Credit Card Basics

Here are a couple good things to know about credit cards, I hope to keep adding to this as time goes on.

The best way to raise your limit after applying for cards

Just give them a call. Some people get uneasy about calling credit card companies, but unless you have a past due account, they are actually very easy to get along with and willing to work with you. Some people tell them they have a large purchase coming up etc., but usually just asking will do the trick. Most cards also have the ability to request an increase online, but for the majority of cards I believe you can raise it more by calling.

Should you cancel credit cards when you are done with them?

Unless they have an annual fee, probably not. According to Fico, it doesn't lower your credit score by having too many cards, some people have 50-60 cards and still get accepted easily for new ones. If you really want to get rid of some though, first try and consolidate that limit onto another card from that issuer, thus closing the card in the process, and allowing more money to be used on the 0% balance transfers. If you see that a card has an annual fee, it won't be charged until the end of the 12 months, just write yourself a note for that card on Yodlee to cancel at the end of the term.

Dealing with little or no credit history

If you have a bad credit history, or little credit history, you probably shouldn't jump in and apply for a bunch of cards right away. I have decided to include a Student Card, and Bad/No Credit Section for this very reason. Pay it off every month and you'll have some good credit history in no time. At that point, you can come back and have some real fun.

Getting out of credit card debt

You can use 0% transfer cards to pay off your interest bearing accounts, but just make sure you can make the minimum payments each month, or you will be in the same boat. Whatever you do, get out as soon as you possibly can.

Figuring out what goes into your credit score

Most of us have probably asked ourselves, at one point or another, just what exactly are they using to come up with that all important 3 digit credit score? The exact percentages actually change slightly for each individual, but this graph shows the basic layout of how credit scores are formulated.

Now that we know that what goes into your credit score, let’s look at how using the balance transfer method will affect that score.

Payment History - This is a positive category for us, making all of those payments on time will really improve your payment history. The fact that it is more than a third of your score doesn’t hurt either.

Amounts Owed - This seems like it would be a negative category, but balances at zero percent do not go against your score. Much like unsubsidized student loans won’t count against you. If you keep your utilization in check, (look at FAQ for more info) this should also be a positive category.

Length of Credit History - Obviously, there has to be a downside somewhere, and this is the main one, luckily it’s a much smaller slice of the pie. To put it simply, opening up new cards will bring down your "average length of account." This is the area that will originally drag that score down a couple points, as those cards get older during the year, those points will be added back on to your score.

New Credit - Having new credit could be good or bad. All of the credit inquiries from the card issuers will hurt you in this category, but maintaining a positive credit history with the new credit should bring it back up. Therefore, this area is considered a push.

Types of Credit Used - Using credit cards would usually not be the best addition to this category, but the fact that it is at 0%, means it should not go against the score.

As I mention on the site, in the beginning, your score will usually fall anywhere from 10-30 points. After having the accounts open for a while, and making your payments on time, your score will not only rebound, but it should actually improve.