Credit Card Question...Please Assist?

Question

I am attempting to build my credit. Let me know if this method is OK, or if you recommend something else:

I pay recurring charges (cell phone bill, hosting fees, electric bill, etc) with my credit card - then pay off my credit card bill with my debit card/checking account. I have the money to pay off the recurring bills when they arrive, but thought if a credit card is used (rather than a debit card) it would at least show credit activity.

Is this an OK method to building credit?

Another thing: I am going to take out a secured loan from a bank in the amount of $3500. I already have a CD in that amount, and will use the CD to secure the loan. Once I have the $3500 from the bank, I will hold it (not spend it) and pay it back to the bank in small increments to build a solid rapport with them. Has anyone tried similar?

Thanks

Answer 1

The ONLY thing that I see as a slight negative is that you'll end up paying interest on the secured loan and that is an outflow of money that you could better utilize...BUT if you're planning on a quick payback to minimize the interest paid out, you've got a pretty good idea on your hands.

Using your debit card to pay your credit card is not a bad thing. Debit cards do not show on your credit report since the intention on a debit card is the ability to access the money in your checking account. And since you're on time with your payments, your credit is going in the right direction.

You could open a revolving store account and instead of using your credit card to purchase the shirt, use the store card. Store cards might not carry the weight of a Visa or Master Card in purchasing power, but they still show an open account with a great payment history. The negative is that, unless you use the card on a semi-regular basis, your report won't show anything but an open credit line.

Answer 2

You are on the right track. Revolving credit is highly factored in the FICO scoring model, so try to obtain 1 or 2 more revolving accounts...like a store charge card. Target is generally fair, in fact, if you have a major cc you can usually get a card from them. Be sure to keep your credit -to- credit limit ratio low on any card as this is factored into the score as well.

While the secured loan is ok, it will usually show up as "secured" on your credit report and this won't help you as much as an unsecured account will.

Answer 3

Borrowing money in order to re-invest it is always a bad and risky idea.

Your idea on the credit card is what I've recommended many times. Work at trying to get the credit limit booted up to around $5-10k. Too high of a limit may actually hurt your score.

Answer 4

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Answer 5

Good for you......but don't feel you need to keep the secured loan for as long as the terms.....If it's a three year loan, pay it back in one.....You can always pay back early.....

Answer 6

yes dearie you're on the right track

all the best
keep up