Hello everyone, I'm just getting started building my credit over the next three years before I want to go for a mortgage. I've started with a few VISA/MC like FutureCard and Capitol One and Orchard Bank. I've been told that if I pay off my balance in full each month before the grace period, that this is NOT building good credit. Do I really need to carry over a balance and only pay partial payments in order to show building credit over the years? I'm terribly uncomfotable owing, especially with such high interest rates. I prefer paying cash, but I'm now realizing the necessity of good credit records for a mortgage in the future. Can someone tell me if I can pay off my balances in full each month on every card and still come out with good scoring? If not, how would you recommend that I handle this? Also, with cards that charge a monthly "participation fee" does that count as a balance if I don't use the card that month? Thank you, Michele
RE: paying off balances in ful As a mortgage broker I can tell you that most lenders require at least 3 open lines of credit. It doesn't matter if there is a balance as long as the accounts are open. If you want a good interest rate you will want to make sure that if you do carry a balance that you make your payments on time every month.
RE: paying off balances in ful If your credit reports show that you can charge a specific amount and pay if off, that is developing a credit history and helping your score. However, you need to order a copy of your credit report from each CRA to see how the credit card companies are reporting. Some companies will report your high balance for each month even though you pay your balance in full( I know Capital One does this) and some will not report at all if you do not carry a balance. If your credit card company reports your high balance, then paying your balance in full each month should be ok if you prefer this. I'm not an expert so if anyone else has any suggestions, please chime in. Hopes this helps some Michele!
RE: paying off balances in ful Paying your balances in full is a good habit. I know some here say that carrying balances may lead to faster crdit limit increases but I am not so sure. I always pay my balance in full each month and my limits are more than I think I could ever use. In my opinion nothing shows a bank your financial stregth than charging a few thousand and just cutting a check at the end of the month to pay it off. They may notget rich off of you but they will surely stand in line and beg you to borrow more. The old saying goes that when you don't need to borrow money then it is easy to get!
RE: paying off balances in ful I most certainly agree! I have never carried a balance, and although my credit history is relatively short, I still carry very nice prime cards with high limits.
RE: paying off balances in ful I agree, but I have built my credit to over $150,000 in personal lines alone. I have done both, paid in full and carried a balance. There are advantages to both methods. The most important thing to keep in mind is to lower your credit costs to the minimum. Exercising my credit has brought me lower rates and higher limits for years. Profit from the experience. http://www.creditsense.com
