starting and building credit (questions)

[TIM TIM TIM]

Well, I am 18. I have no credit cards, car loans or anything in my name. I wanna try to start getting some credit built but I dont know how to do it. I have applied for a store card and a gas card but was declined by both. I figured there low limits and all so it would be easy to get one.... I was wrong, So my real question is, how do I go about getting a little bit of credit started?? my parents have talked about refinancing my car and putting my name on it but I dont know if they are for sure or not. Any help would be great, thanks

Also, I have a bank account at GTE credit union if it helps any

[Rdline1]

get 2 credit cards. just 2, forever. i have been told that by a professional mortgage broker that the BEST thing to build credit is to get 2 credit cards and pay them off every month on time. dont EVER transfer balances to new cards, as this will hurt your score. i'm 20, and i just got my 2 a few months ago and have so far only charged each with some gas. keep it low and just pay it off on time and you'll build up a good score slowly but consistently.

[Amortized]

Establishing credit, a catch 22. Nobody will extend you credit because you don't have any, so how are you supposed to get it? I'm sure you've heard bad credit is better than no credit, thats only true in some cases, and this is one of those. If you are the type of person to have 300 late payments on a credit card, a credit card company will extend you credit in a heartbeat, as those late payments make up the majority of profit for most credit card companies. As long as you aren't past due on anything, you'll likely get approved for a credit card....UNLESS you have no credit. Problem with no credit, creditors don't know what to think, they're not sure if you're gonna pay on time, pay late, or never pay at all.

So to establish some credit, you can do one of 2 things. Continue applying for CC till you're approved, or go with a secured credit card. You'll have to put down a $500 deposit (or whatever limit you determine/pay). You will then use your credit card as it would, however you will make a payment each month (typically 2% of the balance, congress has passed a bill requiring the minimum monthly payment on CC to increase from 2 to 4%. A few months of paying on time should allow you to be approved for other cards without having to put down a security deposit.
If you are in the market for a new car, have a job, and a down payment, you should be able to get approved for an auto loan.

To learn more about credit, visit http://www.artofcredit.com .

[Amortized]

get 2 credit cards. just 2, forever. i have been told that by a professional mortgage broker that the BEST thing to build credit is to get 2 credit cards and pay them off every month on time. dont EVER transfer balances to new cards, as this will hurt your score. i'm 20, and i just got my 2 a few months ago and have so far only charged each with some gas. keep it low and just pay it off on time and you'll build up a good score slowly but consistently.

that professional mortgage broker wasn't very professional when he gave you bad advice. Paying off a credit card each month is useless if trying to build credit. You might as well just throw the card away. Here is where the problem lies, each month the cc will report the balance of the card to show account activity. If the card is being paid each month, the reported balance doesn't change, it would appear as if there was no activity on the account. So your score will improve in the sense that a credit line has aged (the older the accounts the more it will help your score, and aging accounts is more important than most think), however you won't get credit (no pun intended)from the credit bureau for making a charge and submitting full payment. In order for the bueau to see activity, the balance would have to change, or the payment made late.
If somebody is trying to build their credit, instead of paying the balance off each month, they should aim to have their balance at 30% of the credit limit. The scoring models use a number of factors in the algorithim that computes the score. One of these factors is having your balances at 30% of the limit.
For more on credit, go to http://www.artofcredit.com (http://www.artofcredit.com/)

[number_2]

are you a student? i'm eighteen and credit-less as well, but i was easily approved for a card from my credit union bc i'm in college. student cards typically have lower limits and maybe even higher interest rates, but if your intent is simply to build credit (as mine is) that won't matter much, at least in the beginning.

[_Charles_]

WOW!

Few things to realize...
1. Store Credit cards (and gas credit cards) are a BAD IDEA. They do not help your score as much as you would think.
2. Applying for credit cards till you get approved is ALSO a BAD IDEA. Every time you apply, they do an inquiry, which drives your score EVEN LOWER!

so what can you do?
Get a 'secured' credit card.
A secured card requires you to open and maintain a savings account as security for your line of credit; an unsecured card does not.The required savings deposit for a secured card may range from a few hundred to several thousand dollars. Your credit line is a percentage of your deposit, typically 50 to 100 percent. Usually, a bank will pay interest on your deposit. In addition, you also may have to pay application and processing fees — sometimes totaling hundreds of dollars. Before you apply, be sure to ask what the total fees are and whether they will be refunded if you’re denied a card. Typically, a secured card requires an annual fee and has a higher interest rate than an unsecured card.

Make sure it is a Visa/Mastercard/Discover.

The trick to gaining points is this: The Maximium number of points is given when you have are at 25-40% of your revolving credit limit. Example: You have 1 card, $500 credit limit, you want to keep your balance below $200 or so. IF you have 5 cards, you add the total limits (let's say $10,000), than you want to keep your combined balance below $4000, and so on.

Cliff notes:
1. Join a CU
2. Get a secured CC (VISA/MC/DISC)
3. DO NOT apply for a store CC/ or Gas CC ever again
4. Pay payments on time
5. in 6 months, apply for a 'Visa Classic' through your CU ($500 begining balance) unsecured.

That is a good start.
Charles

[John]

get 2 credit cards. just 2, forever. i have been told that by a professional mortgage broker that the BEST thing to build credit is to get 2 credit cards and pay them off every month on time. dont EVER transfer balances to new cards, as this will hurt your score. i'm 20, and i just got my 2 a few months ago and have so far only charged each with some gas. keep it low and just pay it off on time and you'll build up a good score slowly but consistently.

this sort of advice is good for aging your credit file, but your score won't be very high very quickly. Its the long long way to do it. Also, you can pretty much expect to have a hard time getting limit increases. Carrying a small balance, 50% or less of your high credit limit, is the way to go. Make your payments on time. And do not be afraid to transfer balances if the offer is good, but its not something you want to do every year. Your goal should be to always have on time payments on installment accounts, try to keep your balances below 50% of available credit, and always try to get your credit limits higher.

As for the original topic, refinancing your car and putting your name on it is the easy way to break into credit. Any form of secured credit (sans a home) is the easiest to get. A secured credit card is another way. Never be late and you're golden

[Charles]

GTEFCU gave me an unsecured Visa card with $500 limit when I was 18, was earning around 25k/year gross at the time....might be something to apply for depending on your income.... if it's low, a secured card is the way to start.

[Charles]

Your goal should be to always have on time payments on installment accounts, try to keep your balances below 50% of available credit, and always try to get your credit limits higher.


+1 and transferring balances around from card to card will not hurt your score any that I've seen, it's my favorite pasttime :lol: my highest rate now is 5.9 soon to be 1.9%. I've transferred often in the past to get my rates as low as they are now and my score isn't top notch(740+), but still over 700 now.

[Amortized]

Your goal should be to always have on time payments on installment accounts, try to keep your balances below 50% of available credit, and always try to get your credit limits higher.


to add to this, I can see the benefits of an increased credit limit. But do not try to have your limits raised to tens of thousands of dollars. Having HIGH credit limits (over $20,000) with low balances can actually bite you. If applying for a home loan, the underwriter may turn you down if you already have a high DTI with a lot of available credit. Reason being, if you go out and buy $20k in furniture for your new house on that visa, your DTI just got that much higher making it harder to pay the house payment. If you're just bumping it up a couple hundred bucks, or maybe a couple thousand, it can be beneficial, especially if the end result places your balance at 30% of the new limit. And of course the other negative aspect associated with high credit limits is the urge to go out and charge a sum you can't pay back in a reasonable amount of time.

[Amortized]

+1 and transferring balances around from card to card will not hurt your score any that I've seen, it's my favorite pasttime :lol: my highest rate now is 5.9 soon to be 1.9%. I've transferred often in the past to get my rates as low as they are now and my score isn't top notch(740+), but still over 700 now.

that's not typical, but not rare either. There are so many other variables computed in the algorithm that comes up with your score that one chain of events can affect you in a completly different way than the next person.

[TIM TIM TIM]

well I am part of GTE credit union and my income isnt great. I just started a new job so that wont look good for me. I only make 7.25 an hour.
So my best bet is to go to my credit union and try to get a secured account?
I have only applied for 2 cards, one gas card and one store card.

Ps. Thanks for the help

[Charles]

Secured card is probably your best bet......
I don't think GTEFCU offers a secured Visa so you might have to look elsewhere....possibly other local CU's or look here...

http://www.bankrate.com/brm/rate/cc_ratehome.asp?cc_online=0&hAboutType=C&product=cc&prodtype=cc&web=brm&R1=1&card_type=Secured&card_class=All&cc_freq=1

[Amortized]

also check out orchard bank, they're a TR banner advertiser. banner said "establish or re-establish". Don't know if their CC to establish credit are secured or not. Might as well support a TR supporter if they can help ya.

[TIM TIM TIM]

yeah true. Why is it so difficult to get damn credit haha

[Rdline1]

you all are knocking my ideas, but in other threads you have said that you are all in the process of repairing your credit! wouldnt it be technically a better situation to have NO debt every month, and still showing you can pay off your cards, then having that higher balance? im a freak about credit cards, i was extremely skeptical when the broker even mentioned getting them. but seeing as im looking to buy a house, i need it. id rather owe no one anything (except for a house), then know that i have $1000 in debt from credit cards.

[Amortized]

you all are knocking my ideas, but in other threads you have said that you are all in the process of repairing your credit! wouldnt it be technically a better situation to have NO debt every month, and still showing you can pay off your cards, then having that higher balance? im a freak about credit cards, i was extremely skeptical when the broker even mentioned getting them. but seeing as im looking to buy a house, i need it. id rather owe no one anything (except for a house), then know that i have $1000 in debt from credit cards.

basically what it boils down to is how much you want to establish your credit. We say not to pay it off completely each month as it doesn't register with the credit bureau, keep it at a managable level (this is key), increase score, establish credit, simple as that.

[_Charles_]

id rather owe no one anything (except for a house), then know that i have $1000 in debt from credit cards.

I didn't have a revolving credit line (credit cards) for 10years, and my FICO score kept going down slowly, and I didn't know why, till I went to the FICO website and read more. It appears that 'NO CREDIT CARDS' actually hurts you, so, I had to get one. Credit score has been going up ever since.

Charles

[TIM TIM TIM]

so when i get a card, i should just pay a big chunk but leave a little bit to roll over to the next month? like say I owe 200 bucks, I should pay like 175 (I wanna keep as little as possible so the interest doesnt rape me) and just repeat the process every month?

[Amortized]

so when i get a card, i should just pay a big chunk but leave a little bit to roll over to the next month? like say I owe 200 bucks, I should pay like 175 (I wanna keep as little as possible so the interest doesnt rape me) and just repeat the process every month?

EXACTLY! Try to keep the balance to 30% of the credit limit. Keeping your balance around that figure would be optimal if trying to increase your score.

[TIM TIM TIM]

sweet. thanks for all of the help guys. I am going to look into the secure cards very soon

[Rdline1]

EXACTLY! Try to keep the balance to 30% of the credit limit. Keeping your balance around that figure would be optimal if trying to increase your score.

thats makes theorhetical sense i guess, i just would rather play the safe card and not let interest rate go crazy.....

[number_2]

redline - i want to point out here that people are NOT saying that it's financially "smarter" not to pay off your credit car bills at the end of the month. obviously, you would keep yourself one hundred percent out of debt and never have to fork a cent in interest over to the credit card companies. that would be optimal. the problem is that, apparently, if at the end of every month you've payed off your card completely and owe nothing, your balance remains zero and your credit history shows no activity whatsoever. which is almost, if not exactly the same as not having a card in the first place, and building no credit at all. that's what i've gotten out of this. like you, i REALLY don't like the idea of not paying off my card every month... but i want to build credit, so i'm doing what's necessary. and people have convinced me, this is the way to go.

[Amortized]

redline - i want to point out here that people are NOT saying that it's financially "smarter" not to pay off your credit car bills at the end of the month. obviously, you would keep yourself one hundred percent out of debt and never have to fork a cent in interest over to the credit card companies. that would be optimal. the problem is that, apparently, if at the end of every month you've payed off your card completely and owe nothing, your balance remains zero and your credit history shows no activity whatsoever. which is almost, if not exactly the same as not having a card in the first place, and building no credit at all. that's what i've gotten out of this. like you, i REALLY don't like the idea of not paying off my card every month... but i want to build credit, so i'm doing what's necessary. and people have convinced me, this is the way to go.

and to add to this fine post, you can pay the card off the second month. all I'm saying is not to pay it off each month. Carry a small balance. Pay 70% of your balance the first month, and the remaining 30 the following month. Anything you charge the second month, again, pay 70% that month, then 30 the third month. by the 3rd or 4th month, pay it off in full (so the balance doesn't climb too much) and start the process over. Just a suggestion to increase your score while keeping your balances low.

[John]

if you keep your balances very low, you wont be paying much in interest anyway. Just leave like under 50 on the card, that should suffice.

[TNathe]

I was thinking of this thread this weekend and realized what I had been told once about building credit. W/O stupid credit cards.

First and foremost, YOUR BANKER IS YOUR FRIEND, he is the one who ultimately controls your financial future, w/o that investment loan you dont make money. And just because the bank says you have to meet certain qualifications, one who is "in" with their banker can get a loan approved otherwise by having his banker speak on behalf of him in front of the banker's superiors.

Anyways, on to the point. Go down to your local bank, the one you bank with preferrably. Speak to a loan officer about getting a $500 loan. When he asks for what, tell him you want to build your credit with it. You are going to take that $500 and open another account at the bank and put the $500 in it. Every month you will take money from that account and pay it towards your loan. Ask you banker how long you should make monthly payments so that it reflects on your credit score. After that time, take the rest of the money and pay the balance of the loan off. After a $500 loan has been accomplished, you can do $1000 then $3000 if you wanted to help improve it even further.

PS: I just remembered where this info came from, I had ordered Charlton Sheet's investment packet a while back. hehe, it actually IS good info.

[_Charles_]

I was thinking of this thread this weekend and realized what I had been told once about building credit. W/O stupid credit cards.


"STUPID CREDIT CARDS" are now a requirement to building your credit score. NO revolving accounts actually hurt you now....that's the rude awakening that I came to.

CREDIT SCORES predict your ability to 'MANAGE' debt. A revolving line of credit is now considered a key indicator. If you have a CC, what is your balance? do you pay on time, etc.

If you don't have a credit card, they have no idea...so you get no points.

Pretty sad...but so true. I found out the hard way.

Charles

[TNathe]

they're still stupid though. haha

[TIM TIM TIM]

yeah I dont like the idea of credit cards but if your smart with them, they can be just fine

[TNathe]

i was just throwing another idea out their. Maybe it can help someone improve existing credit? It just not as easy as receiving an envelope in the mail and signing the bottom and returning it.

[John]

they're still stupid though. haha

IMHO they should be sporadically used and held onto for emergency situations. However after you get your credit established and can recieve excellent interest rates, they can really help you.

[number_2]

I was thinking of this thread this weekend and realized what I had been told once about building credit. W/O stupid credit cards.

First and foremost, YOUR BANKER IS YOUR FRIEND, he is the one who ultimately controls your financial future, w/o that investment loan you dont make money. And just because the bank says you have to meet certain qualifications, one who is "in" with their banker can get a loan approved otherwise by having his banker speak on behalf of him in front of the banker's superiors.

Anyways, on to the point. Go down to your local bank, the one you bank with preferrably. Speak to a loan officer about getting a $500 loan. When he asks for what, tell him you want to build your credit with it. You are going to take that $500 and open another account at the bank and put the $500 in it. Every month you will take money from that account and pay it towards your loan. Ask you banker how long you should make monthly payments so that it reflects on your credit score. After that time, take the rest of the money and pay the balance of the loan off. After a $500 loan has been accomplished, you can do $1000 then $3000 if you wanted to help improve it even further.

PS: I just remembered where this info came from, I had ordered Charlton Sheet's investment packet a while back. hehe, it actually IS good info.

i'm fascinated by this... good post.

[moldyhands]

wow, i'm drunk, so i didn't read very carefully, but did no one suggest getting someone to cosign for the credit card? my parents did and i got a gold card for my first CC. not only was i blangin' but it helped get my credit score pretty decent, pretty quick.

by the way, until you have a major loan that you pay in full (like a car loan), your credit score will pretty much suck.

[Amortized]

i was just throwing another idea out their. Maybe it can help someone improve existing credit? It just not as easy as receiving an envelope in the mail and signing the bottom and returning it.

I might have a program for that if all 3 of your credit scores are in the 800's.

[Amortized]

wow, i'm drunk,



by the way, until you have a major loan that you pay in full (like a car loan), your credit score will pretty much suck.

I see you're drunk so I'll excuse it, however that's not necesarily true. I've seen plenty of people with very little credit, yet good scores. Of course all of those have one thing in common, perfect payment history on the few, if not one account they have.