Am I Establishing Credit Right?

Question

Ok so basically I have a credit card, car insurance, and a cell phone. I pay off the car insurance and cell phone bill perfectly every money. Now as for the credit card(500 dollar limit), it's been pretty much maxed out every two weeks since i've got it, BUT, what I do is I pay about 60 to 90 percent of it every two weeks and max it out again and continue the cycle. I've had the credit card for about two months so far and have spent and payed off over 1,000 dollars. I always pay way over the minimum ballance, but not the full balance. I was wondering if i'm building credit the right way. Keep in mind I turned 18 in September and I am just building credit so hopefully it won't be to hard to get a car after 6 months of using my credit card that way.

Well actually there is usually a 50 or more dollar cushion because I pay 60-90 percent of my balance EVERY TWO WEEKS, not just once a month.

Answer 1

No. Do not run a balance. You must pay the entire balance off every 30 days. That will keep you from getting into the interest trap where your finance charge is most of your payment. If you keep the card paid off every month then you are getting FREE loans from the bank (by using the 0% grace period). Also - your cell phone and insurance do not count as good credit - only as bad credit if you screw up. You will need another card - I always recommend a gas card because they have low limits and are easy to keep paid. Lenders want to see you have the habit of paying your bills, but you do not get extra points for running a balance - so don't do it. In fact, having a card maxed out will lower your credit score.

Good luck and congrats on taking this seriously at a young age - You may still need a co-signor to get the car in 6 months. It takes a while to build up a credit profile, so be patient.

Answer 2

You are doing good except on your credit card. It looks bad when you keep it maxed out. This makes it look like to other creditors that you don't have control of your spending habits.Anytime you have a credit card, keep your balance to half or a little less then half of your credit limit. People don't understand that there are more factors to building good credit and a high score then paying your bills on time. Get your balance down and keep paying like you have been paying and your scores will go up quickly.

Also, one of the other writers said something about getting the balance down to zero twice a year. This incorrect. In fact having zero balances and accounts with no activity can hurt you. You have to have active credit to build good credit. Some people will also tell you that you need to pay the full balance off every month. If you are paying the minimum payment or the minimum plus a little extra if you want to, then you will be fine. Try not to get more then 2 or 3 credit cards and keep them at half the limit or less and you will do great. You're getting a good start with your credit. Keep it up!

Answer 3

Paying your bills on time will definitely boost your score.
The longer you keep your credit card, the higher your score will be.
Pay off your credit card if you can. You're losing money on interest by keeping a balance.
Also, the percentage of your available credit that you currently owe counts against you, for example, if you have a 500 limit, and $100 balance, that is better than a $500 limit with a $450 balance. By running it up each month, you risk the credit agencies having a record of a high balance.
A big part of getting a loan with little credit history(sorry, despite your noble efforts 6 months is little) is a down payment. If you can save up 10% of the price, that tells the lender that you can afford to make the monthly payments.
Also, if you don't have a long job history, you will probably need a cosigner. Good Luck!

Answer 4

I agree with the others who have warned against maxing out your card; this does have an adverse affect on your credit. Another strategy for building credit is this: go to your bank and open a passbook savings account. Speak with a banker and ask the lowest dollar amount loan that they offer. When you have saved this amount, talk with the banker about making a loan for that amount, using your savings account as collateral. Tell the banker that you are trying to establish credit. Turn the passbook over to the bank, take the loan check that they give you and use it to open a checking account at another bank. DO NOT SPEND THE MONEY!!!! Set up automatic payments from this account to pay off the loan. It would be a good idea to pay over the amount of the scheduled monthly payments so that you in fact pay the loan off EARLY. You will end up with a good credit rating from a bank, and bank credit is the best credit to have. When you are done, repeat the process at another bank. In the meantime, you will be maintaining the checking account, which you will use ONLY to pay your loans. Use a totally separate checking account for your regular use. Hope this helps.

Answer 5

sounds about right. You can pay it in full every month also without any problem. Next thing that will happen is they will offer you a higher limit. Then you'll know you're on the right track. Check out the interest rate your getting. It might be real high.
If you're going to buy a car see if the insurance company you use offers loans. Also if you work at a place with a credit union, check there for a loan rate. They will be glad to have you if you work for one of their companies.

Answer 6

If you keep the card in good standing, ask them to raise the credit limit but do not charge more to it, so it's not maxed out so often. That will help.

Otherwise, just keep paying the bills, and the credit score will be good. Check your scores at least once a year to make sure that identity theft beast isn't on your back.

Answer 7

You are doing everything mostly correctly ... but you will want to refrain from "maxing" out your card. New credit grantors will look at your available credit, versus the amount you are authorized for. If you have no credit available, then your risk factor goes up.
Check with your bank about increasing your $500 to, say, $1000, then DON'T charge over $500.
Good for you for being conscientious about your credit. You will need it all your life.

Answer 8

no. you must make a zero balance at least 2 times a year.