bad credit. want to earn credit with current credit card?

Question

i have bad credit. i finally got a credit card and can start earning my credit. i've been told two seperate stories regarding paying for my credit cards payments to earn those credits.

i was told the 1. if i make monthly payments and not pay my balance (although i have to pay to stupid finance charges), that's a way to earn credit. so i was told to do that for 6 months to a year and my credit will improve

the second one i was told was that i HAVE to pay my cc bills in full EVERY month in order to get better credit ratings. and also to avoid finance charges.

so which one is correct??

1. make monthly payments, have a balance, and pay finance charges?

or

2. pay my cc bills in full every month and not get charged on interests

Answer 1

You should make regular purchases, that is one you will normally pay cash for, on your credit card. Then at the end of the month pay it in full and on-time to avoid the interest charges.

What happens is that the credit card company will report your high balance for the month. So if you charge $100 they will report your balance of $100. If you pay it off and then charge $75 the next month, your balance is reported as $75. There is no way creditors will know if you made a payment of $25, or paid the 100$ balance and charged another $75.

One important factor is your utilization. So for the best help you should not be using more than 30% of your limit at any one time. That is if you have a credit limit of $1000 you don't want to use more than $300 in any one month.

Answer 2

I would get a credit card and also get set up with online banking. That way you can spend on your credit card and pay off the amount the same day. This will raise your credit rating without risking getting into debt. Another option is to get a Catalogue or store card Essentially this is all meant to be proof that you have borrowed money in the past and paid it back responsibly. If you have ever had a car loan or finance agreement you should already have a pretty good rating. As for earning interest on a credit card I have never heard of that situation. I think they just charge you if your in debit but as long as you pay within 30 days of the spend on the account you shouldn't have to pay interest.

Answer 3

Only charge what you can pay off at the end of the month. Carrying a balance is a bad habit to start and it doesn't really help your credit score.

Pay the balance in full every month. The most important thing is to pay it on time. Don't wait till the last minute to pay. Send your payment early so it will be posted before the due date.

Answer 4

I agree with OC1999.

Use your card for everyday things like food and gas being careful never to exceed 30% of your credit limit in any given month and pay in full before the due date.

This will do two things, first it will establish a payment history and second it will keep your debt to credit ratio low. These two things alone make up 65% fo your credit score.

Dont worry about a balance, the differerance between the billing date and the due date there should be a small balance for them to report to the credit bureaus and you will not have to pay interest on it.

I have done this with 2 credit cards for the last 2 years and have raised my score over 150-points.

Answer 5

I would suggest you use your cards and pay your bills on time and in full as much as possible. Occasionally have a bill get a finance charge (remember the card issuers are in this to make money and if they can't make any money off of you they will drop you. I realize that the vendors pay to accept cards but people who pay off their bills entirely every month have been dropped by their credit card companies).

The key is to keep your actual debt to maximum debt ratio low. The only way to bring up your score is to keep paying timely and hope the 7 years when things can be removed off your report goes quickly. The further back bad reports are the better your score will be.

Good luck

Answer 6

There are three credit rating agencies in the US. (Trans Union, Experian, and-I forget) All credit ratings come from one of these agencys. They have a very complicated system for rating people.

I attended a class on how the system works (but they didn't give us the detailed formula. That is a secret.)

A perfect score is 860 or something like that. There is probably no one in the world who has a perfect score.

Each application for credit counts a few points against you. Never cancell an old credit card, even If you have an old cards in your possession, even if you do not use them, count in your favor.
If you have an old bill from anyone, pay your current bills first. As these old bills get older and older, they count less and less against you. Do not get evicted, Leave on the notice to move.

Answer 7

Whoever told you to maintain a balance does not have your best interest in mind. NEVER accumulate debt on a high interest card!
pay off the balance every month- do so. Your credit will improve when they see that you pay on TIME every month. Also- the more debt you maintain, the worse your credit is.

#2 is the way to go.

Answer 8

To the best of my knowledge, only American Express requires the bill paid in full. As long as you make your payments on time, you can do the monthly payment sand have a balance. Of course it would be better if you could pay in full, if possible.

Answer 9

The best option is to activate the card and don't even use it. If you must use it charge small amounts and pay that balance in full every month. Its estimated that you lose one point off your fico score for every percent of total available credit in use.

Answer 10

if you don't pay your cards to 0 bal each month you are borrowing money at the highest rate allowed. prepaid cards help train you to only spend what you have.
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