Establish Credit

[gayteentn]

ok i got a question about establish credit. I'm 19 and I really want to establish good credit, I have my own phone in my name but I heard that it dosen't establish credit that people will really take into consideration, My friends tell me I should get like a credit card with a small limit, But honestly I have a really bad habit of overdrawing my bank account and I'm not sure if I could handel a credit card, but I need to establish credit so any suggestions of alternate ways to establish credit?

 

[Croynan]

Try establishing credit by applying for a credit card with a major gasoline company.

Often they will start an account with a lower credit line and if you make your payments on a regular basis for about 6 months or so, they probably will gradually raise your credit limit.

You could then do the same thing with a dept. store, and see what credit limit they will offer you - if it is too high, just ask for a lower credit limit that suits your needs.

If you are just going to apply for a "credit card" be careful of the ones you apply to with regards to what there monthly interest rate is on unpaid balances. If you see rates into the 20 percent and higher bracket, stay away from them and if they do issue you a card and you don't want it close out the account. (lower interest rates are given to those with high credit ratings and or score on their credit report and or history.

Most like a first time credit card being issued will have a low limit on it any way.

I would stay away from a credit card that requires you to deposit 300-400 dollars to get a line of credit - basically in that case they are using your funds as collateral.

Make sure you list work references and if personal references use people who yo feel have a good credit history and or own their own home. Using someone older then you would be much to your advantage i would think, not unless a friend of yours has already establed good credit alreay.

just some random thoughts from the local village idiot who is the last one who should be advising anyone about credit cards.

eM.

 

[okstatecowboy]

Don't fall into the credit card trap. If you do decide to get a credit card, limit yourself to one and keep the limit low. Be sure to pay it ON TIME and pay more than the minimum balance. Your credit score is partially based on your payment history. Also, pay your phone bill on time as well.

I would also suggest the following:
-visit with a consumer credit counseling individual about your questions/concerns. I've learned a lot in recent weeks.
-visit your local library and check out Suze Orman's Young, Fabulous, and Broke. She answers a number of questions regarding establishing and building your credit and credit score.

mikey

 

[thermodynamics]

As a college student (and a fiscally responsible one at that), I discovered there's a flaw in the "college students shouldn't have credit cards" thinking. If you don't have a credit card, you don't have a credit report/history, and this is a problem when you go to rent an apartment!

My advice: Just go for *one* of the standard ones you get in the mail. Chances are, you'll have a credit limit of like $500 (that was mine), and the interest rate isn't great. But...the companies don't care at all if you actually use it that much. You won't get "good credit" from using it all the time. You can get "good credit" from just using it for, say $50 per month. So you could use it for a recurring bill, and that's it if you wanted. Actually, that's a pretty good setup--have, say, a cell phone bill and that's it. Don't allow yourself to spend anything on it.

You have to learn fiscal responsibility sometime, and it might as well be now.

 

[Andreus]

get a secured card

they report regular payments that you make and if you dont pay they close the card out and pay off the ballance with the principle without ruining your credit line...

the interest is higher, and you need to save the principle, but it will bring your rating up

 

[me12121]

As a college student (and a fiscally responsible one at that), I discovered there's a flaw in the "college students shouldn't have credit cards" thinking. If you don't have a credit card, you don't have a credit report/history, and this is a problem when you go to rent an apartment!

Yeah, I got one too because of that. I also got it because I'm limited to 10 transactions per month on my debit card, but on my credit card I never have to pay for transactions. So now I just use my credit card for everything I would normally purchase with my debit card, as long as I have the money in my chequing account.

 

[M4P]

You've been given some great advice here. Use it and pay the balance ON TIME each month and your responsible track record will be rewarded in the future with borrowing power and lower interest rates

 

[jonboy1645]

Bravo for the great information above!!

By definition, your credit rating is a record of how well you pay someone back the money that you owe them. The only way to establish credit is to borrow money and then pay it back as agreed.

You can do this several ways: 1) A revolving line of credit - most visible form of this is a credit card. You have a limit, and you can borrow, and pay it back, borrow again, and pay it back, and borrow again and pay it back . .. Many people start out with a secured credit card. You have to deposit an amount of money into the bank - which then issues you a card with that limit. If you do not pay as agreed, then the bank takes your money on deposit to cover your balance. A famous brand of secured credit card is the Orchard Bank Secure Master Card. Note: This is way different than a Pre-paid Visa or Mastercard. Pre-pay cards are simply stored value cards - like a gift card that can be used anywhere. With a pre-paid card, since you don't owe anyone any money - you are just using your own, there is no credit reporting. Second is a traditional credit card without any security. This card poses more risk to you if you are not fiscally responsible, because the debt can't be washed away with funds on deposit. In this case, it's my opinion that you see if your bank offers a low limit card that you can apply for. This gives you the convenience of paying your bill at the financial center (saves mailing time), and many times you can automatically have the minimum payment, or more directly taken from your checking account. Further, your bank may offer overdraft protection where if you overdraw your checking account, the funds will come off your credit card to coever and pay the item - thus saving you the overdraft fee. Please note: if a card is issued to you with a limit you don't think you can handle, you can call the number on the back of the card and ask to have it lowered.

2) A personal loan - sometimes called a signature loan. Perfectly honest, small banks and credit unions are better at issuing this type of loan than huge banks. You can go in, maybe need a co-signor, and get an loan for a certain amount, maybe $1000 - $2000. Then over the next year or two, you owe a payment back to the issuing bank each month. Here's a hint - Don't spend the money. Put it in a high yield savings account, and then make sure you make your payments on time each month. Chances are, the interest rate for this loan will be similar to a credit card interest .. upwards toward 16%. There are 5% savings accounts out there, so you are paying 11% on the money - with $1000 loan for 1 year as an example, you are paying less than $100 in interest.

If it sounds like I work in a bank . .well, actually I do. I specialize though in estate administration and intergenerational wealth transfer (when someone dies - get to give out all the money) Hope this helps to get started. After you take this step, start a thread asking people to explain how credit scoring works and I will come back and do my best there too.

 

[knotty223]

When I moved to college my mom made me an authorize user on one of her Visa and because her fico score is well above 700 it reflected on my score and it helped establish my credit. I got my first card like a few moths after; Amex (blue) gave me a generous credit limit, which I think is a little too high for a college student but I was told that it’s good for my credit score as long as I don’t used more than 30% of it…something to do with utilization vs. credit limit. So asked someone with good credit, preferably related to you, to make you an authorized user. I'm not even going to pretend that I completely understand how it works but I think that route is a lot better than opening a secured card with a lot of fees and 0 chances of getting it unsecured (or wait for like a year) and with a very low/limited trade line.

 

[cocktales]

I remember very well how I first started establishing credit: Sears had this promotion where they allowed students to have a Sears card with an established "LOW" balance, whereby using their card you got started with a credit history and they taught me how to maintain my good credit rating .....!!!

My friends at JUB have done a good job ^^^^ before me talking about the "Hows" of establishing good credit; but here is a summation of "HOW":

On time payments
Owning no fewer than two cards and no more than four
Maintaining a checking and savings account
Keep debt-to-income ratio under 20% -- that is no more than 20% of your income is used to pay off debt
Keep request for additional credit to a minimum - less than four in the past year
Live at your current address for four years or longer
Employed at your current job for five years or longer
Demonstrate responsible spending behavior - keep balances well under card limits
Avoid court judgments, collection agencies and bankruptcy


I hope "ALL" of you who are trying to establish/maintain good credit ratings will take this issue very seriously and always pay your bills on time, NOT one day late; and if you always do this, you will have a superb credit rating and can one day walk into a dealership or a home for sale and get what you want without any hassle!

Good luck out there in "Credit" land! lol

 

[bedbugy]

you want credit try paying in cash if you aint got the dosh don't go for fools dosh you will always end up paying for ever and ever and ever

 

[gvlatinboi]

get a secured card

they report regular payments that you make and if you dont pay they close the card out and pay off the ballance with the principle without ruining your credit line...

the interest is higher, and you need to save the principle, but it will bring your rating up

Agree 100%!!!!! Secured card is the way to go for you!

 

[gabriel1]

if your bad with money get used to paying 100 $/ month interest on the $3000 you racked up in one year....
thats what everyone does... be smart and pay off the whole amount every month and youll have smooth sailing.... i learned the hard way

Ditto - Don't extend yourself so much that you need more than 2 months to pay it off. I generally pay off my balances every month, unless a major purchase then I generally go two months.