Pay in full or carry a balance?

jamie_mtJune 10, 2003

Okay all, I need some advice. My credit is *finally* starting to improve a lot, and my fiance and I decided it would be a good idea for me to get one major credit card to create a "recent good history" for unsecured loans (I have a very good credit history for secured loans like my house and truck - just not so good for the credit cards). So I applied for, and got a mastercard with a limit of $1000. Honestly, I'm scared to use it, but I really, really want to build my credit rating as high as possible in then next year or so.

Now, I know that in order for it to affect your credit report, there has to be activity on the account occasionally. And I plan on not charging anything I don't have the money to cover in my account. But I've read in some places that for building credit you should pay the balance in full each month, and other places say you should carry a small balance from month to month to build credit. My primary goal is to raise my credit score by using this responsibly, so in your experience, does it help your credit more to pay in full each month, or carry a small balance? I have no problem doing it either way - I just want to know what seems to have worked best for most people in raising credit scores. :-)

I'm planning to use this card for monthly gas and pet supplies only, so there will never be a huge amount put on it at once (maybe $200 every month - $150 pet budget which I'm generally under, and $50 gas budget). The money will be in my account (receipts will be treated as duplicate checks - subtracted from my checking acct balance every few days just like I do with checks), so I figure if I need to pay in full to build credit, no problem. If I need to carry a small balance, I figure I'll pay everything down to $20 every month, so there is a $20 balance left on the card each month that I'll have to pay interest on. I figure I can get the interest rates lowered in 6 months of good, on-time payments, then again in another 6 months.

So any advice, comments, and well-wishes are certainly appreciated. I'm hoping to start this in July, if I can get over my fears of actually using the card - might start very small with just gas budget only. I'm determined to make this work for me though! Thanks a bunch... :-)

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Best for your credit scores;
1) 3-5 revolving accounts paid in full each month,
2) 2-4 installment accounts paid on time each month,
3) Minimize hard credit inquiries (from credit apps,)
4) Don't close existing revolving accounts,
5) Lather, rinse, repeat... #1-4, over & over.

Dave Donhoff
Just some mortgage guy ;~)

    Bookmark   June 10, 2003 at 10:01PM
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Thanks Dave, that helps a ton! I'm going to print it out and keep it in my "current bills" file, so I see it every month. :-)

So my credit card will be my revolving account (sorry, nowhere *near* ready for three of those yet) - I'll pay that in full every month. My mortgage is my installment account - it's automatically paid each month right on time and has been every month since I got it, so no problem there. I don't have any other installment loans (paid my truck off earlier this year - but it was always on time as well), and I'm not going to apply for anything else, as we'll be applying for a new mortgage sometime either this year or next and I don't want any new inquiries or too much available credit on my report. Sounds like a plan - thanks again! :-)

    Bookmark   June 11, 2003 at 12:12PM
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Just to elaborate on what Dave said, the reason that you want to keep the cards paid off is to keep the debt to available credit ratio as close to 1 as possible. The link below is to a thread where I (windchime) explain this in detail.

On another note, you said, "I'm hoping to start this in July, if I can get over my fears of actually using the card - might start very small with just gas budget only..."

I say, don't be afraid, trust yourself. You know why you messed up before, right? As long as you've analyzed things, and know why you messed up, and have a solid plan to not repeat past mistakes, then nothing bad will happen. Your plan is to use the card to buy things that you already buy now, and to record them in your checkbook as you buy them. It sounds like a great plan to me. Stick with your plan and you WILL succeed! The scariest thing, I think, is that you don't trust yourself to stick to the plan. Why not? You are an intelligent woman who has gotten herself out of a mess with hard work and discipline. Are you not? You didn't use more loans, such as home equity to get out of the mess, did you? You've learned your lesson. Trust yourself that you can ace this test!

I would have one more suggestion for your plan. Consider putting some of your recurring monthly bills on automatic payment and charging them to the card. Some suggestions would be cable bill, internet bill, cell phone, and anything that is the same amount each month. I don't like the idea of using the phone bill and power bill, because these can fluctuate. I actually like the idea of using these bills to start, rather than the gas and pet expenses, because you already pay them out of checking. Maybe you pay for the others with checks too, I dunno, but I pay cash for gas, pet expenses, and groceries. It saves stamps too (and the trouble of going to the P.O. to buy them.)

Here is a link that might be useful: debt to available credit ratio explained

    Bookmark   June 12, 2003 at 2:54PM
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Thanks, windchime - I appreciate the input! I know I learned my lesson, and I'm sure once I get going I can stick to it and be fine, but honestly, those years when I was in debt with creditors calling me every night and all the harrassment & hassles I went through is what I seem to associate with credit cards most often in my mind. So it's not really that I don't trust *myself* as much as I fear of the people behind the credit cards - which I realize is a moot point if I handle my credit responsibly, but even the best of us have irrational fears sometimes - mine is being seriously harrassed by creditors (a plight I brought on myself, of course). LOL I'll get over it, it just might take awhile. :-)

Honestly, I don't have any other bills I could use the credit card for. I exchange my web design services for my internet access, I don't have cable or a cell phone, and all the other bills are just utility bills that fluxuate (and I won't automate those in any way because of the fluxuations). The only other bills I have are my house payment, car insurance and gym membership, and all of those are automated from my checking account each month. They're never late that way. :-)

I use my checking account for *everything* -it's easier for me to track my spending with duplicate checks (and starting next month, debit card reciepts - I just got a debit card too so I wouldn't have to write $3-$5 checks for lunch occasionally). I only shop once a month, so I'd have to carry $400 in cash for a weekend if I paid cash for pet supplies, groceries and gas (not smart, and it's harder for me to stay "on budget" with cash for some reason). Normally it's checks for that stuff, so it makes sense to put some on the credit card, and I'll use my debit card for the rest. It will save me a ton of $$ in ordering checks, let me tell ya! LOL

Thanks again! :-)

    Bookmark   June 12, 2003 at 4:03PM
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Hi Jamie on the wide open spaces,

To consider rationally the issue of the hassles over the misuse of your "credit" card, bills overdue, nasty phone calls on a regular basis, etc. in an earlier life - look not at the "credit" card.

Remember - it's really a debt card.

Look in the mirror.

Things have changed inside that head, right?

Earlier, the credit card was king.

Now - the brain is in charge.

The credit card, like a faithful dog, will do as it's told.

As someone said a while ago - the dog will test you every now and again.

Just be firm - and it will revert to its subservient place in the hierarchy of life.

But - the current issue isn't mainly rational, I think. You *know* that circumstances have changed.

It's the emotional portion of your being that's feeling the heat.

Tell it just to calm down, relax and let things roll along. Everything will work out all right, if it just has faith.

It's tension will ease off as things move along well.

One suggestion: before you consider messing about with the new plan - just think how uncomfortable that'll make your emotional being.

It'll take months for its renewed sharp increase in tension to calm down again, to regain it's level of ease with the situation at the time just prior to the lapse.

Not worth the hassle.

Good wishes - as you continue to "take charge".

ole joyful

P.S. You never did tell us how the recent holiday/vacation turned out.

I'm waiting to see who's going to be boss in the new home.

As some families do with regard to children after break-up - will it be "joint custody"?


    Bookmark   June 13, 2003 at 1:53AM
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Hey thanks for your concern, Ed - I do appreciate it, really. Yes, it is my emotional side feeling wary, however, I'm more practical/logical than emotional, and I'd feel pretty weak if I let my emotional side win out. I'll be just fine - that emotional "conflict" will keep me in check while I'm starting out - which is a good thing. Sometimes mental conflict is a good thing, as it allows us to grow.

My vacation, of course, since we were cleaning out a house to get ready to sell, and I was cleaning and such at my house as well. But all went as planned, and it was a very productive week. And of course, it was nice to actually *do* something other than sit at my desk all day for that week. If labor jobs paid more, I'd be almost tempted to switch. LOL

As far as finances go, we've talked about that a bit. Dear Fiance is better at long-term planning than I am (he's been saving for retirement since he was 18), so he's in charge of long-term and retirement accounts. Through my 'bouts with debt and such, I've gotten *very* good at budgeting and paying the monthly bills on time (something he's not so good at), so I'm in charge of that aspect. He'll have some imput into the budget of course, and we'll each have our separate accounts as well as joint "household" checking and savings accounts. All income will be put in the household account, then portioned out according to need after bills and savings are taken care of (that way he always has enough for his golf games and nights out with "the guys", and I'll have some extra for my crafts and hobbies that we can spend without consulting each other). He brings home about the same amount I do, but he'll get more because he likes to spend more - I just don't need as much, which is perfectly fine with me. We've got it pretty well figured out to my satisfaction (and his), so while I'm sure there will be a little "tweaking" necessary once we actually put things in place, I'm pretty confident that we'll do just fine with it. :-)

    Bookmark   June 13, 2003 at 11:06AM
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Hi again, Jamie,

I'm glad that on your vacation you had a substantial change from work routine, got some worthwhile things done, and had some results that you'll be pleased with.

The money system that you're working out for the future sounds like a plan that should suit your needs - sharing some of the things and leaving you with some free spending money.

May you have a song in your heart as you proceed with your plans and preparations.

ole joyful

    Bookmark   June 16, 2003 at 11:19PM
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$150 for pet budget and $50 for gas??? Guess you don't have show dogs you have to carry around the country.

How many "pets" do you have???????

    Bookmark   June 19, 2003 at 1:44AM
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My pets are a luxury, Gina, which I freely admit. :-) I have 3 large dogs (food is about $90 a month for them, because I won't feed them cheap stuff, and then there's treats, maybe a new toy, bones, etc...and any shots/check-ups are usually taken out of that budget too, which is why I'm generally under it), 3 lizards of various sizes (I do raise some of thier food, but still need to buy vitamins and veggies for them and buy new insects occasionally for the colonies), 3 aquariums with fish/aquatic frogs that need filters and food among other supplies, and a "toad tank" for my 3 firebelly toads - half water and half land that needs a new filter or two each month as well (they eat what the lizards eat).

And it's more like $45 per month for gas, actually, but I budget $50 - I drive a Ford F-150 truck, which is not the most gas efficient vehicle on the road (mine's an '87), but it's another "luxury" for me (I freely admit that too). I paid off all my debts (aside from the mortgage) and try to live frugally in other areas so I can easily afford my luxuries here and there. :-)

    Bookmark   June 19, 2003 at 12:02PM
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Hi Jamie in MT spaces,

We'll have to hitch you up with Meghane, in NC, I think, before next year. She has lizards, too. And a tropical forest in part of her home.

You (and yours) should get on well together with her (and hers).

Good wishes,


    Bookmark   June 19, 2003 at 7:53PM
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This really belongs in the money saving tips forum, but I know that you'll see it here, so here goes: DH and I have been buying our aquarium supplies from That Fish Place for years. They have a website:, I think. And they also have pet supplies now at That Pet Place (which probably also has a website.) We usually order filters in bulk and save a decent amount over the local pet shops. The real savings is when you have to buy a new filter or another larger item because the difference in price is phenominal. DH's friend once brought the catalog to a local store and asked them to match the price (which they did) because he needed the item right away. They charge shipping by the weight of the item, so it's probably not worth it for dog food, but when buying filters, you won't get overcharged, like some places that charge $5.99 shipping, no matter what the ACTUAL shipping cost. Although, I bought both of my dog crates from them, and saved $$, even after paying shipping. They also have good deals on "multiple" dog toys. Man, you'd think I work for them or something, since this is sounding like an infomercial-LOL.

Those lizards can be quite expensive. I saw a program on animal planet, not too long ago, featuring iguanas. They require a very varied diet of fresh fruits and vegetables. I was quite surprised.

This is going so off topic, but OMT: I buy my dog food (Purina One) at BJ's Wholesale Club ($27.99/3 weeks.) It's much cheaper than the supermarket, and we have a membership for DH's business anyway. Of course, if your dogs get Science Diet, you can only get that at the vet.

    Bookmark   June 23, 2003 at 5:40PM
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LOL windchime - I browse through the money saving tips forum too, so don't be afraid to post tips there. :-)

Thanks for the site - I'll check it out! Would be nice not to hassle running to two different pet stores (I won't shop at several due to thier policies on selling pups, others because of the prices, etc...). I couldn't really shop online before since I didn't have a cc...that's much easier now. :-)

    Bookmark   June 24, 2003 at 1:33PM
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