Building Credit

[wfbberzerker]

I am 19, and as of now, I have no credit cards. The only things I can think of which may have began to establish my credit are my cell phone (have had no problems ever paying the bill), and my checking account.

Right now, i use my check card for all my purchases whenever I go out. Would it be worth it forr building credit to get a credit card and use that instead whenever I go out, and then pay off the balance in full each month?

 

[Geomagick]

I can't really say what the best thing is to do. Your best bet is to ask a financial advisor (possibly in a bank - although I don't know how this works in the US).

If you do get a credit card avoid at all costs using it like the money is yours.

 

[Shyatic]

Okay here's a good method that I used during college to build up a great credit score by the time I graduated.

I got myself a student credit card, and gave it to my parents. Every time they bought something, they paid for it with my card and then paid it back. Over the period of a year, my credit limit went from $500 to $6000. After the first year, they continued the same thing including putting a down payment for a car, buying a refridgerator, etc... a lot of money was spent.

In the meanwhile, I also used the card to buy my school books and stuff like that, and taught myself some responsibility and self control. By the time I graduated, my credit score was a tad over 700 and it would have been higher, but the amount of actual credit history you have plays into your score. Today, some 2 years after that... my credit score is nearly 800.

So my advice is get the student credit card, use it like crazy and pay it off, and on SOME months -- carry a balance over (ie, don't pay the whole thing off). Credit card companies LIKE if you give them a little interest for a month and if they show they can make a few bucks off of you, it shows that to other lenders as well. Aside from that, BE fvcking responsible. I know a lot of people who put themselves into a huge amount of debt with credit cards in college.

Speaking of debt... I got like $5800 on my credit card right now 😛 I gotta pay it off at the end of the month though, it was purchases for work 🙂

 

[squirrel dog]

When I was your age I got a Sears card , bought things I needed , and paid them off on time with no balance ever . That will do what you are looking for .

 

[simms]

Originally posted by: Scribe
Okay here's a good method that I used during college to build up a great credit score by the time I graduated.

I got myself a student credit card, and gave it to my parents. Every time they bought something, they paid for it with my card and then paid it back. Over the period of a year, my credit limit went from $500 to $6000. After the first year, they continued the same thing including putting a down payment for a car, buying a refridgerator, etc... a lot of money was spent.

In the meanwhile, I also used the card to buy my school books and stuff like that, and taught myself some responsibility and self control. By the time I graduated, my credit score was a tad over 700 and it would have been higher, but the amount of actual credit history you have plays into your score. Today, some 2 years after that... my credit score is nearly 800.

So my advice is get the student credit card, use it like crazy and pay it off, and on SOME months -- carry a balance over (ie, don't pay the whole thing off). Credit card companies LIKE if you give them a little interest for a month and if they show they can make a few bucks off of you, it shows that to other lenders as well. Aside from that, BE fvcking responsible. I know a lot of people who put themselves into a huge amount of debt with credit cards in college.

Speaking of debt... I got like $5800 on my credit card right now 😛 I gotta pay it off at the end of the month though, it was purchases for work 🙂

Generally good advice, but I believe the whole "Carry a balance over" has been disproven. Don't remember where though.

 

[GI Ho]

The college years is a good time to build your credit.

Be careful and don't fall into the trap of applying for too many credit cards because of their attractive offer. Read the fine prints. Opening too many credit cards at one time is not good, each time a bank checks your credit report, your credit score is reduced. I agree with Scribe, too many people accumulate a huge credit card debt while in college.

My first card was the American Express back in 1993 and I chose American Express even though there was an annual fee. The other reason is because I knew I had to pay in full. It taught me discipline. More importantly, American Express customer service is excellent, they delete first and ask questions later.

Furthermore, do not pay the balance over time, the way a bank makes their money is interest from finance charges. I recommend only spending what you can pay back in full at the end of the month.

 

[Sparke]

I didn't have a job (except in the summer) while I was in college, so I didn't feel the need to get a credit card. That's one of the biggest mistakes I made. When I got out of college, I couldn't get a mortgage because I didn't have enough credit history, even though I had a 20% down payment that I had saved up. So I had to get a credit card and wait the obligatory 2 year credit-building period before I could get a mortgage.

 

[Injury]

Start small, build up.

I just bought myself a new LCD from Dell on credit. HORRIBLE APR... but I've had it less than a week and I've already paid 75% of it off. The rest will be paid off in a few weeks, before the first bill even comes.

If you ever look at a credit report, you'll see that you don't get any marks for things like "pays off cards immediately" or "only pays minimum amount due." You WILL see things like "pays 30 days late", "pays less than minimum" or "account in default".

If you're going to buy something, try and get ahold of a credit card, set the cash you have for it aside, and put it on the card. Use that cash to pay the bill in full right away.

Done.

Also keep in mind that if you have too much open credit (like if you had multiple cards with high limits) that some people who look at your credit may consider that a risk or a red flag... some deadbeats have a tendency to get as many cards as they can, run them all up in a week or two, then try and disappear. A company that wants to give you credit may not do so if there is a chance of you have large balances on other accounts. They can't see your account balance, they can only see your credit limit. They assume the worst, and rightfully so.

I'm still learning about credit, so if anyone has any beef with this info, feel free to edit: fixed it.

 

[kitkat22]

Originally posted by: GI Ho
Opening too many credit cards at one time is not good, each time a bank checks your credit report, your credit score is reduced.

Actually it depends on who and what type of checking is being done. Your credit is being checked all the time. Those 20 nice credit card offers you recieve in the mail come from credit card companies checking your credit. I think what you mean to say is if you repeatedly try to apply for credit over a short period of time; such as trying for a car loan, mortgage, and several credit cards over a month, you're going to have problems.

 

[Shyatic]

I have an account with TrueCredit.com that monitors my credit for $9.95 a month. For the OP it's not useful but for us established folk (people with $$$), it's very useful to see that no false reports are made on your report. I found out that apparently, I had a Macys card somehow and I never signed up for it. It was never used but it was on my credit report. Needless to say I got on the phone with Macys and b!tched them out, so now my credit report doesn't show anything from them 🙂

 

[AnyMal]

Here's how you can get started without incurring any debt, and actually making little money.

Go to your bank (where your checking and savings accounts are). Ask them for a $1,000.00/1 yr personal loan. Here's the trick: instead of taking cash, ask them to deposit the entire loan amount into a CD. It's a win-win. You get a loan/credit, bank has nothing to lose, you pay yourself an interest plus whatever interest a CD will accrue.

 

[wfbberzerker]

Originally posted by: AnyMal
Here's how you can get started without incurring any debt, and actually making little money.

Go to your bank (where your checking and savings accounts are). Ask them for a $1,000.00/1 yr personal loan. Here's the trick: instead of taking cash, ask them to deposit the entire loan amount into a CD. It's a win-win. You get a loan/credit, bank has nothing to lose, you pay yourself an interest plus whatever interest a CD will accrue.

CD?

 

[AnyMal]

Originally posted by: wfbberzerker

Originally posted by: AnyMal
Here's how you can get started without incurring any debt, and actually making little money.

Go to your bank (where your checking and savings accounts are). Ask them for a $1,000.00/1 yr personal loan. Here's the trick: instead of taking cash, ask them to deposit the entire loan amount into a CD. It's a win-win. You get a loan/credit, bank has nothing to lose, you pay yourself an interest plus whatever interest a CD will accrue.

CD?

Certificate of Deposit.

 

[Kalbi]

Originally posted by: George Powell
I can't really say what the best thing is to do. Your best bet is to ask a financial advisor (possibly in a bank - although I don't know how this works in the US).

If you do get a credit card avoid at all costs using it like the money is yours.

Do not listen to this guy.

 

[Pabster]

Originally posted by: AnyMal
Here's how you can get started without incurring any debt, and actually making little money.

Go to your bank (where your checking and savings accounts are). Ask them for a $1,000.00/1 yr personal loan. Here's the trick: instead of taking cash, ask them to deposit the entire loan amount into a CD. It's a win-win. You get a loan/credit, bank has nothing to lose, you pay yourself an interest plus whatever interest a CD will accrue.

Interesting idea, except that CD rates suck.

You can do better leaving the money in ING or the like.

 

[Eeezee]

Originally posted by: AnyMal

Originally posted by: wfbberzerker

Originally posted by: AnyMal
Here's how you can get started without incurring any debt, and actually making little money.

Go to your bank (where your checking and savings accounts are). Ask them for a $1,000.00/1 yr personal loan. Here's the trick: instead of taking cash, ask them to deposit the entire loan amount into a CD. It's a win-win. You get a loan/credit, bank has nothing to lose, you pay yourself an interest plus whatever interest a CD will accrue.

CD?

Certificate of Deposit.

Aren't CDs those untouchable accounts for so many years? Or am I thinking of something else..?

Is this really an effective strategy? I'm also in college, so I went ahead and got a credit card through my bank to build up a credit rating. I've used it for about $1100 worth of stuff so far, but paid it all off instantly because I don't want to pay any interest =p

Doesn't a credit rating go up with regular credit card use regardless of how much interest you pay? I know the report won't actually say "pays off card immediately" or anything like that, but my score should still go up right?

 

[DaWhim]

Originally posted by: Kalbi

Originally posted by: George Powell
I can't really say what the best thing is to do. Your best bet is to ask a financial advisor (possibly in a bank - although I don't know how this works in the US).

If you do get a credit card avoid at all costs using it like the money is yours.

Do not listen to this guy.

QFT

well, perhaps you should educate yourself a bit more. the way the cc works and how you can make it works for you, not the other way around.

 

[DaWhim]

Originally posted by: Eeezee

Originally posted by: AnyMal

Originally posted by: wfbberzerker

Originally posted by: AnyMal
Here's how you can get started without incurring any debt, and actually making little money.

Go to your bank (where your checking and savings accounts are). Ask them for a $1,000.00/1 yr personal loan. Here's the trick: instead of taking cash, ask them to deposit the entire loan amount into a CD. It's a win-win. You get a loan/credit, bank has nothing to lose, you pay yourself an interest plus whatever interest a CD will accrue.

CD?

Certificate of Deposit.

Aren't CDs those untouchable accounts for so many years? Or am I thinking of something else..?

Is this really an effective strategy? I'm also in college, so I went ahead and got a credit card through my bank to build up a credit rating. I've used it for about $1100 worth of stuff so far, but paid it all off instantly because I don't want to pay any interest =p

Doesn't a credit rating go up with regular credit card use regardless of how much interest you pay? I know the report won't actually say "pays off card immediately" or anything like that, but my score should still go up right?

hah......what the hell is that advise?

personal loan = 10% APR+
CD = less than 5% interest rate.

there are short term and long term CD. longer the term, higher the interest rate.

your credit score will go up a little by little, as long as you don't default on your bill. that's all.

 

[AnyMal]

Originally posted by: Eeezee

Originally posted by: AnyMal

Originally posted by: wfbberzerker

Originally posted by: AnyMal
Here's how you can get started without incurring any debt, and actually making little money.

Go to your bank (where your checking and savings accounts are). Ask them for a $1,000.00/1 yr personal loan. Here's the trick: instead of taking cash, ask them to deposit the entire loan amount into a CD. It's a win-win. You get a loan/credit, bank has nothing to lose, you pay yourself an interest plus whatever interest a CD will accrue.

CD?

Certificate of Deposit.

Aren't CDs those untouchable accounts for so many years? Or am I thinking of something else..?

Is this really an effective strategy? I'm also in college, so I went ahead and got a credit card through my bank to build up a credit rating. I've used it for about $1100 worth of stuff so far, but paid it all off instantly because I don't want to pay any interest =p

Doesn't a credit rating go up with regular credit card use regardless of how much interest you pay? I know the report won't actually say "pays off card immediately" or anything like that, but my score should still go up right?

Not at all, you can get a CD for a term as short as 3 months.

 

[mattocs]

The only time the cellphone will go near your credit score is when you don't pay it and it goes to a collection agency.

 

[Boztech]

Originally posted by: OBW96
The only time the cellphone will go near your credit score is when you don't pay it and it goes to a collection agency.

QFT

My suggestion is get your parents to cosign on a card with a small limit and low APR - a gas card is a good way to start. Don't run the balance up to the limit, pay it off every month, and you'll be good.

 

[Yossarian]

Originally posted by: Scribe

So my advice is get the student credit card, use it like crazy and pay it off, and on SOME months -- carry a balance over (ie, don't pay the whole thing off). Credit card companies LIKE if you give them a little interest for a month and if they show they can make a few bucks off of you, it shows that to other lenders as well.

WRONG WRONG WRONG. You don't know wtf you're talking about. Don't give them money for free, that's just stupid. They make plenty of money off you from the merchant fees.