Making CC's work for me

[bdizzle]

As of the end of March 2007 I'll be 100% out of credit card debt. It got really hairy there for a minute, but I paid it all off thank God. I told myself I'll never get in that situation again, so I'm trying to make my credit work for me. I'm going to be buying furniture in the near future, around $5000 worth, and I want to put them on my credit cards.....AFTER I have 100% of the cash saved up. I don't have any furniture as I'm only 24, so I have to buy everything; living room, dining room, bedroom, etc. My problem is all of my current cards have high interest rates. Here's the brake down:

Card - Interest Rate/Credit Limit
Circuit City Visa - 19.74%/$2,500.00 (dont qualify for a lower rate)
Macy's Visa - 24.9%/$7,500.00 (will drop to 21% in 2 months)
Target Visa 19.24% var/$700.00 (have to wait til May for a lower rate)

I don't have the best credit score in the world (684) but using a FICO simulator it says if i pay off my credit cards my score could possibly go up to 724. I don't know how accurate those simulators are, but I figured I'd throw it out there. So should I try to apply for a low interest rate card and risk getting denied because of my low score, or should i just grin and bear it with the cards I have and the high rates?

I'm not planning on buying the furniture for the at least 6 months, so my score could go up a lot in that time, but I figured it'd be smart to get started now.

Thanks for any help

[jIM_Ohio]

Originally Posted by bdizzle

As of the end of March 2007 I'll be 100% out of credit card debt. It got really hairy there for a minute, but I paid it all off thank God. I told myself I'll never get in that situation again, so I'm trying to make my credit work for me. I'm going to be buying furniture in the near future, around $5000 worth, and I want to put them on my credit cards.....AFTER I have 100% of the cash saved up. I don't have any furniture as I'm only 24, so I have to buy everything; living room, dining room, bedroom, etc. My problem is all of my current cards have high interest rates. Here's the brake down:

Card - Interest Rate/Credit Limit
Circuit City Visa - 19.74%/$2,500.00 (dont qualify for a lower rate)
Macy's Visa - 24.9%/$7,500.00 (will drop to 21% in 2 months)
Target Visa 19.24% var/$700.00 (have to wait til May for a lower rate)

I don't have the best credit score in the world (684) but using a FICO simulator it says if i pay off my credit cards my score could possibly go up to 724. I don't know how accurate those simulators are, but I figured I'd throw it out there. So should I try to apply for a low interest rate card and risk getting denied because of my low score, or should i just grin and bear it with the cards I have and the high rates?

I'm not planning on buying the furniture for the at least 6 months, so my score could go up a lot in that time, but I figured it'd be smart to get started now.

Thanks for any help

How soon will you have the 5k saved for the furniture? If you pay it off the first month, they could charge 100% interest and it would not matter.

If cards are paid off, no harm in getting a new card... choose cards carefully.

We went furniture shopping and found what we wanted. 3 years later it went on sale (7k bedroom set for under 4k), and we bought it. "Need" is all relative. We did not want to buy the first 3 years because we were in a condo and looking to move... once we moved, we waited for sale and got what we wanted.

Did the same with our couches (who wouldla thought the coaches and bedroom set we wanted would go on sale within 2 months of each other). We had 17k cash saved up and got the furniture we "needed".

[bdizzle]

Originally Posted by jIM_Ohio

How soon will you have the 5k saved for the furniture? If you pay it off the first month, they could charge 100% interest and it would not matter.

If cards are paid off, no harm in getting a new card... choose cards carefully.

We went furniture shopping and found what we wanted. 3 years later it went on sale (7k bedroom set for under 4k), and we bought it. "Need" is all relative. We did not want to buy the first 3 years because we were in a condo and looking to move... once we moved, we waited for sale and got what we wanted.

Did the same with our couches (who wouldla thought the coaches and bedroom set we wanted would go on sale within 2 months of each other). We had 17k cash saved up and got the furniture we "needed".

I'm not gonna get everything at once. So one purchase might be $2000, and the next might only be $400. I'll have all the money in probably 6-8 months. I heard that putting something on a credit card, and paying it off immediately doesn't help your credit at all. It's best to wait a few months and make a couple payments, is that true? Everything I'm planning on getting I need. Like I said, I don't have any furniture except for an my mattress and my brothers decade old dresser. I make a little over 60k a year, so I can easily save up the money for the things I have to buy. I just want to make sure that whatever route I go, it's most beneficial to my FICO score and credit history. I did the math on an interest rate of 19.45% and if I pay it off in 4 payment's I'll pay $68 in interest, and even less if I make the payments early each month (still too much money to give them tho).

So if you have any recommendations on how I should go about this I'm listening

[sweeps]

Originally Posted by bdizzle

I heard that putting something on a credit card, and paying it off immediately doesn't help your credit at all. It's best to wait a few months and make a couple payments, is that true?

Not true. But even if it were, it wouldn't be worth the 20-30% interest charges just to boost your score a little bit.

[jIM_Ohio]

who cares what the score is? Will you "need" MORE credit soon?

I have a score of 780 and did what I needed to. Most times card is paid off, sometimes I have to take 2 months... I do what I need, my score is a reflection of me... I did not do things on purpose to get one score or another.

I'd rather have a high net worth and low score than a low net worth with a high score. Credit isn't a game... (not implying you suggested this, just stating it) the higher score does not win anything.

I actually think showing activity each month (which is paid off) is why my score is so high. I used to CC for groceries gas and work all the time... and paid off each month.

Not having furniture isn't a huge issue. I used a twin bed the first 3 years I lived here (my wife LOVED that when she was my girlffriend). Didn't even have a couch... had granpa's old recliner that two of us sat on.

I did break down one day and get some couches... then a double bed a year later... and picked up used furniture along the way too. My suggestion is get some minimum stuff... but I would wait for sales before cashing in.

For the amount of money we saved on our family room furniture, we actually bought a whole set of leather couches for our formal living room... we have furniture in every room in our house and I know several people which have same floor plan (or smaller) houses in our neighborhood and have 1-3 empty rooms.

Why pay full price for furniture?

[pearlieq]

Personally I don't think it's worth paying a dime of interest in your position. You don't need to "buy" a credit score.

Just buy the furniture with cash or use a credit card for rewards/purchase protection and pay it off right away.

I don't know the intricacies of credit scores enough to know how paying it over a few months would change your score versus buying it and paying it off imediately. I don't think anyone knows for sure. I don't think it would really benefit you much though, and certainly not $68 worth!

[bdizzle]

Originally Posted by sweeps

Not true. But even if it were, it wouldn't be worth the 20-30% interest charges just to boost your score a little bit.

Ok that's good. I heard that from someone years ago, and honestly I don't even really remember who that person was. In that case I'll charge it to the card, then pay it off the same month.

Originally Posted by jIM_Ohio

who cares what the score is? Will you "need" MORE credit soon?

I have a score of 780 and did what I needed to. Most times card is paid off, sometimes I have to take 2 months... I do what I need, my score is a reflection of me... I did not do things on purpose to get one score or another.

I'd rather have a high net worth and low score than a low net worth with a high score. Credit isn't a game... (not implying you suggested this, just stating it) the higher score does not win anything.

I actually think showing activity each month (which is paid off) is why my score is so high. I used to CC for groceries gas and work all the time... and paid off each month.

Not having furniture isn't a huge issue. I used a twin bed the first 3 years I lived here (my wife LOVED that when she was my girlffriend). Didn't even have a couch... had granpa's old recliner that two of us sat on.

I did break down one day and get some couches... then a double bed a year later... and picked up used furniture along the way too. My suggestion is get some minimum stuff... but I would wait for sales before cashing in.

For the amount of money we saved on our family room furniture, we actually bought a whole set of leather couches for our formal living room... we have furniture in every room in our house and I know several people which have same floor plan (or smaller) houses in our neighborhood and have 1-3 empty rooms.

Why pay full price for furniture?

I care what my score is, that's why i asked the question. The reason my interest rates are so high is probably because of my low credit score. It's not about the money because right now I make enough so that I can save up for this stuff. I'm not going to buy a house for the next 3-5 years or so, but when I do I don't want to get shafted with unneccasarily high rates. The furniture I picked out is the furniture I wanted, so I don't see what the price of it has to do with anything. The price may go up, it may go down, I may change my mind and buy something totally different; but my inquiry was about finding out if applying for a new card is a good idea or not just to get a lower rate (building my score in the process). I could buy everything cash, but that wouldn't benefit my credit history at all.

I don't know what my net worth or you sleeping on a twin bed for x amount of years have to do with me trying to use my credit cards to raise my score.

Originally Posted by pearlieq

Personally I don't think it's worth paying a dime of interest in your position. You don't need to "buy" a credit score.

Just buy the furniture with cash or use a credit card for rewards/purchase protection and pay it off right away.

I don't know the intricacies of credit scores enough to know how paying it over a few months would change your score versus buying it and paying it off imediately. I don't think anyone knows for sure. I don't think it would really benefit you much though, and certainly not $68 worth!

I would buy it with cash, but I want to get my score up. Im also planning on refinancing my car loan to get a lower rate also. And a higher score would help a lot I assume.

[jIM_Ohio]

Originally Posted by bdizzle

I care what my score is, that's why i asked the question. The reason my interest rates are so high is probably because of my low credit score. It's not about the money because right now I make enough so that I can save up for this stuff. I'm not going to buy a house for the next 3-5 years or so, but when I do I don't want to get shafted with unneccasarily high rates. The furniture I picked out is the furniture I wanted, so I don't see what the price of it has to do with anything. The price may go up, it may go down, I may change my mind and buy something totally different; but my inquiry was about finding out if applying for a new card is a good idea or not just to get a lower rate (building my score in the process). I could buy everything cash, but that wouldn't benefit my credit history at all.

I don't know what my net worth or you sleeping on a twin bed for x amount of years have to do with me trying to use my credit cards to raise my score.

I did not mean to offend...

My point was when I was single, I did not need much furniture. Even after I started dating my wife and got furniture, it turned out she wanted to replace it once we found our house. I basically "overspent" on furniture the first time around and most of it became obsolete within 2 years after I bought it... sorry for not making that point directly.

The second time around we had cash and saved ourself a bundle watching for sales.

As far as credit score, the best thing which will help you is a "payment history". Charge it each month, pay it off each month. If you can do this, your score will improve. I have a 780 score in part because I would charge close to 4-10k in business travel expenses each month, my company would reimburse me, and I would pay off the balance.

If you are waiting 6 months to buy the furniture (because you are saving), price check the furniture each holiday (Easter, Memorial Day, July 4 etc...). We found a one weekend veterans day sale which saved us 2k. So that might be "time" to charge, even if not all cash is there, for example.

In the meantime by charging groceries and gas, and paying that off each month, you will be helping your credit score each month (more than one big purchase would help/hurt).

You mention 4 issues:

1) wanting/need to buy furniture
2) repairing credit score for house purchase
3) ability to save money for purchase
4) should you get new cards

1) only helps credit score "once", assuming you don't shop/spend on furniture each month

2) sounds like the real goal... so then the issue becomes create a good repayment history on the credit you have or obtain. Repayment history has to be more than one month (your friend was somewhat correct when they told you this)

3) saving money for big purchases, charging the purchase and paying it off in one month helps you... shows a repayment history that month. Continue with this technique over time and score should improve.

4) new cards help in that they give you "more credit". The issue is part of the credit score is % of available credit you use. I might be wrong on this. One more card shouldn't affect things much, 2 more probably not, but you would be entering a gray area in this regard, IMO.

[bdizzle]

Originally Posted by jIM_Ohio

I did not mean to offend...

My point was when I was single, I did not need much furniture. Even after I started dating my wife and got furniture, it turned out she wanted to replace it once we found our house. I basically "overspent" on furniture the first time around and most of it became obsolete within 2 years after I bought it... sorry for not making that point directly.

The second time around we had cash and saved ourself a bundle watching for sales.

As far as credit score, the best thing which will help you is a "payment history". Charge it each month, pay it off each month. If you can do this, your score will improve. I have a 780 score in part because I would charge close to 4-10k in business travel expenses each month, my company would reimburse me, and I would pay off the balance.

If you are waiting 6 months to buy the furniture (because you are saving), price check the furniture each holiday (Easter, Memorial Day, July 4 etc...). We found a one weekend veterans day sale which saved us 2k. So that might be "time" to charge, even if not all cash is there, for example.

In the meantime by charging groceries and gas, and paying that off each month, you will be helping your credit score each month (more than one big purchase would help/hurt).

You mention 4 issues:

1) wanting/need to buy furniture
2) repairing credit score for house purchase
3) ability to save money for purchase
4) should you get new cards

1) only helps credit score "once", assuming you don't shop/spend on furniture each month

2) sounds like the real goal... so then the issue becomes create a good repayment history on the credit you have or obtain. Repayment history has to be more than one month (your friend was somewhat correct when they told you this)

3) saving money for big purchases, charging the purchase and paying it off in one month helps you... shows a repayment history that month. Continue with this technique over time and score should improve.

4) new cards help in that they give you "more credit". The issue is part of the credit score is % of available credit you use. I might be wrong on this. One more card shouldn't affect things much, 2 more probably not, but you would be entering a gray area in this regard, IMO.

its no prob, i appreciate you're advice though. after reading your initial post about charging to cards then paying off the balance, i checked and that would allow me to have around $1200 of activity on my card each month (before food, gas, etc). I think I'll start doing that every month from now on.

[sakigt]

Frankly, in your situation, I wouldnt risk putting nearly $5000 on a credit card just to raise your score. Worst case scenario and youre looking at paying a large amount of intrest on it.

Instead, charge your gasoline to your card and pay it off monthly. Every month you pay your caard on time you get a green check mark on your score. They dont know how much the payment was, nor the fact that you arent paying any intrest on it.

Additionally if something tragic happens, you arent stuck with a $5000 credit card bill, only a $100 one or so.

[jIM_Ohio]

Originally Posted by bdizzle

its no prob, i appreciate you're advice though. after reading your initial post about charging to cards then paying off the balance, i checked and that would allow me to have around $1200 of activity on my card each month (before food, gas, etc). I think I'll start doing that every month from now on.

Your score would probably be benfitted most by finding a card with a low credit limit (say $300) and charge $200/mo on it (66% of available credit).

relative to taking a card with a $3000 limit and charging same $200 (6% of available credit).

If you see the company with $300 limit increase your limit, that means your score is improving... and I think the fact you used 66% of your limit, then paid it off, then ran it up, then paid it off helps your score out.

The increase of the limit, though, would also be assurance your credit standing is improving.


Once a year go for a large car loan (test drive) and ask them what your credit score is. The free credit reports do not tell you your score (to my understanding).

FYI- a score of 680 is not that bad.

[vsjhoc]

If you are purely interested in raising your score, the only way to do it is to have a history of paying all your bills on time.

A one-time purchase and pay-off doesn't hurt the score, but doesn't help as much as a consistently good track record. However, the track record isn't worth it financially if you are paying interest, so charge only what you can afford to pay off each month.

It's best for your score to keep your utilization under 33% of your limit -- for each card and in total.

Do not apply for credit just to get a report. You will generate another inquiry which lowers the score.

Don't obsess about the credit score. But do obsess about paying your bills on time and keeping your balances well below your limits.

[disneysteve]

Originally Posted by jIM_Ohio

Your score would probably be benfitted most by finding a card with a low credit limit (say $300) and charge $200/mo on it (66% of available credit).

Why do say that? I've always read that exceeding 30% of your available credit is a negative thing and lowers your score. Charging up to 66% of your limit, according to that, would be a bad thing.

[bdizzle]

Originally Posted by sakigt

Frankly, in your situation, I wouldnt risk putting nearly $5000 on a credit card just to raise your score. Worst case scenario and youre looking at paying a large amount of intrest on it.

Instead, charge your gasoline to your card and pay it off monthly. Every month you pay your caard on time you get a green check mark on your score. They dont know how much the payment was, nor the fact that you arent paying any intrest on it.

Additionally if something tragic happens, you arent stuck with a $5000 credit card bill, only a $100 one or so.

I'm not gonna buy it all at once, I'm gonna break it up. spend 1000 here, 400, there until i'm done. I'll have 100% of the cash saved up before I even put anything on credit, so i dont think i'd get in trouble going that route.

Originally Posted by jIM_Ohio

Your score would probably be benfitted most by finding a card with a low credit limit (say $300) and charge $200/mo on it (66% of available credit).

relative to taking a card with a $3000 limit and charging same $200 (6% of available credit).

If you see the company with $300 limit increase your limit, that means your score is improving... and I think the fact you used 66% of your limit, then paid it off, then ran it up, then paid it off helps your score out.

The increase of the limit, though, would also be assurance your credit standing is improving.


Once a year go for a large car loan (test drive) and ask them what your credit score is. The free credit reports do not tell you your score (to my understanding).

FYI- a score of 680 is not that bad.

if that's the best route to go, i'll pay all of my bills with the card with the smallest limit then, and pay the credit card off the same day.

thanks for all the advice everyone, hopefully all this stuff will help

[autoxer]

Originally Posted by bdizzle

So if you have any recommendations on how I should go about this I'm listening

You don't have to pay interest to have good credit. And you don't have to worry about what interest rate the cards are charging if you have no balance. So use your cards, pay them in full and your score will improve as long as you don't pay late.

If you really want to make the CC's work for you, then you'll use cashback cards & pay them in full. I get 5% back on all of my gasoline purchases & 1% on everything else, which ends up being a couple hundred dollars a year, that the CC pays me. I'm trying to get back all of the interest that I paid them when I ran up my cards in college.

And when you do go to buy the furniture, they will try to talk you into financing it through them, but you don't have to. I would rather use a cashback card & pay it off right away, instead of using one of their 0% for 3 months deals where they really screw you if it's not paid in full in three months.

[disneysteve]

Originally Posted by autoxer

You don't have to pay interest to have good credit. And you don't have to worry about what interest rate the cards are charging if you have no balance. So use your cards, pay them in full and your score will improve as long as you don't pay late.

My thoughts exactly. I've never carried a balance on my CCs and I have an excellent credit score. Pay your bill in full on time each month. Keep your utilization below 50% and preferrably below 30% and you'll be fine.

whatever you do, never pay full retail at a furniture store, whether with their account or not. the reason their 0% credit offers last for centuries is because there is interest built into the price. you buy the furniture, they sell your credit account at a discount (which still has profit for them because the furniture is marked up so much) and the purchasing credit agent makes the profit between the value of your account and what the furniture company sold it to them for once they collect in full. (there's no way to ever escape the interest on the purchase because it was "0%")



I got my score where it is by auto-charging around $60 a month of recurring expenses to my credit card.


The folks here recently convinced me to start using the card for everything so I have but I've learned a little lesson...with the higher regular balance I became "twitchy" and started paying the thing off pretty much once a week (I still have some deep seated credit aversion processes loose in my head.) After doing this for a while my score began to drop. It has now plummetted all the way into the 780 / 790 range


but kidding aside, the reason now listed on my "negative factors" is the absence of a balance. not an interest bearing balance but a balance at all. I've been paying off the card so frequently that when the bureaus sweep in once a month to take a peek, there's never anything on the card.

so I'm settling down on that a bit and just paying the balance when the statement closes each month.


and this has been said already but don't worry about your interest rate on the card, it shouldn't even enter into the conversation. the only exception I can think of is if you follow the mentality that you shouldn't keep any cash available and instead use the card as an e-fund and then pay it off asap when used for that purpose.


that's a choice you have to make but one I wouldn't personally feel comfortable with.



and lastly, kudos to you for even having this conversation at 24!

[jIM_Ohio]

Originally Posted by bdizzle

I'm not gonna buy it all at once, I'm gonna break it up. spend 1000 here, 400, there until i'm done. I'll have 100% of the cash saved up before I even put anything on credit, so i dont think i'd get in trouble going that route.



if that's the best route to go, i'll pay all of my bills with the card with the smallest limit then, and pay the credit card off the same day.

thanks for all the advice everyone, hopefully all this stuff will help

I knew there was a % utilization of credit which goes into the credit score... I do not know what the % is which hurts/helps.

Month over month, would using 66% of a credit line impact "final" score more than 30%? I don't know for certain... so defer to others comments in this regard.

When the "score" is calculated it looks at "available credit line" and "credit used" overall, I do not know if it examines this on an account by account basis.

I can tell you as your score improves, the low credit lines will get bumped automatically to higher limits (if you are using that card).

[disneysteve]

Originally Posted by rexdart

whatever you do, never pay full retail at a furniture store, whether with their account or not. the reason their 0% credit offers last for centuries is because there is interest built into the price.

Very true. Around here, the furniture stores advertise 0% until 2010, but if you read the fine print it says 10% discount for cash purchases. So that 0% financing isn't free at all.

[jIM_Ohio]

Originally Posted by disneysteve

Very true. Around here, the furniture stores advertise 0% until 2010, but if you read the fine print it says 10% discount for cash purchases. So that 0% financing isn't free at all.

In our case we went to stores and created a "wish list" and it's corresponding "price list".

The bedroom set was 7k "on the floor", and we got it for less than 5k. Solid oak BR set. Veterans day sale, my wife has a milatary ID (she used to live on base when she was a kid). My parents have a similar BR set which has lasted them since 1969. Great stuff.

The stereo cabinet was 3k "on the floor", and we got it for less than 2k.

The sectional listed at 4k, we got it for 2500. With the 1500 we saved, we bought another full room of furniture.

The furniture was a one day sale. The bedroom set was a veterans day sale. We went back to same store and ordered the stereo cabinet a few weeks later for a different sale.

cash for everything... and it pays to window shop a year, or 6 months... before such a big purchase.

never pay full retail price for anything.