Credit Card strategy to build a bit of credit?

[BradleyT]

You get the best rate on borrowed millions based on your credit.

Say you need to borrow 1.5M
@ 7% Mo = $9979.54
@ 4.5% Mo = $7600.28

So you save $2,380 per month for 30 years just because you decided to use some credit cards when you were 18.

[Cubswin]

RZ

Of course you are not dated, just your stance on credit cards.

I have spent nowhere near 20-100 times the value of my 'perks' on consumer goods, or any goods for that matter. My monthly spending on my credit card is around $1,500 and typical reward redemption for me are in the 3% range and this is for goods I am going to purchase anyways. Taking the time to educate myself and research different reward programs means an extra $50 bucks a month for me, with very little effort.

One can realize even more value from credit cards by whoring sign-up bonuses, which are a nice added bonus when selecting a new card. Why not sign up for a card, get a nice initial sign-up bonus (25k free miles for instance), no annual fee and then earn rewards for your purchases? 25k miles is worth $600 to a savvy traveler and most of us would find this a nice reward for 30 minutes of poking around fatwallet or flyertalk.

The OP stated his total line of credit is just over $1000. I think it is quite reasonable for him to wrack up 50% utilization in any given month even with paying off his bill each month. A second card will increase his total available credit, which will decrease his utilization and lead to a higher FICO.

Let's face it, 95% of us will not be able to purchase a dwelling outright (at least our first one), so we need credit. Credit cards are the only method that I know of where you can get paid to build credit history. If people are able to use their credit cards responsibility they are a huge asset. Increasing your net worth is nice and all but this will not help your credit score.

[Cubswin]

[ QUOTE ]

sorry bradley but you get to borrow millions on your income and net worth not what you did on credit cards. thats not where to put your energy.
you can increase your borrowing power a little by establishing a credit history but it will not get you far.

[/ QUOTE ]

Let's do a little experiment Ray. Im guessing your net worth is at least 100 times that of mine and your income is greater than mine. Don't pay your credit card for 6 months while I continue to pay mine on time. Let's then go searching for a 500k non-collateral loan and see who comes back with a better interest rate. We could even put money on it to make it interesting.

[Brad1970]

Subaru, if you are interested in building your credit by obtaining more credit cards just for the sake of having them, that isn't necassarily the best way, IMO. You didn't tell us much about yourself but from the tone of your post I assume you are young, still in school or recent graduate, don't have much in the way of assets or net worth. If you were older, had credit established, had a job, mortgage, etc...then your mailbox would be busting at the seams with credit card offers. You wouldn't have to ask us what's the best way to build credit. I believe that RZ was trying to steer you in that direction with his post...build yourself up thru net worth, education, job, salary, etc & the credit cards will follow. I know those things don't impact your FICO score or directly build credit but trust me, credit card companies aren't stupid & they know who their target customer is.

But, to address your questions, as the others have said use what you have & pay it off every month. Shop around for some other cards with a low limit so you won't overspend & get yourself in trouble. Consider a secured credit card or see if someone else would be willing to add you on to their credit card account as a authorized user or joint account holder. Your goal should be to limit your risk of harming your credit while building it at the same time.

[SubaruSTiMike]

I came back to this thread because I just forgot about it with school, but since it's summer I have more time to think. I apologize for making such a short post without much information on myself.

I love the idea of investing and money. Let's face it, we all and need money for life. I am trying to set up my life at a young age so I can have a good future. I care more about finance than most people I know. I want to get into investing because I truly believe that is a way into a happy future. Although I won't be investing as a job, just something I do aside from my day job. I'm a third year student in college studying to be a dentist. I have a little above average GPA and am working hard to bring it up.

The reason I asked this question is because I hear about people saying I should start building my credit young. And the key is to always pay off whatever bills I accumulate. I don't have much in terms of my name on contracts like credit cards, utility bills, or car payments. I just wanted to get a head start in this area. But thanks to your insightful post, I realize I do not need to worry about this small part of my life and concentrate on the more important things like my education and getting a good job. I've always known to look into my future and sacrifice what fun I want to have now for a better life when I'm older. That is why I want to see if there's any little thing I can with my life right now to reach my goal.

I think I'll work on saving money at this point since that is already a huge problem.

[CardMinger]

An easy way to increse your credit score quick is to have someone with good credit list you as an approved cardholder and you will get a card through them. My mom has excellent credit and she did this for me and now my credit score is in the low 800's which is extremely high for someone my age.

CM

[Sportsrmylife]

How old are you and I take it that you have never missed a payment if your score is over 800. Nice job!