My husband and I would like to be able to make a budget using credit cards. We have little credit and would like to be able to someday get a loan to buy a home. How can we successfully budget our finances to be able to pay off the credit card every month?
P.S. We usually try to do the envelope budgeting.
To establish good credit, pay your bills on time. To keep out of debt while using credit cards, pay off the entire amount when the bill comes. It is easy to get into the habit of paying the "minimum" due, but you will soon find that you are accruing finance charges and the "minimum" due starts to grow as your balance increases. The credit card companies are out to make money--their intent is not for you to pay off the balance each month! When we were first married, we bought a washer/dryer combo on a Sears credit card. Money was tight, but we knew we could make the minimum payment each month. We paid month after month--which became year after year. By the time we had paid off the washer/dryer (we bought nothing else with that card), we had paid the original price THREE times! We certainly learned a valuable lesson!!
you can't build credit by charging something and then paying it off the next month, you need to show that you can charge and make payments, always more then the minium payment. And always on time, do not get over the limit fees or late payment fees, because that will bring up your finance charges. If you want to buy a house in the future, you can't buy it and get a loan and pay it off, you need to make payment for a very long time and the bank needs to see that you can handle a balance for a period of time, say 6 months and then pay it off and then charge something else and make payments for a period of time then pay it off. This will show good on your credit report and your credit points will go up. You also can get a small loan from a bank to make time payments to show a credit history..I'm not saying to get into credit debt, but you do need to establish credit history. I hope this information helped.
May I suggest a different approach? I am a big fan of Dave Ramsey. You might try checking out his website at www.daveramsey.com and also finding out which radio station in your area carries his program. He is hugely motivational and anti-debt to create "credit scores". He has a lot of great suggestions and specific ideas on how to get home loans, how much you should borrow vs. your income, how much to put down for the best return (and interest rate) on your money. I have been listening to his program for about two years now and feel both our financial situation and our marriage are stronger for it!
Hello. I had a situation recently where I was offered a credit card and didn't want to take it (this debt thing isn't one of my issues, and I don't want it to be!) but it's good to have some credit cards I was told by a loan broker, so for what it's worth, this is what she said. You open the credit cards far in advance of wanting to buy, and not too many at a time. Meaning, one or two probably. If you accept a credit card, be careful, even if you never use it or cancel it before the first due date, there may be an open and closed account on your credit anyway. Always ask once you've accepted a card, nto activated...accepted. Before you decide to dump a card, make sure you've had it at least six months, and if it's right in the beginning you might want to reconsider if it's already an account, it could impact if it's on the report, depending on how long. American Express (I loved this card because I never was tempted to carry a ballance) they told me, the broker, that American Express is the example of credit that won't help you get a house down the road.And it's the same problem if you charge and pay off each month on another card. They can't see you make payments. With AMX it's even worse, because there's no spending limit, normally. So, the way around it, I was told, is to carry a small balance, even if you pay it off every so often. Maybe just a few months then pay it off. NEVER pay only the minimum, ever. Make certain if you decide to make a payment off the time it's due, that it gets applied in the month you think it will, so you don't have no payment in May for example, becuse you paid May on the first, and someone's computer thought you meant April. Make sure that when you do carry a balance, it's less than HALF of the limit. That seems to be a reapeat theme with a lot of brokers, accountants and so forth, no more than half the limit used on any one card at any one time. Hope that helps, it's been consistant advice from my end.
I hope to buy when I'm a nurse, even something small, but not having enough credit though mine is really good what there is of it, can hurt. It's different with a house, I qualified for a new car, no down payment no income information at all at a preferred rate though my bank, yet, I can't get more than $500 limit on a credit card. I told them, it's weird, you were going to give me thirty plus thousand for a car, no questions asked...but it's different. I don't have much credit card experience, except AMX.
Talk to Fannie Mae (if that's spelled correctly you can find them on the web! :) ) but find an authority to guide you so there are no unhappy shocks later. I do know, that if there isn't something in your credit that you need, it takes months sometimes to fix that. So, starting early (as I am) is a good plan.
Good luck to you! Enjoy the house, paint it any color you want! ;)
I'd strongly encourage you and your husband to checkout www.daveramsey.com. Also, go to your local public library and checkout any of his books, "Total Money Makeover" or "Financial Peace". The guy makes a lot of sense and wants folks to be able to live debt free. He's not out to sell you stuff and you can work his program by reading his books.
As a REALTOR I can tell you that you don't need to rack up credit debt to qualify for a mortgage. Don't live your life bowing to the alter of the FICO Score. Lenders can perform a manual underwritng process for folks who don't have much or any kind of a credit score.
One other tid bit for you, you and your husband need to sit down and create a budget for the month, whereby you assign a spending category to each dollar you two bring into the household. Begin with your basics; food, shelter, clothing, transportation and then continue down the list. If you have some money left over set it aside for an emergency fund. Again, refer to Dave Ramsey's books or web site for help.
Please don't do credit cards! You'll become a slave to the lender. I speak from years of being enslaved. It's not worth it.
About ten years ago, I swore off borrowing from credit cards. But I still wanted to use them for convenience and points. I created an Excel spreadsheet "checkbook register" that includes a second set of columns for my credit card expenditures, payments, and balance owed. In the very last column, my credit card balance owed is subtracted from my bank account balance, and that is my "available balance." I simply don't spend more than my available balance, and that way, the money to pay my credit cards in full is always there. (My credit card payment is entered as a minus under the checking account section and a plus under the credit card section, for a net effect on my available balance of zero.) If you don't use Excel, you can do the same thing using an old-fashioned columnar pad.
One other point: I disagree with Jpcasino17. You most certainly *can* build credit while paying off your cards every month. In fact, that's the only way you should ever use credit cards. The credit scoring system isn't smart enough to keep track of whether you're carrying a balance. In fact, if you use your cards at all, your credit report will read as if you're carrying balances. A credit score is simply a snapshot of your situation on a given day, and the credit card companies report your balance as of your most recent statement. When preparing to obtain a mortgage last year, I was able to bump up my credit score several points by paying off my credit card balances a couple of days before the statement dates, so that the credit card companies reported all zero balances.
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