Just got my first card ever.... Advice?

[drewgrantt]

I'm 19 years old, college student (just finishing freshman year) and looking to build credit. I have no idea how to check my score, but I just applied for the discover student card and got approved. They gave me a $500 line to start, and zero APR for the first 6 months. After that, its about 21%. I have about 9K in student loans at this point, and am paying only the interest on my non-subsidized portion, which is about 5k. I live in Oklahoma.

So the question is, what is the best course of action to increase my credit score?

I'm very disciplined and motivated, and make a pretty good income given the fact that I'm a full time student and only 19.
Also, I wondered if anyone could give me the technical info on my score... like what the actual formulas are for the calculation, if that's available to consumers, and if so, what ratios are they looking for? It seems if one knew the ratios, with a little time on excel you could literally make every decision perfect - that is give them exactly what they want to see.

Looking forward to replies!

[Gigabitch]

Um, I think you got bad directions to Financial Forum. That's not what we do here. Do you have a relationship question?

[Cbrider]

It's the off topic forum though, I have seen worse, lol.

Pay it on time, every time - late payments aren't an option. Time is the only way to build it and it takes a while, but one mistake can undo a decade of work. I don't like credit cards, they have always been synonymous with trouble. I have a solid score for my age and all I did was finance motorcycles. Its a shitty deal because I could pay the bike off, but doing so doesn't help my credit score. The longer it runs, the more it affects the score, generally.

That's just scraping the surface. Credit and its inner workings are complex and don't make sense a lot of times. You really need to ask a professional or someone certified with credit related things to get solid information.

[bluesummer]

Well this is right up my alley.

I issue a lot of credit to young people, and my advice is always the same. Do NOT act like credit is 'free money'. Use it sparingly and pay it off every month on time. That way you don't pay interest AND you build your credit score. Carrying a balance will not hurt your credit, but why pay interest when you don't have to? Keep your credit limits as low as you can so you're not tempted to rack it up on junk you feel like you want but don't need. If there's something you want to buy that's expensive, pay cash. That said, you should also be putting aside a little of your pay into savings every month and NOT touching it. It looks good when you apply for credit in the future, and it gives you a cushion when large unexpected expenses come up.

Paying off your student loans on time will also help your score.....even better if you pay it off early. I believe a perfect score is 850, and the majority of the population doesn't have it. If you're in the high 700's that's pretty good. It takes a while to build it up to that.....years. You don't automatically get a good score for paying your stuff off on time, you have to do that for a long time and build it up. My credit's near perfect, but it took me almost five years to get it there. A couple of late payments will make it drop like a stone.

[IndiReloaded]

You don't automatically get a good score for paying your stuff off on time, you have to do that for a long time and build it up. My credit's near perfect, but it took me almost five years to get it there. A couple of late payments will make it drop like a stone.

Ha, we used to late pay stuff randomly before automatic payments. It was never by a lot, but if we were busy it might have been a couple weeks before we got around to it. It never affected our credit, the bank was always happy to lend far more than we needed.

I'd like to know more about what factors go into those scores (I have no idea what ours are--never bothered to check), but it must be more than just payment history. Or is that just important for younger adults?

[bluesummer]

Factors......

Payment schedules. Your credit bureau will report every single time you are 30 days, 60 days, or 90+ days late for every credit product you have, and how many times they were late each of those time periods. Anything over 30 days is bad. You will usually get a little wiggle room with 30 days.

They also track how much credit you have been issued. If you have 10 credit cards with $10K limits that you were given without a check and you really can't afford it, you will get flagged.

Your score drops every time there is an inquiry on your credit. Most people don't realize that cell phone companies do credit checks on you when you sign a cell phone contract, some property rental places do it as well.

If you owe the government, or if something goes to collections (like a cell phone or cable bill), it's reported. If you claim bankruptcy you're pretty much screwed for a good seven years unless you make a lot of money.

I don't like to tell people this, but you can get away with paying your credit late if it's under 30 days. It doesn't get reported. I still don't recommend it though, your bank still knows you're delinquent and might not lend to you in the future. Plus, it makes you lazy.

Credit reporting is getting faster and tied to more and more products. Banks are also getting tighter with their lending policies after this whole recession.

[dewilliams2]

Seriously I have the same exact card from a few years ago. Those things don't expire for like 7 years. Like everybody has said, don't go over your limit and pay it on time....if you do that then they really have no reason to jack your interest up other than if they want to be dicks.

But here is what I did on the same card. Keep in mind you get 5% cash back on everything you spend with it, or at least I do. I call every 6 months and they put my on a special interest rate because I've done well with the card in terms of payment history.

They give me a a 3.9% fixed interest rate for 6 months at at time. I call back every 6 months and get it renewed. With that 5% cash back bonus its quite similar to saying that I get 1.1% knocked off of everything I buy and pay no interest.

I buy my gas with it and that is it. By the end of the month I have usually spent about 150.00 on it. I pay it all back down and start over.

[dewilliams2]

Oh another thing...whatever you do try to get a fixed rate and not a variable one...that way you know what you are paying in interest so it isn't like 12% here, 28% there.

[IndiReloaded]

Factors......

Payment schedules. Your credit bureau will report every single time you are 30 days, 60 days, or 90+ days late for every credit product you have, and how many times they were late each of those time periods. Anything over 30 days is bad. You will usually get a little wiggle room with 30 days.

That explains it then. We don't fit any of that criteria and we have never contract-hopped. Who the hell needs 10 credit cards? LOL. Interesting post, thanks Blue.

[Riyko]

I learned in one of my finance classes (I just recently graduated college in finance) that with a credit card it's best not to use it unless you have that amount of cash available. A lot of people make the mistake of using a credit card, but not having that amount of money available to pay it back. When I had a credit card I would use it to purchase groceries, but I would always pay my credit card the same day i bought the groceries because I knew I had the money in my bank account (I got a credit card through my bank in Canada).

[bluesummer]

^ They shouldn't be teaching you that in university finance, they should be teaching kids that in grade twelve before they graduate and get a credit card.

I hate how uneducated people are about credit and personal finances these days. I actually volunteered for a program that goes into high school classes and teaches kids simple financial concepts, cause god knows most of them aren't learning much from their parents.

[lovesjoyajm]

I agree with blue. Overextending your finances on credit is just dumb and irresponsible.

I never saw the point in getting a credit card myself, except that I need to build good credit history if I want to buy a house or anything eventually - but I am not the type of person who is inclined to buy on credit. I use it like it's my debit card and always know how much money is in my account and available.

[IndiReloaded]

^ They shouldn't be teaching you that in university finance, they should be teaching kids that in grade twelve before they graduate and get a credit card.

I hate how uneducated people are about credit and personal finances these days. I actually volunteered for a program that goes into high school classes and teaches kids simple financial concepts, cause god knows most of them aren't learning much from their parents.

LOL, I thought that but didn't want to imply that university 'finance course' sucked. Aren't you supposed to be learning about EBITDA, COGS and all that? Besides if you are fiscally responsible, I don't think paying the card back right away is actually a good use of time. Also, I use a credit card all the time for mundane purchases; I collect huge numbers of points with it that lets me fly free around the world at least once a year.

The high school course is a good one. In my son's school (elementary!) they gave the kids a project and a small budget and they had to manage with it.

[bluesummer]

LOL, I thought that but didn't want to imply that university 'finance course' sucked. Aren't you supposed to be learning about EBITDA, COGS and all that?

Yeah, at the very least.

I have an awesome Visa, I get 3 travel points for every dollar, and they're not Aeroplan miles, it's basically cash. We pay for everything with our card, and we probably get $800 - $1000 worth of flights every year. I booked my flights to Europe last month through some travel agency, and I had 110,000 points so Visa gave me a $550 credit. Woohoo!

I feel sorry for my future kids, I'm going to be so up their ass about money and financial responsibility.

[asdfg789]

Um, I think you got bad directions to Financial Forum. That's not what we do here. Do you have a relationship question?

Hehe. I think it is a question about relationships with credit cards and banks

Sorry, i think i'm having verbal diarrhea right now. Now where are my charcoal pills ...