SoulAssassin
Diamond Member
- Feb 1, 2001
- 6,135
- 2
- 0
Sorry...I interpreted "last June" as June 06. I didn't sleep much last night.
Regardless, you're still fine to apply for the card. Your FICO probably took a little dip but nothing significant.
Sorry...I interpreted "last June" as June 06. I didn't sleep much last night.
Regardless, you're still fine to apply for the card. Your FICO probably took a little dip but nothing significant.
azazyel
Diamond Member
- Oct 6, 2000
- 5,872
- 1
- 81
I was 26 when I got my first credit card and it was hard. The only card I was able to get was a City Bank with a $800 limit. But like you said you wanted to do, I paid mine of monthly. The biggest draw back is now I'm getting credit card offers daily. 75% of my mail are these things and it annoys the hell out of me. A couple years later I was able to get a $22K car loan from a credit union in no time. I actually got one for $19K but when I told them I needed $22K they didn't even hesitate.
This sparks my curiosity. If don't mind tell us. What year was it when you were 26? Also, did you have any other credit history such as student loan payments when you got the Citi Bank card?
I have been counseled to shred the old card and not close the account as Lothar suggested. I've been told that each time you close a credit card your credit score gets lowered. Maybe I got bad advice. Can anyone confirm whether your credit score really does get lowered upon cancellation of a credit card?
Yes, this is a fact. Your credit card score does get lowered when you cancel it yourself but the amount that it gets lowered is extremely minimal. The amount that your credit score goes up by making regular payments on time during those 11 months far exceeds the amount you lose when you cancel. Plus, the amount that you lose by canceling is nothing in comparison to the amount that you will lose if you exceed that 33% mark.
crt1530
Diamond Member
- Apr 15, 2001
- 3,194
- 0
- 0
There is really no good reason to close a credit card. Generally speaking, it lowers your available credit and quite often your average account age, which both factor in to your FICO score. Shredding a card and never using it again will eventually lead to account closure by the creditor. They don't want to spend the money keeping your account open if you haven't used the card in a few years. This will also be detrimental to your score.
All you have to do to keep a card active is buy a pack of gum every six months or so.
So when people do AOR's, what do they do with all the cards after the 0% APR expires and they pay everything back?
Got my first card at age 18 with absolutely no credit history. I started my bank account only 2 years earlier too, so maybe I got lucky. Otherwise, all the credit history stuff [eople scare you with is probably more applicable to large loans/mortgages than credot cards.
crt1530
Diamond Member
- Apr 15, 2001
- 3,194
- 0
- 0
The smart ones keep them in a safe location and have a schedule where they make some small everyday purchase once every six months or so. I tend to set up recurring bills on various cards to keep them active (gym dues, cell phone bill, etc.). Don't worry about credit card arbitrage just yet. You really need to have a total credit limit of 100k plus (over all your cards) before the numbers start making sense.
For now, just get your first card and wait at least 6-12 months before you think about getting another. Also make sure to call the credit card company every six months or so to ask for a credit limit increase. Quite often, you can get your limit increased without any mark on your credit report.
So is an AOR a one-shot only thing, or do these same people run a new AOR every year or so? That would add up to a ridiculous number of credit cards.
dullard
Elite Member
- May 21, 2001
- 26,028
- 4,653
- 126
Whatever you do, don't listen to Xavier434!
His words are about as close to being 100% incorrect as possible.
1) Yes, you can get 0% interest CC loans but it does cost you. (A) Your credit score plunges meaning car loans, mortgages, insurance, etc goes way higher. You WILL lose hundreds of dollars a year and never even know it. All to save a few bucks here and there. (B) If you do goof somewhere in the scheme, you are in a world of pain. (C) Many cards charge 3% to transfer OUT of them. He forgot to mention that. (D) The days of easy money (0% cards) are limited. It hasn't happened yet, but it will happen soon that these offers will dry up. What do you do when you have thousands of dollars on a CC and you can't get any more 0% cards and the whole scheme crashes down on you?
2) Cancelling a card yourself can harm your credit score. (A) It may shorten the history of on-time payments in your credit score. (B) It may reduce your credit limit, thereby making your % used credit higher which harms your credit score.
3) Having available credit is crucial. If your CC debt to CC limit exceeds 25%, your credit score plunges. If you don't have enough available credit, or if you have too much debt, then your credit score will suffer. His plan includes both little available credit and high debt. His 33% calculation is so completely backasswards. Note: I'm talking about credit score only. Lenders use other criteria other than just credit score. Yes, some lenders can be scared away by available credit in some situations. But that is a pretty rare occurance.
4) He is only 26. He hasn't lived through times when the 0% credit isn't available yet. He is in for a rude awakening when it does happen.
Yes, you can use 0% loans to your advantage with minimal harm. But take his advice too far and you are setting yourself up for the biggest disaster in your life. How far is too far? How much do you want to gamble?
His words are about as close to being 100% incorrect as possible.
1) Yes, you can get 0% interest CC loans but it does cost you. (A) Your credit score plunges meaning car loans, mortgages, insurance, etc goes way higher. You WILL lose hundreds of dollars a year and never even know it. All to save a few bucks here and there. (B) If you do goof somewhere in the scheme, you are in a world of pain. (C) Many cards charge 3% to transfer OUT of them. He forgot to mention that. (D) The days of easy money (0% cards) are limited. It hasn't happened yet, but it will happen soon that these offers will dry up. What do you do when you have thousands of dollars on a CC and you can't get any more 0% cards and the whole scheme crashes down on you?
2) Cancelling a card yourself can harm your credit score. (A) It may shorten the history of on-time payments in your credit score. (B) It may reduce your credit limit, thereby making your % used credit higher which harms your credit score.
3) Having available credit is crucial. If your CC debt to CC limit exceeds 25%, your credit score plunges. If you don't have enough available credit, or if you have too much debt, then your credit score will suffer. His plan includes both little available credit and high debt. His 33% calculation is so completely backasswards. Note: I'm talking about credit score only. Lenders use other criteria other than just credit score. Yes, some lenders can be scared away by available credit in some situations. But that is a pretty rare occurance.
4) He is only 26. He hasn't lived through times when the 0% credit isn't available yet. He is in for a rude awakening when it does happen.
Yes, you can use 0% loans to your advantage with minimal harm. But take his advice too far and you are setting yourself up for the biggest disaster in your life. How far is too far? How much do you want to gamble?
azazyel
Diamond Member
- Oct 6, 2000
- 5,872
- 1
- 81
just a student loan and like a phone bill or something.
Edit:
I was 26 4 years ago. I was going to buy a HDTV and thought might as well put it on a Credit Card since I had the cash for it on hand. Since then I mainly just use it to pay my bills with and I use it for all my online purchases.
Thanks for the advice. I had no intention of messing around with 0% APR offers this early in my credit history. In regards to your point #3 - does this mean that if my first card is approved for a $1000 limit, and I charge some monthly expenses of $250 to the card, my FICO score will tank?
Dont be concerned about APR, because the second you carry a balance on the card, you have stopped letting the card work for you. DONT walk down the same dark debt path that everyone seems to have to go through when they are young. If you cant afford to pay it off every month, cut it up.
crt1530
Diamond Member
- Apr 15, 2001
- 3,194
- 0
- 0
AOR or App-O-Rama was a term coined by a poster named SUCKISSTAPLES over on the FatWallet Finance forum. Every time you apply for credit (apply for a credit card, sign up for a cell phone plan, buy a car or house with financing) your credit gets slightly dinged. Your score also suffers from lower average account age and there are penalties built into the FICO scores for having recently applied for credit.
The idea was to apply for all of the credit vehicles you were interested in all at once so you could maximize the advantage of your current high credit score. It basically boils down to the fact that SUCKISSTAPLES saw his FICO score as a commodity that was worth something and he attempted to figure out how to maximize its value.
The short answer is that the time period inbetween AORs depends on how long it takes for your FICO score to recover to its original level. It also depends on how much you like playing the credit card arbitrage game. SUCKISSTAPLES and a number of the other AOR proponents are real estate investors and use their credit profiles to invest in real estate.
Many people on FatWallet have a LOT of credit cards (i.e. dozens). A few have 100+. Generally, AOR people will consolidate their cards so they have at most 2 or 3 from any one bank. Currently, I have six. Right now I'm not interested in the additional effort required to manage large quantities of credit cards.
This is the original thread from 2004 that spawned the term.
This is an FAQ thread about AORs.
Spend some time reading the FatWallet forums. They have really good threads and FAQs that should answer just about any question you can think of.
Yeah I'm actually a regular reader of FWF, but I'm afraid to ask questions there because the regular posters will flame you into oblivion if your question is not something brand new or incredibly noteworthy. That said, I find it hard to search for some of the little details of stuff like AORs.
This is partially true but it revolves around the individual being irresponsible. I was not suggesting to rely on 0% interest credit cards to allow one to stack up tons of debt worry free. That is dumb. Using it in same manner as taking a out a small loan with a solid budget plan to pay it off in a short time span can't hurt though. In regards to the 3% charge for the balance transfer, I have yet to apply for a 0% APR card that did not include a free balance transfer, but one should definitely confirm that a free balance transfer is included before signing up. You are very correct that one could get themselves in a lot of trouble if they never really pay off their debt and instead just keep adding to the card relying on another deal being available the following year. Again, this goes back to the responsible part. I would never recommend putting so much money on a card that you can't pay it all off within that year.
There are ways to work with this system. I already mentioned how canceling the card hurts but not much and the positive results outweigh it anyways. In regards to available credit, I keep one card that I never cancel which currently has a $10,000 limit and 0 balance on it. I also call annually to apply for my interest rate to be reduced on this card.
My plan said nothing about having little available credit. It was not by any means a budget plan. I was merely offering a tip to someone looking for a credit card. The 33% thing was refering to lenders being scared away like you mentioned. You touched on the Debt to Income ratio here as well which is very good thing to read up on because it is important. I recommend that the OP google it sometime.
Ya, I'm 26, but we all were at some point. Luckily I read a lot of stuff from those older and more experienced then me before taking on my master plan, which is basically what I mentioned above by keeping your 0% APR debt low and controlled. There is no easy way out of a lot debt. I realize this. It boils down to responsibility.
Lastly, let me say that how I have budgeted myself and handled debt has increased my credit score by about 100 points in the past year alone according to a few credit reports. I am not in huge amounts of debt with exception of my student loans and car payment which is normal for my age. I don't have a house but I already qualified to get a great mortgage loan with very competitive interest rates and a low down payment. I figure that as long as I remain responsible and don't allow myself to get overwhelmed by debt then I will be just fine.
dullard
Elite Member
- May 21, 2001
- 26,028
- 4,653
- 126
Tank isn't the correct word. If you used 25% or less, there is virtually no effect on your score. So, yes, charge up to $250 without worry. But, you probably shouldn't charge up to $1000 very often. Why? 165 points on your credit score go to how much of your available credit that you have used. If you have used it all up, you could be harmed by up to 165 points. Of course, we should all hope the scoring system isn't so petty that it harms you the full 165 points for only $1000 in debt. But, we don't know the formula either. So, don't test it too much.
So, keep your balance at or below $250 for as much as you can. Sure, charge above it now and then for a big purchase or two. But try not to do it often. Your credit score only matters when a company checks it. You don't know when they will check it, but you can be pretty sure most of the time (when you apply for a loan, mortgage, appartment, insurance renewal, etc). Just stay at or below 25% right around those times.
After a little bit, your total limit will be far over $1000 anyways (especially if you get both CCs you are interested in). But just try to stick below 25%.
If I'm approved for the first one today, should I try for the second one right then also, or wait awhile?
dullard
Elite Member
- May 21, 2001
- 26,028
- 4,653
- 126
I really don't think it matters much. If you apply for a lot of things all at once, you get a temporary hit to your credit score. The reason for that is you may be getting a lot of credit, running up a tab, and fleeing. But only two cards at once shouldn't be a major hit. It is the app-o-rama that will give you a big hit. And these hits are only temporary.
For point 3, isn't it actually your debt-to-income ratio that affects your FICO score? And in that case, don't all loans apply, not just credit cards?
TRENDING THREADS
-
Discussion Zen 5 Speculation (EPYC Turin and Strix Point/Granite Ridge - Ryzen 9000)- Started by DisEnchantment
- Replies: 25K
-
Discussion Intel Meteor, Arrow, Lunar & Panther Lakes + WCL Discussion Threads
- Started by Tigerick
- Replies: 22K
-
News NVIDIA and Intel to Develop AI Infrastructure and Personal Computing Products- Started by poke01
- Replies: 384
-
Discussion Intel current and future Lakes & Rapids thread- Started by TheF34RChannel
- Replies: 23K
Facebook
Twitter