Submitted 15 hours ago by Patnou@lemmy.world to [deleted]
If it does help, it will make a miniscule difference and not be worth the trouble. Building credit takes years.
If having a credit card changes your spending behavior, then just use your credit card for stuff non-discriminatory stuff, stuff you have to buy, and cut up the card or don’t carry it around.
It won’t hurt. It probably won’t help.
A credit score is a number generated by the credit bureau that factors in the borrower’s repayment history, average age of all accounts, how much debt has been incurred vs the credit limit, and what types of debts are owing (e.g. mortgage, LoC, credit card, etc.). The key factor in your question is the repayment history.
To build credit history with the reporting bureaus it’s not enough to just use a credit card and pay it on time. The borrower has to use it, wait for the statement to be generated, and then pay it.
This is because the credit card company isn’t constantly reporting to the credit bureaus. They only do it once a month. They basically say whether or not the borrower made the minimum payment, how much they’ve borrowed, and their credit limit. This information all comes from the statement. The statement is not the constantly updating record of transactions you see when you log in online. It’s the PDF or paper document they provide monthly.
The number of transactions for that month doesn’t matter, nor does the method of settling the debt (returning the item vs paying the bill). If the borrower uses the card and settles the debt entirely before the statement is generated, that amount is not reported to the bureaus because there’s nothing owing at that time.
The reverse is also true. If the borrower is late making the minimum payment, but the payment still posts to the account before the next report goes out, the report will show that the minimum payment was met. It only shows 30, 60, 90, days past due for late payments.
Source: Capital One employee training
Just a single point of order: charges can be reported off cycle, i.e. not when the statement is generated but within a few days of the transaction. I thought it was monthly too but monitoring has shown otherwise.
I am not a creditcardologist, but I believe it’s neutral, since the transaction is effectively canceled, and no balance is change in the long run.
That entirely depends on where you are. Credit cards will remove some borrowing power but there is no score attached to borrowing.
It isn’t really buying small things either. It’s buying homes or cars. While small purchases do affect it, they want long term loans.
Your credit score is your willingness to pay interest. While not using too much of your available credit, which is utilization.
Mostly your willingness to pay interest monthly. (Your score does sink when you pay off a loan, by a lot.)
You do not need to pay interest. You need to let statements close out monthly with a balance. Interest on that balance will not accrue until the next cycle closes.
Say your statement closes on the 1st of the month. Buy something on Jan 15th. Let the statement close Feb 1st. Pay it off any time before Mar 1st. You get a benefit to your score by showing utilization without accruing any interest.
Paying off a loan hurts your score because of other things like reducing borrowing power, messing with utilization, and usually lowering the average age of all accounts. Nothing to do with paying interest.
If you can’t jump straight to a car or home loan, collect credit cards if you have the willpower to avoid debt. That’s how I built it up. I got a new card annually for several years. I’d take advantage of intro promos, but once those were up, I’d just assign some small monthly subscription to a card. Gotta spend and close with a balance to look good on paper, but also need to occasionally spend to keep them from canceling the card, too. At peak, my combined credit limit was more than my income, spread across 8 cards. That was double an average car msrp. It worked perfectly fine for a mortgage application despite driving older cars bought with cash.
When my credit score was 725 to 775, I would get daily credit applications. At times when it was 850, I would barely get any.
They target people with just enough credit they assume they will be paying interest.
This is completely wrong. Your credit score is NOT how much interest you pay. It’s how likely you are to repay your debts. You need to show that you will always pay, and never skip a payment.
My credit score for years was absolutely amazing, entirely on credit cards, and without paying a single penny of interest, ever. Instead, I paid in full every single month on every account.
Credit is a measure of your ability to repay. You can get your credit score really high by literally just putting $30 on it each month and paying it off a week before it’s due. Your credit will skyrocket. So returning items has nothing to do with your credit.
Get a copy of your credit report (you can do so for free every year in the US) and see what actually gets reported. It’s a much higher-level view than you probably think it is.
For credit cards, it’s a revolving account type. That differs from the other major type, installment. The latter covers things like car/house loans.
Within that, the total balance on each statement is reported, along with credit utilization, and whether your payment was on time and as agreed. It does not include individual transactions, at all.
If you’re trying to use credit cards to build your credit, here is how you do it. Note that this takes a long time to help, and won’t help as much as you think.
Sign up for a bunch of cards, all with no fees, at the same time. Get the highest limits possible on all. Make sure they are all active and paid as agreed every month. In practice, that means a few small transactions on each, paid in full every single month. Do not pay any interest, ever. Keep this up for several years to help establish your reliability on repaying debt. You want your average active account age to be as high as possible.
After 2 years of this, you’ll overcome the hit you took to open them. After 5 years or so, your account age will be decent enough to make it worthwhile. But this all falls apart if you need to buy a car or a house or something in the meantime.
lIlIlIlIlIlIl@lemmy.world 15 hours ago
it doesn’t help nor hurt, because it doesn’t show that you’re any more reliable in repayments, which is what credit score is.
Reliable repayment and % utilization are what move credit scores
fuckwit_mcbumcrumble@lemmy.dbzer0.com 14 hours ago
If you’re tricky you could buy the thing before the end of the month. Then return it afterwards.
Stonks.