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Discussion in 'Credit Talk' started by F.F.M, Apr 15, 2001.
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First of all, the difference between the secured and the unsecured cards is that with the secured cards you are paying interest for the use of your own money. That seldom makes sense, or at least it never has to me. I suppose that there may be some circumstances where it might make sense, i just have never been able to think of any.
Any credit card that you can lay your hands on can be used very effectively to build good credit. All you have to do is to be certain that you can always pay your bill in full at the end of each manner and on or before the due date.
The more cards you have, up to a reasonable number, that you keep always paid in full and in a timely fashion will build you good credit over a period of time.
There really are no other magic formulas that I know of.
You can play a "loan game" using savings accounts to secure loans from banks to get a start if you have to, but the end result, although it works, does not result in all that great of a credit reference.
Re: Establishing Credit
Certain cards are poorly suited for establishing credit. Some subprime banks will receive your payments but credit them late or not at all. You need an honest bank that won't ruin your credit.
Also, very high interest rates or annual fees can make it hard to pay off a card. Most of your payment goes to fees and interest, and your balance never goes down. This hurts your utilization ratio, and therefore your credit score.
Small retail and gasoline cards without annual fees can help you build credit in an inexpensive way. As long as they report to the credit agencies, that is. Chevron, Exxon, Mobil, Target, and Macy's are good possibilities. You probably need at least one bank card first, perhaps a secured card. But one is all you are likely to need.
Collecting a bunch of costly subprime bankcards is a poor way to build your credit. Any one of First Consumers, Capital One, or Aria/Providian is all the bank credit you need for your first year or two. Then you can start to get real bank cards like Chase or Citibank at normal interest rates, with no annual fees.
The statement that "any credit card that you can lay your hands on can be used very effectively to build good
credit" is laughably false, for reasons I have already mentioned. However, whichever cards you choose to accept, you do need to make at least the minimum payment on time every month. More than the minimum would be even better. For a credit card that allows extended payments, paying the full balance every month is unnecessary. You simply need to keep your total debt and your monthly interest charges from getting too high.