Tip toeing back into the world of credit

[jdcat]

Hello all-

My spouse and I filed for ch 7 and were discharged 8/2010. We've been doing really good saving up and have $11k in savings. We would have more but son needed braces ($3k) and autos needed some repairs. I have to say that I am so proud! We have never been able to save in the past but have stuck to our guns and it feels so good!

I have a Kohl's card that survived the bk and have been thinking that may help rebuild my credit but overheard a few co-workers talking about rebuilding credit and one said a Kohl's card really won't do it. Her fiancé is an accountant so I'm assuming he knows what he's talking about. I have been buying $100 worth of stuff on my Kohl's card every few months and paying it off over those few months then doing this over and over again.

I really don't want credit cards again and would spend the rest of my life without them if I could but I'm not sure that is realistic thinking.

So I guess my question is this...if and when I do apply for and get approved for a credit card how should it be used?? Is carrying a balance better to rebuild credit or is paying it off each month better? Is what I've been doing with my Kohl's card ideal? Also, will one card be good? Or not enough to make a difference? When we had credit cards in the past none of this mattered to me, I never paid attention to our credit score, checked our scores not once in all those years and basically used the cards to make it from one month to another.

Our cars have both been paid off since our bk so the only thing we have is our re-affirmed mortgage payment as a source of rebuilding credit at this time and I'm guessing that is not enough? Or could it be? That would be so nice!

Anyway- any advice from any of you who have been through this would be great. I'm just not sure how to use a card to build credit. It was never a concern in the past so I'm going into this completely ignorant.

[Logan]

An accountant doesn't necessarily know how to rebuild credit. Assuming that would be like assuming a flight attendant can land an airplane because she/he works for an airline.
My recommendation is to never pay anyone any interest. I'm 4+ yeas out of BK with a mid FICO of 716 and I've never paid interest except for an auto loan.
Just use your card and pay it off when the statement comes.

Logan

[IBroke]

Is carrying a balance better to rebuild credit or is paying it off each month better?

In regards to rebuilding, it doesn't matter at all. I have been carrying a few balances over the last couple of months and it took me 4 weeks to get to the point where i would have been if i would pay each and every card in full from month to month. By paying off the cards each month, you certainly save on interest - but there is no advantage when it comes to rebuilding credit.

[sassiebaz]

So, Kohls reports to all major credit bureaus...therefore it will help and probably has helped you rebuild your credit. Since it's been two years, why don't you check your credit reports? And scores? Annualcreditreport.com will help you check your credit for free...once a year. You can pay around $7.95 to get a score per each credit bureau. I wouldn't bother with signing up for any credit monitoring service. You can do the free thing once a year and should be, everyone should be in my opinion. Checking up on their credit I mean. Good job on saving money though! We are just almost 3 months out of discharge and have $2K saved. Haven't started rebuilding, although we do need another car...my 17 year old will be getting his license soon....and needs braces too! I too feel so good about where we are financially, I have never been this positive. I am getting ready to apply for a CapOne card, mainly just to use for gas. And to answer the question regarding keeping balance on credit cards or not, from what I understand, you should keep something on your card, even if its $25. It's good to have revolving credit...not neccearily paying everything off entirely every month. Atleast until your scores are really good...alot of the info I have learned s from this forum...and from my job. I am by no means an expert, and welcome any other ideas and opinions...all in all I'd say you guys are doing pretty dang good!!!!

[IBroke]

You can pay around $7.95 to get a score per each credit bureau.

These are FAKOs, right? If so, I would consider it a waste of money. If the OP wants a true FICO-score, he/she has to invest a little more and go to myfico.com.

[jdcat]

TY for the replies! Ok, so keeping a small balance on the card sounds like it might be a good idea. Nothing that will rack up anything significant in finance charges. Maybe even just jumping back and forth between keeping a small balance for a while and paying it off every so often. It sort of sounds like it shouldn't matter either way.

What are the thoughts on how many cards to get? Would one card be enough? The reason I ask is that we would like to better our chances at buying a different home at a good rate in the next ten years and that is our main goal for wanting to better our credit. I know that having to many open credit accounts is not a good thing but is having to few accounts seen as a negative thing as well? I know that having a nice savings will help our financial picture when we are ready to buy but I'm not real sure about the credit card aspect of it. I'd prefer one card and am wondering if I'm over thinking this.

@sassiebaz- good job on your saving! It does feel great!

[sassiebaz]

These are FAKOs, right? If so, I would consider it a waste of money. If the OP wants a true FICO-score, he/she has to invest a little more and go to myfico.com.

True, myfico.com is a great place to go....I was however suggesting a credit bureau as they will also supply a free report once a year. I don't believe that is something FICO.com does...but I could be wrong...

[sassiebaz]

They say having two or more revolving lines of credit is good. I see alot of great scores with simply two revolving lines of credit...it is also the length of history with each account too. so the longer you keep your account in good standing the better!

[ValleYum]

I have read that it is also a good thing to have a mixture of different types of credit: auto loan, bank card, store card, student loan, etc.

[Amy26]

Keeping a balance or not depends on your limit... if you have a 100 limit on the card a 30 dollar balance that's 30% utilization on one card. You typically want to keep the utilization per card below that to not have a significant score impact. It is beneficial to have a credit mix. However the formulas for credit scoring are super crazy retarded... there are also tons of different models out there. So, its really hard to say exactly what you SHOULD do. Some places say you should have at least 3 major credit cards and others say you just need one. I think what maybe the accountant was getting at is that a store card doesn't look as good on your report as a major credit card. But it is helping you rebuild.

I would definately start with pulling your reports and seeing what they look like. If you want to get scores definately use the ones from myfico.com ... the TU one isn't exactly on point but its better than the other FAKO scores out there.

[IBroke]

True, myfico.com is a great place to go....I was however suggesting a credit bureau as they will also supply a free report once a year. I don't believe that is something FICO.com does...but I could be wrong...

You're absolutely right - they don't.

[jdcat]

Thanks for the advice everyone. Will start watching for decent offers in the mail. So far the best offer has been 0% for a year then 23% Variable after that year. Insane but I guess that's life post BK, at least for a while. Maybe the offers will get better as time goes by. Plus we have two bk's reporting on our credit report right now. The first one should be off our reports as of this month. So hopefully once that first one is off the offers will get better.