Engagement Ring Purchase

[am_vanquish]

I'd like your advice!!! My girlfriend and I will be celebrating our 4-year anniversary in the next couple months. We've known for a long time that we'd spend our lives together, and since I'm graduating next summer, I'm going to propose this winter.

I take my finances very seriously. I grew up in a family that was HORRIBLE with money, which helped me realize at a very young age that I must pay close attention to my $$$. I will graduate college next summer with no student loan debts, an IRA funded entirely by my own hard work with maximum allowable contributions every year since I was a sophomore. I've got one credit card, which I use often, I pay for everything I need (mostly for the cash-back bonus).

This is where it gets tricky though. That's the only thing on my credit report. I paid cash for my car and I didn't finance my education. Therefore, my credit score sits at 750 (which is good, but I feel it could be better). When I last checked my credit score, the analysis thing said that my thin file was holding me back (only one revolving credit line), and that getting something like an installment loan and paying on it would improve my credit.

Here's the question: would financing the engagment ring help my credit score, even if I could purchase it with cash? I've got money sitting in an investment account and I recently sold some stock, so it's available. However, I think this might be a good opportunity to add to my credit report. Also, I could put the ring on my credit card, but I don't think this would help my credit score. Please provide your input, thanks!!

[sweeps]

If you can continue your good financial habits, then absolutely get a credit card. Charge a few things, but always pay the bill in full. You'll earn rewards and you'll build up your credit report. If you can buy the ring outright, that's great --- put it on the card and then pay it in full when the bill comes. You'll also get protections through your credit card you won't get by paying with cash.

[jIM_Ohio]

750 is not bad- you will get good rates, possibly best rates, on loans like mortgages in the future.

Getting a higher score does not win you much. My credit score is between 730 and 780 (depends on which agency is used) and I do not see the need to raise it (I already have a house, though).

My advice is charge the ring, then pay it off the next month on the CC. Use the cash back to take her out to eat the night you propose.

Buy a ring, get a free dinner.

Do not worry about the credit score (it can only go up a little from the additional loans, anyway, IMO).

[disneysteve]

If you can buy the ring outright, that's great --- put it on the card and then pay it in full when the ring comes. You'll also get protections through your credit card you won't get by paying with cash.

I agree. Also, if you can, make the purchase at the beginning of the billing cycle. That way you get the maximum float time on the charge and get to keep earning interest on the money while it sits in your account.

I wouldn't stress any about increasing a 750 score. It will vary from day to day and agency to agency and you are right on the cusp of the highest tier (760-850) so you really don't have much room for improvement.

[Knows Money]

If you can pay cash for the ring great, though I'm not keen on using investment funds that you can reinvest. I'll ride someone else's comment on using a credit card - if you use a credit card, you do get some additional protection for the ring.

[am_vanquish]

Thanks for the advice guys. I guess I just thought that adding something to my credit report would help it out some. I checked and my CC offers insurance on any item I purchase over $2,000 so that's another plus for using it (but the cash back will be nice!).

Should I not worry much about my "thin" credit? I only ask because I can't think of anything else that I would finance until I purchase a house and I worry that they'll find it negative that the only thing on my report is one CC account.

[disneysteve]

I can't think of anything else that I would finance until I purchase a house and I worry that they'll find it negative that the only thing on my report is one CC account.

I see nothing wrong with getting a 2nd CC as long as you always pay the bill in full each month, if that would help improve your credit prior to buying a home.

[scfr]

This isn't what you asked, but have you thought about not buying an engagement ring, and instead save the money to put towards a down payment on a house? Would your fiance-to-be be open to that? Personally, I think the engagement ring tradition is one that needs to be reconsidered. [When DH & I decided to get married, I asked him to please save his money and not buy me a ring. He went out and surprised me with one anyway, and to tell you the truth I still wish he had saved the money. It's a lovely ring and I was touched by the gesture, but it spends most of the year sitting in a safety deposit box.]

[disneysteve]

It's a lovely ring and I was touched by the gesture, but it spends most of the year sitting in a safety deposit box.

For some people, a ring really isn't a worthwhile purchase. I wouldn't have bought my wife a ring if I thought it wasn't going to get worn. I see no point in having jewelry that sits in a safe. My wife wears her ring 24/7 and has since I gave it to her in 1991. She only takes it off for bathing and dishwashing. It killed her this summer when she had hand surgery and couldn't wear her ring for almost 2 months.

So if I had to do it all over again, I'd buy her exactly what I bought her. She loves it. I love it. And to this day, she still gets comments on it.

And forget that BS about spending 3 months salary. That is a marketing promotion by the diamond folks. Spend what you feel is reasonable given your situation.

[cptacek]

My fiance bought me "last year's model" and saved 50%. I thought that was AWESOME! Of course, until he bought me that ring, I didn't really wear any jewelry (except the necklace he bought me for Christmas).

[project15]

And forget that BS about spending 3 months salary. That is a marketing promotion by the diamond folks. Spend what you feel is reasonable given your situation.

WOAH!!! I've never heard that, but it kind of disgusts me just thinking about spending that kind of money on a piece of rock and metal. I paid $1000 for my wife's ring (which she wears everyday). It's small, but it got the job done.

Oh yeah, and I financed it at 0% for the added credit score, however, it didn't seem to add much to my credit score overall since I only had one other CC at the time too. Every little bit helps though.

[LivingAlmostLarge]

I wear my ring everyday since i got it. I love it so much, I picked it out actually. Randomly we walked through a mall and I said that's what I like. I've worn it since 2002. I nearly died when I thought i lost it one day. I couldn't tell DH, and had to hide my hand.

So it's not all a waste.

[disneysteve]

WOAH!!! I've never heard that, but it kind of disgusts me just thinking about spending that kind of money on a piece of rock and metal.

From diamondtutorials.com:

"Engagement Ring Budget

Setting A Budget

An Engagement Ring spending guideline as De Beers addresses on their website is 2-3 months' salary."

[FrugalFish]

You are clearly incredible with money. Keep on keeping on and you'll be fine- as pointed out, you are already considered in the upper tier of credit scores.

I can tell you from personal experience that carrying a balance on a CC can indeed increase your FICO, but it has to be done right. You've got to have a lot of available credit, and carry a balance for a period of time that is a small percentage of that total.

At one point DH and I both had credit scores over 800. It was ultimately the result of his very long unemployment that sent them that high. It was having a lot of available credit and carrying a CC balance that was a small percentage of that amount over a period longer than a year. We always paid well more than the minimum due each month, but carried that balance and showed FICO how responsible we could be with that much open credit and in paying faithfully on what we did owe each month. We don't carry a CC balance anymore, so our FICO scores have suffered for it- I just can't stand to pay interest.

[am_vanquish]

This isn't what you asked, but have you thought about not buying an engagement ring, and instead save the money to put towards a down payment on a house? Would your fiance-to-be be open to that? Personally, I think the engagement ring tradition is one that needs to be reconsidered. [When DH & I decided to get married, I asked him to please save his money and not buy me a ring. He went out and surprised me with one anyway, and to tell you the truth I still wish he had saved the money. It's a lovely ring and I was touched by the gesture, but it spends most of the year sitting in a safety deposit box.]

The ring really is important for her. She's from a family that's accustomed to spoiling her (although she's cut back quite a bit since she's met me, and I'm very proud of her, which is why I want her to stick around with me). It's also important to me. Granted, it won't be a tremendous rock worth 3-month's salary, but it is an important symbol. Also, she is working on her nursing degree to be an emergency room nurse, so I don't want it getting banged up while she's pulling someone off a gurney, so she'll get a small, nice engagement ring with a nice wedding band.

FrugalFish, I'm curious about the balance-carrying. My father suggested getting a new CC with a "0% APR/No Interest for 12 months" offer, putting the ring on that, and paying off 90% of the balance before the first statement. That way I'd carry a 10% balance (no interest) for a while. Then pay another 5% the next month, 5% the second month and be done. Is this the "small percentage" you were talking about?