Harveyspecter

You all know the hassles of getting a good credit rating for us expats. After emigrating in June 2016 I got a Capital One Credit Card in January of 2017. Initially I used it only for online purchases as I did with my HSBC card in the UK. However, given how credit score happy the USA is, I did some research and listened to some interesting talks with Frank Abignale (Google him if you don't know who he is) and decided to start using my credit card for everything I used my Debit Card for. Not only to improve my credit rating, but for the 0 liability on a Credit Card. I'll add that the only true dept I have are a mortgage and car payment, both of which are paid on time and in the case of my car payment I am overpaying the minimum payment per month.

I get paid bimonthly so easily pay the full balance every month (or every 2nd week if needed) and I recently started taking the card closer to my current credit limit ($2750) and guess what? My credit score dropped 45 points because I 'used up most of my credit'. So if I don't use the card my score doesn't go up because I'm not using it, and if I do it seems I get punished?! I'm sure that this is the way it is to begin with and I just have to take the pain while paying off my balance on the credit card in full each month?

MidAtlantic

Take a look at this to see the factors affecting your score.
https://www.creditcards.com/credit-c...score-6000.php

On the use of your credit card it is affected by how much of your credit you use ("credit utilization"). Usual advice is to keep it around the 10% mark.

KK85

My credit score takes a drastic plummet if ever I'm nearing the 100% utilization mark on my credit card, which has happened a couple of times. I'm talking over a hundred points. As soon as I make a substantial payment, my score increases again, thankfully very quickly. Credit Karma recommends only using up to 30% of your available balance on a credit card to avoid taking a hit on your score, and that certainly seems to have been true for me.

My next port of call, once I have my license, is to finance a car. I've been told most people do that without issue, despite a tiny credit history - was that the case for you, OP?

Good luck!

Harveyspecter

Thank you, I'll take a read.

Good to know. I'm hoping at the next credit check cycle given I paid off the entire balance will go back up. I'll begin using my debit card again when I reach 30% of my credit limit from now on, thanks.

I financed a car on a good rate (4.14% for a 2 yr old car in 2017) with $1000 down so I had no problems. It did help though that I'm employed with a major and well known employer on the area.

KK85

Yup, I bet it will. My credit card company upped my limit by several hundred dollars while I was close to 100% utilization, and the following week my credit score increased by 108 points. I dipped into my card again a bit while between jobs and my score dropped, as expected. I do think a lot of weight is given to card utilization when determining credit score - it's certainly been true in my case, anyway.

Thank you for sharing your experience - that sounds like a great deal! We hope to put down a decent payment on a car for me once we get our tax return, so hopefully I'll have similar luck to you. Good to know - thanks again!

Harveyspecter

Fingers crossed! My limit was increased a few months ago by $1000 so I'll see when it gets increased next. Yeah we were very lucky in that we got a 2 year old car with low miles (for the US) at a great price, it helped that I am good at haggling

civilservant

My recommendation is to stop using them all together and forget about your 'I love debt' score. I am a big fan of Dave Ramsey, and performed plastic surgery on my cards some time ago.

tom169

​​​​​​I agree, unfortunately we are in the minority. We own 2x$10,000 cars and they're both absolutely fine and safe.

KK85

It's a lovely idea, and wonderful if it can work for you. I lived debt-free in the UK (aside for student loans). But my husband and I, for example, are not in any position to be able to afford to buy a car outright, no matter their price, and I've struggled to get by without one. We live seven miles from the city where I work, and the public transport is diabolical. So, if I have any hope of being independent where we live, I'll need to finance a car, and I feel lucky to have that option available to me. The credit card I have was a necessity in order to start a credit history so that, one day, I could finance a car. My point is that for some of us - and I appreciate there is some irony in this - living without accumulating any debt is a grand idea, but unrealistic if we're aiming to move up in the world in any way. I think it's okay to strike a comfortable balance between having no debt, and having a manageable amount for a little while, so long as you are responsible.

civilservant

Depends what you mean by 'move up in the world' - that sounds like living beyond your means to me. IMO opinion, the only reasonable debt is a mortgage, and that's because it's financing an appreciating asset. Financing a car is ok, but you must be able to take the hit on the depreciation, and not have more than 50% of yearly income invested in it - that way if you lose your job it doesn't become a noose around your neck.

KK85

I have no intention to live beyond my means, though I am quite aware that many people do. What I meant by 'move up in the world', to use my specific circumstances as an example, was having an ability to transport myself to a job that has career prospects and utilizes my skills. Without my own transport, I am limited to work for the businesses within walkable distance of my home (they are mostly dollar shops and pizza restaurants, which are fine, but not exactly dream work), or that exist on the bus route that runs through my neighbourhood. Many of the better job opportunities in my area are either three bus rides and as many hours away, or cannot be reached by public transport at all. My husband can only drive me around so much as he also has a job to get to, and his hours are not the same as mine. For several months, I was stuck in my office until 11pm every night because the buses stop running at 7, and I had to wait for my husband to collect me. It wasn't sustainable. So I guess as much as you see a mortgage as an asset, I see my working life as one as well, and in order to have a better working life, I need a car. It would take me years to save up to purchase a car, and I can't save money if I don't earn any surplus, and round and round the cycle goes. Hence the preference to finance.

Edited to add: re. your comments about car depreciation, which are of course very valid: this is why I'll be financing a cheap run-around that I'll eventually be happy to sell on for pennies, if anything.

civilservant

See, I would rather buy a $2k car and run it until it dies (which I do - 2003 Mazda Protege) and not have a payment. When that dies, I'll buy another cheap car until I can save up to pay cash for something more expensive.

The average car payment is now $505. Put that in a Roth IRA for 35 years and get a decent rate of return and it's millions of $. I don't like cars to the tune of $millions.

I would encourage anyone to look at Dave Ramseys Youtube channel.

KK85

If I had $2K to drop on a car and not be stuck with a monthly payment, believe me, I would. I aspire to your way of doing things, and am generally an advocate of living without debt as much as possible - hopefully, one day, I will be able to do so wholly. It's just not an immediate option for me, while getting to and from work is an immediate need. Perhaps that is our grey area here. For some of us a bit of debt is a necessary stepping stone, and let's hope we all use the luxury briefly and wisely.

As an aside, I am shocked by that $505 figure! There is not a frilly chance in hell you'd ever catch me paying $505 per month on a car.

I will check out Dave Ramsey's channel.

petitefrancaise

The reality of moving to the USA for most of us is that we have to finance a car somehow. Personally, I would not advocate a $2k car - you are just asking for that to break down when you need it and have an expensive repair bill to cope with.
Sounds like you are doing ok with the credit cards - it does actually take some time for the credit to build and if you don't use credit, it won't. Getting a $5-$10k loan for a car, makes sense, you get a decent car (not new, so depreciation is minimised), you're paying it off every month and your credit score goes up.
I always pay off my credit card each month, both of my kiddoes are authorised users on one and sometimes, it goes right up to the limit and I don't see a drop in my credit score. I just pay it off.
FWIW - a mortgage advisor told me that having 4 lines of credit is the optimum, at least when getting a mortgage. Keep up to date with payments, never be late and you should be ok.
Dave Ramsey??? Nah. Old hat. Look at MrMoneyMustache and YNAB.

civilservant