Engagement Ring Purchase

[disneysteve]

I can tell you from personal experience that carrying a balance on a CC can indeed increase your FICO

I want to clarify this. You don't need to "carry" a balance. You need to "have" a balance. These are not the same things. Here's why.

Let's say that in a typical month, my CC charges total $3,000. My billing cycle runs from the 1st of the month to the 30th of the month. My payment is due on the 20th of the following month. Even though I pay my bill in full each and every month, my account never shows a zero balance. By the time I make my November payment, for example, I've already charged an additional $1,500-$2,000 to the account. No matter what day of the month the credit bureau checks, there is always a balance.

So you don't need to carry over a balance from month to month if you are using your card regularly.

[jIM_Ohio]

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.

My wife's ring coubled in value within 2-3 years. Platinum cost shot through roof (tripled in cost) so her 5k ring is now worth 10k+.

I asked her to downsize it and allow me to invest the difference. That did not go over well.

[sweeps]

My wife's ring coubled in value within 2-3 years. Platinum cost shot through roof (tripled in cost) so her 5k ring is now worth 10k+.

I asked her to downsize it and allow me to invest the difference. That did not go over well.

LOL

[FrugalFish]

With all due respect to Disneysteve, I can tell you that my score went up when there was an ongoing balance being carried. We always have a balance going that is paid in full every month, but our scores were over 800 when we actually had a balance that carried over month to month. I'm no expert on this, all I can tell you is that this was how it worked out for us. My understanding is that the FICO model looks at, and rewards, how one properly manages an ongoing debt. Again, I'm no expert on this. Check myfico.com and you may be able to find more information.

In our case we had about $30K of available credit on 3 separate CCs. For the better part of a year we carried around $2K at any given time. I don't recall what the minimum payment was, but we always paid at least $100-$200.

Of course, I have a friend who has a bankruptcy only about 5 years in her past and she claims to have a FICO over 800. Either she's lying, or the FICO model is really arbitrary- from what I've seen, nothing would surprise me, so don't take my experience as the way to a high FICO. Maybe it was just a fluke...

[disneysteve]

With all due respect to Disneysteve, I can tell you that my score went up when there was an ongoing balance being carried.

In our case we had about $30K of available credit on 3 separate CCs. For the better part of a year we carried around $2K at any given time.

FICO is a snapshot of your financial and credit situation at one moment in time. If, at that moment, you have a balance of 2K on your CC, that's what gets recorded. Is doesn't matter if you have carried that balance for a month, a year, or a day. It also doesn't matter if you have been making minimum payments or if you pay it off in full the very next day because your credit report doesn't record any of that information. All it reveals is credit limit, current balance, if you are current on your payments and if you've made late payments.

FrugalFish - The situation you describe wasn't a fluke. It was a reflection of the activity on your cards at that time. We always pay our CC bills in full every month and have FICO scores around 800. But, as I explained above, we always show a balance of $1,500-3,000 on our cards depending on what day of the month they check. If you (general you) use your card infrequently and sometimes have a zero balance on your account, that could lower your score.

[am_vanquish]

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.

Okay, so I applied for an AmEx (Blue) card for this very reason about a week ago. I planned to use it seldom and only as a way to "thicken" my credit file. I

Sounded smart to me ... then I get the card offer today. The credit line is OUTRAGEOUSLY big (over $10k, for a college student making minimum wage part-time), which scared me. I wasn't expecting such a big line of credit, and I'm worried that activating the card will significantly damage my 750 score (which I like). Also, if I don't activate it, how will that affect my score. The goal is to strengthen my credit over the next 18-24 months for a home purchase.

[Coleroo]

I agree with disney steve - you don't have to carry your balance month to month to have a balance reflected on your credit report...it just depends on the time of month your bank makes its report to the credit bureau in question. if you have a balance of 2k on dec 15, it gets reported that day as 2k..if you pay it off completely on the 16th, then charge something else for 2k on january 14 and its reported again on january 15, your balance will not reflect a dip to zero and then back up. it will only show that current day's balance... 2k. that's why its important to be careful with balance transfers if you're going for a bigger loan at the same time - you could end up showing double your true balance (old balance on card #1 and new balance on card #2) which can hurt your monthly fico.


AMVanquish - you're score is already great. 750 is outrageous even for a thick credit file. after around 730-750 or so banks dont look so much at you credit report as they do your assets. you can pretty much get top of the line with anything above the first quarter of 700.

Do not get so focused on your FICO.... a good bank does not just look at your credit report nor your score - but they take you you as a whole... your personal assets, your employment record, etc. I dont think one credit account will hurt your chances to get a mortgage from somewhere one day - especially at 750. Any good broker can find you a great deal if you know what you want.

I personally would suggest NOT going for a credit purchase...especially since it might put a slight temptation there for you to "break the bank" and get a more expensive ring that matches up to your credit line... ....but that's just me. if you are set on going for credit, i would say go for a 0% for 12 months card (usually easy to come by for anyone with a fico over 700!) and store your "ring money" in non-touchable seperate high interest savings account.... THEN, set up an automatic minimum payment (or perhaps a little more than minimum) from the savings to the credit card. after 11 months, pay off your balance with the remaining money. in the meantime do NOT put any more purchases on the card and do NOT touch the savings account. Also, do not purchase a ring that costs more than 50% of your total card limit! utilization ratios (how high your available line is versus how much you have used) play a big factor in determining your FICO.