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I recently got my first credit card (although I have had a debit card for a long time). It has a $1200 limit. In order to maximize my credit building, which of the following is the best method (or, feel free to offer an alternative method)?

  1. Pay my rent each month with the credit card. My rent is right around $1030 including utilities and everything. If I did this, I wouldn't use my credit card for anything else.

  2. Pay for all my random monthly purchases (restaurants, groceries, gifts, etc.). This would likely hover around $500, although I'm really not sure because I've never tracked it THAT closely. If I did this, I obviously would have to pay my rent via check or with my debit card instead.

If neither of these is the optimal method to build credit/encourage Discover to raise my credit limit, let me know! However, I'm "guessing" one of these methods is pretty close to being optimal...

If it makes a difference, I have the "Discover It" card. My #1 priority is building credit, but a close 2nd is being able to increase my credit limit.

Edit: Does total number of purchases make any difference, or just the bottom line? In other words... is 1 purchase of $300 with my credit card equivalent to 50 $6 purchases when it comes to building credit?

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    My first Discover card had a $2,000 limit, and after using about 90% of that limit for four months, I asked Discover to double it and they happily obliged. I don't know if that's the best way, but if you pay it off in full each month, Discover should be more than happy to raise your limit to something higher.
    – John Bensin
    May 31, 2013 at 2:30
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    @JohnBensin Just yesterday in your question titled Does high credit utilization, coupled with paying off my balance in full each month, increase my chances of a credit limit increase? you said "My utilization is well within the 1-20% range on my credit cards, so unfortunately if this situation does occur, I don't have any personal experience with it." So, have you or have you not had an experience where high utilization led to an increase in the credit limit?
    – Dilip Sarwate
    Jun 7, 2013 at 1:25
  • @DilipSarwate Good point, I wasn't clear on that. I've had an experience where high credit utilization led to a raise when I asked (that was my very first credit card, the one I referred to in my first comment here). I've never had high utilization lead to my limit being raised without my asking, which is what that question is about. When my limit was raised without my asking (see my comment on the question you linked), I didn't have high credit utilization, so I don't know if it was related to high utilization or not. Thanks for pointing that out; I clarified my question.
    – John Bensin
    Jun 7, 2013 at 2:47

3 Answers 3

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I couldn't find where I posted it before, I'm sure I have, so I'm posting it again:

How does that thing with the credit cards work again?

In summary, your #2 is close to what I suggest in that article, but it is more detailed and more to the point.

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The ideal credit utilization is 1%-20% as I noted in my article Too Little Debt?

If your bill is over $240, you risk a lower score. I suggest paying anything over the $240 owed before the statement is cut. The statement amount is what's reported, not the average monthly balance.

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There are a lot of different tips and techniques to raise your credit score but some of the most common, and applicable to your question, are credit mix, consistent payments and debt utilization.

Option 1 isn't good because it will look like you charge too much which raises red flags with existing and potential lenders. Option 2 is better due to the lower credit utilization ratio and it's also more manageable. You can choose to stop using your credit card if you feel like you've charged too much.

Most credit card companies are happy to increase credit limits for reliable payers because there is no down side. Providing more purchasing power to responsible customers is always a plus. Try keeping your monthly average balance to 20% or less of your available credit limit and pay the balance in full each month. There are A LOT of other tings to try however like getting a $1000 installment loan, correcting inaccurate information on your credit report, etc.

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    Are you affiliated with stockmonkeys.com? I haven't heard of them before and you posted several of their links in other answers. I noticed a moderator removed one of them as suspicious too.
    – John Bensin
    Jun 6, 2013 at 23:34
  • Hi John, no I'm not affiliated with the site. I came across it when looking up a foundation issue and liked it. I guess if my links where to about.com or eHow.com it wouldn't be an issue. Go figure.
    – Frank Dobson
    Jun 6, 2013 at 23:46
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    That domain triggered the panic page at my work. I don't know why, but I would rather see a different source.
    – MrChrister
    Jun 7, 2013 at 5:38
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    @MrChrister It triggered my office's filters too, which made me suspicious.
    – John Bensin
    Jun 7, 2013 at 13:08

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