you a rope. Follow the guides and learn, be reckless and learn...either way.

[Ima saver]

Good advice above. Make small charges and pay them off each month in full. Do not charge 50% of what you are allowed. That is how your fico score is determined. How much debt to how much you are allowed is what they look at. So charge $20 a month and pay it off. Don't be tempted to use it for anything.

[PRICEPLUS]

In order to make a good credit score for my DD I have included her on a CC acount. My FICO will be her FICO in the early going. When she gets her own card and establishes herself I will cancel the card I gave her. Good credit means a great deal when you are starting out!