Help Me Repair My Credit

Bump

A Chapter 7 is not a bar to getting a loan for a used car. Many creditors are eager to lend to a borrower whose prior debt is discharged. That way you can prioritize their 10.75% car loan

Don’t spend more than you can pay off each month. End of discussion.

[quote]But I have also heard it helps your credit to carry a small balance month-to-month.

I don't agree. Pay it off every month. Mine is set on autopay.

it is a common misconception that you should carry a balance, what people mean by that, is you want a balance to report.. Use the card as you have been doing. Keep the balance under 30%. when the statement is generated, pay in full so no interest.

this shows on time payments, plus usage.

Using a credit card is actually pretty straightforward and easier than the internet myths would have you believe.

Pay your bill once a month; no more, no less. Wait until the statement posts, then pay the full statement balance on or just before the due date, just like a utility bill. Don't pay less or you'll pay interest. Don't pay the total balance since this means you're paying extra money early and losing potential savings interest you could've earned if you'd kept your money longer.

Use your credit cards for every purchase you can. Never use cash or debit unless credit cards aren't an option. Spend within your budget but also don't overthink your usage: Don't worry about utilization unless you're about to apply for new credit in the next month or so. Remember, the "always keep your utilization below x %" thing is a huge myth.

There are usually 4 options each month: Your minimum balance, your statement balance, your total balance, and "other amount". You should always pay the statement balance: That's the minimum amount you need to pay that month in order to avoid any interest charges. Any less you pay interest; any more and you're paying money early before it's due, which means you're effectively paying extra and losing money in the process.

Do you have a link about credit card utilization percentage is not a major factor in your credit score? This is the first time I've ever seen anyone say it's a myth, and have watched my utilization change my credit score.

Pay it early. I always paid mine a week before due date, at the latest. That will build up your credit fast.

Become self-made.

R7 It essentially resets every month. So utilization only technically matters if you're planning to ask for a limit increase or applying for another card/loan that month. If you keep your utilization too low month after month, CC's won't see a need to raise your limit. You obviously don't need a card with too high a limit (especially if, like OP, you have a history of getting yourself into CC debt), but having one at least equal to your monthly salary so that you can use it for as many regular purchases as possible is ideal.

Sell your holes, all of them, to highest bidder 24/7.

OP, I would also recommend getting a secured loan, either through your bank, a credit union, or Self Financial. I went from having no credit score at all to a 740 in around 6 months with only a secured credit card (Discover) and a secured loan through Self that I paid $35 a month into.

R12 gives great advice that I've seen many people implement successfully.

As someone who has been through credit repair, now that you are getting re-established, do not pay them off every month thinking it looks good. Don't listen to the tightwads that thinking paying them off is good advice. It's not. At least not when you are trying to rebuild a FICO score. What you want to do is get several cards, 2 or 3 but not more. Carry a balance but no more than 30% on them total. Never, never, never skip a payment. It shows the bank you are responsible for taking out a loan and paying on a regular basis.

If you pay them off each month, they rank you lower because you look like someone who they cant make money off of with monthly fees. Think about it, what's the point of giving people credit cards if the bank make money off of you? And for all those who do pay off every month and claim you have a high score, it's probably because you have a long established credit history that the OP does not. He's starting from scratch.

Also, as they start offering credit limit increases, dont let them go too high. Lets say you make 50,000 a year and you have a credit limit of the same amount. That's way too high. That makes you a big risk if you were to go hog wild spending one day, lose your job the next. You really dont need that much credit. If you cant afford it in cash, you cant afford it on plastic. I would say a good rule of thumb is no more than 30% of your income OR LESS.

Finally, don't be tempted to open and close a bunch of cards chasing benefits or lower interest rates. Pick the best ones you can find and stick with it. Every time you close a card, even if it's in perfect standing it dings your FICO. They like people who keep the same card for years without ever missing a payment. Not people who credit card hop. It shows you are stable payer and that you most likely are not in trouble and wont default on them.

Like others have said, don't carry a balance if you don't have too. Use the card, and pay the statement balance due each month on time. That way you don't pay any interest. People who only focus on the "they want you to pay interest" forget that the credit card companies make money on fees every time you use the card. You don't need to pay a dime of interest in order to have a healthy credit score.

I have a handful of cards, I use an Amazon brand card for most of my purchases to get points which I used on purchases. My oldest card is 30 years ago, I have one or two recurring bills set for that card so it stays active, and I just pay it off monthly.

So it is better to pay the full balance at the end of each month as opposed to as soon as you use it?

R16, it shouldn't matter for your credit score as long as you pay it by the due date. If you have a low credit limit and will need the available credit for something else, I suppose you pay down the card "early" thus freeing up credit for the next purchase. I am pretty sure they score only cares about late payments.

Two words OP: Sugar. Daddy.

The following things matter to your credit score in order of highest to lowest importance:

— Pay your bills on time. Even if it's the minimum payment. Even one missed payment can lower your score

— Available credit used - the higher your balance, the lower your score. Carrying a balance is fine so long as you're not maxed out all or most of the time. Keep your balances to zero or as low as possible, most of the time

— The length of your credit history. The more history you have the more the lender has to work with

— The number of times you applied for new credit in the last 2 years. The higher, the more of a risk you seem to lenders

And that's pretty much it. Good luck OP.

R4, I did that and then switch to the minimum payment; however, I always payoff each month. My reasoning - if something happened to me and I couldn't make a large payment for whatever reason, I would be okay. Say for example, if someone was hospitalized and in the hospital for a horrible car accident.

I wouldn't want to deal with bad credit because I couldn't make the payment.

Geez I can’t imagine have 40,000 dollars on credit cards.

Why? We didn't help you fuck it up.

R22 is why America is so fucked, blind to collective consequences to credit that is not offered at this level outside the United States.

You should be pissed that banks gave that much credit to someone who didn't deserve it and makes you (and the collections company they sell the debt to as a derivative asset) all collectively pay for that inevitable default. The banks know this is going to happen and have predictive algorithms far more reliable and consistent than OP to prove it.

You'd rather it stay this way so you can get those house bonus offers and large credit limits, so you blame individuals rather than the system.

Bonus offers* (autocorrect)

Some people can’t be helped.

Pay your bills, you fucking deadbeat.

If some people can't be helped why are they being offered 50,000 bonus miles to open an American Express card?

You ruin credit for the rest of us responsible people.

Debtors prison is too good for you.

[quote] I declared Chapter 7 last May after owing around $40K on credit cards.

For what? Clothes? Fancy meals? Worthless shit?

You’re a garbage person. And now you’re begging for advice on how to escape your embarrassing economic woes?

Go fuck yourself.

Debtors prison does not exist anymore oh ancient one.If it did, Trump would have been in jail 30 years ago.

[quite] Debtors prison does not exist anymore oh ancient one.If it did

You’re too fucking stupid to understand a reference and how to applies to a situation.

You’re best situated to action figured and cartoons, simpleton.

[quote]I always payoff each month. My reasoning - if something happened to me and I couldn't make a large payment for whatever reason, I would be okay.

That's not good reasoning. It wont hurt you but it wont help you either. In order to build good credit you need to carry a small balance and pay every month without ever skipping a beat. It can me the minimum or more but paying off the entire balance each month wont help build credit. I know it's counter intuitive but that's how credit works.

If you are worried about some event where you are in the hospital, then put everything on autopay and leave enough money in your account to pay the minimums for 6 months. Or, open a separate back account in a different bank and use it just for that so even if your everyday bank account runs dry, those bills will be automatically paid. Remember, you can always pay more than the minimum if you want, but you dont get any browning points for that. It does not improve your credit score.

I have a FICO score in the 840s of 850 for 20+ years. In the past five years I've moved to another country and cancelled half of my cards (accounts from where I lived previously), from 6 accounts to 3, including my oldest card account of 30+ years without so much as a double-digit drop in the score. I have carried any balance from one month to another in all those years, and I pay off the full "current balance" from the statement scheduled for one day before the due date.

I have a high spending limit on each card and charge nearly every expense that I can for the convenience of not having to replenish and carry cash.

There can't be a huge advantage to carrying a small balance one month to another, at least not with a very high score.

From everything I've read, the idea behind carrying a small balance, is so that your utilization gets rated as just slightly higher than 0. I think it's the right idea - aim for about 1-3 percent of your limit.

From everything I've read, the idea behind carrying a small balance, is so that your utilization gets rated as just slightly higher than 0. I think it's the right idea - aim for about 1-3 percent of your limit.

[quote]In order to build good credit you need to carry a small balance and pay every month without ever skipping a beat

I've never carried a balance in my life and my credit score is in the 830s.

[quote]For what? Clothes? Fancy meals? Worthless shit?

Had to put my mom in a hospice nursing facility the last few weeks of her life back in 2020. She had no savings and I couldn't leave my job to care for her 24/7. Thought I'd just work like crazy to pay it back but then COVID hit.

[quote] If you pay them off each month, they rank you lower because you look like someone who they cant make money off of with monthly fees. Think about it, what's the point of giving people credit cards if the bank make money off of you?

This is ABSURD. Credit card companies make money from merchants. It may seem unbelievable but most credit card balances are paid off every month. These are national statistics. Carrying a balance does NOT increase your FICO store or 'help' your credit history. And as another poster mentioned, maxing out your card, even if you pay it off monthly, decreases your FICO score temporarily. It happened to me once. Try not to do that.

I can't believe the shitty advice on this thread by a few posters.

You have to leave some unpaid balance to create a credit history, The score is based on how well you use credit. I once ended a month with zero balance on all my cards and I got dinged double digits for not using credit. That being said, I rarely use more than 3% of my available credit.

Credit mix is also important. It's better to have credit cards and at least one installment loan (like a car loan) and it's best to have credit cards, installment loans, and a mortgage.

If you can afford it, try subscribing to myfico.com. You can check your 3 scores at any time and in real-time and you will see how each of your credit decisions (paying off a card, increasing the balance on a card, applying for new credit) affects your score.

r14 That seems like bad advice. If they have a chapter 7 you look like a credit risk. Any credit card they get will have a large apr so carrying a balance means they mostly pay interest to the CC company. Your credit is based on a few things, age of credit, which will be short for them. Percentage of used credit and on-time payments. If they pay it off every month they will show a low credit utilization (good) and payments on time (good).

[quote] You have to leave some unpaid balance to create a credit history,

NO YOU FUCKING DON'T. Why do you keep repeating this bullshit? Your credit history is created by USING your credit card, not carrying a balance. If you want a good credit history you pay it off each month on time. Leaving a balance can raise your utilization score which can ding credit history.

Carrying a balance on a credit card to improve your credit score has been proven as a myth. The Consumer Financial Protection Bureau (CFPB) says that paying off your credit cards in full each month is actually the best way to improve your credit score and maintain excellent credit for the long haul.

r41 not to mention high interest.

Yeah there's some super bad information about carrying a "balance". I got into some credit debt about 20 years ago. I tracked my expenses, created a budget, and stuck to it. Since then I've changed jobs 3 times and my salary has increased a lot (relative to what I made then, lol).

My point is for 15 years I have used my cards often (over $1,000/mo) and paid that balance off in full each month, and my FICO is well over 800. Without paying a CENT of interest. I pay my statement balance in full every month. Maybe people don't understand a billing cycle? My card always have a "balance" since I'm constantly using them, but I never pay interest since I pay off the charges from the past month before interest accrues.

My utilization is generally under 4%. As R38 noted, using a lot of credit one month can ding your score, temporarily. I once charged about about 5K one month (airfare, hotel, meals etc) and my score dropped by a few points. The next month it was back to normal.

OP I'm sorry for all the wrong info being posted here. Please do your homework (I.e. don't rely on DL for advice).

[quote]I can't believe the shitty advice on this thread by a few posters.

You are clueless. Credit card companies make money from the merchant yes, but ALSO from the customers. If you were a bank, would you rather make 3% from just one source or 3% + 18% from both sources. If you don't carry a balance, many banks will just close the card because they wont make much money off it. They generally wont do that if there is a balance assuming you have not defaulted on it.

Why you should NOT pay off your credit card every time you make a purchase: @ 9:34

[quote]If you don't carry a balance, many banks will just close the card because they wont make much money off it.

???

R46, I have had this happen to me, not using a card for a few months then suddenly I get a notice it's been automatically closed for lack of use.

Pay the statement balance in full when you get the bill. Do not carry a balance. Do not pay before you get the bill. Rinse, repeat.

r44 I have 5 credit cards from an old churning phase, I only use two now my amex and one visa. Pay them off every month - the other three? Have not used them in 4 years, All are still open, two they bumped my limit and sent me offers all the time for no-interest loans etc...

In addition to my post at R48, I want to second R49. Carry just 2 or 3 cards when you are able to have them. Do not cancel old cards you do not use, let the card company cancel it for you. Otherwise that will ding your credit.

Further clarification on this carrying a balance issue.

1. You should always pay your statement balance, otherwise you're paying ridiculous interest fees.

2. The date the credit card company reports your balance to the credit bureaus does not coincide with your payment date. So even if you pay in full and on time every month, a balance can be reported to the credit bureau if you had a balance on the reporting date. If you are worried about credit utilization, it's the reporting date you need to be focused on. Make sure your card is paid (and that the payment is already reflected on your your account) by the reporting date.

3. This is where carrying a small balance is important. It is better to have a small balance ON THE REPORTING DATE, so the credit bureau sees that you are using credit. Having a zero balance on all your cards on their respective reporting dates will have a negative impact on your FICO score for "not using credit". You really have to subscribe to myfico.com to understand this because the App explains to you the reasons your score goes up and down at any time (and it can go up and down on any day of the month, not just once at the end of the month).

4. But don't expect the reasons given for score fluctuations to make any apparent sense. I personally have no derogatory items on my report and always pay off my balances before their respective payment dates. Sometimes my score goes down where the my reported balance has gone down a few dollars. Sometimes it increases when one of my balances goes up. You may be better off not getting explanations on why your score goes up or down because the algorythms used by the credit bureaus are so inscrutable.

[quote] Credit card companies make money from the merchant yes, but ALSO from the customers. If you were a bank, would you rather make 3% from just one source or 3% + 18% from both sources. If you don't carry a balance, many banks will just close the card because they wont make much money off it. They generally wont do that if there is a balance assuming you have not defaulted on it.

This carry a balance wingnut doesn't give up. No one said the CCCs don't make money from interest, you said there's no point in giving someone a credit card if they don't carry a balance. Do you know how stupid you sound? Why do you keep insisting on being so obtuse? And your card won't be closed if YOU NEVER USE IT or default with a balance.

Eighty per cent of credit cards do not carry a balance. Will you shut up now?

*your card WILL be closed if you never use it.

Yep, if you don't use a card, many banks will close them. I have seen he happen with my own eyes with perfect credit. Yes, I know, some of you old trolls have some that are 10 years old and they are still open, that however is not very common with the general population.

OP check back in May of 2030.

[quote] I have 5 credit cards from an old churning phase

Did you spend all your money on fresh creamery butter?

Not sure why people are super worried about cards being closed for non use. If you don't want a card to be closed for you, use it regularly. That doesn't mean you have to charge 10K a month on it and pay high interest. I have a Chase visa that I put a streaming service on each month. I pay it in full. I have an AAA branded card that I use for gas and occasionally travel. I have another legacy card I use for my cell phone. All of these cards see <$100 of action per month. If anything I get increases in the credit limit.

Honey if I could pay credit cards off every month I wouldn't need 'em!

Stone Age DLers