How to build credit?

JohnnyDaJackal · 11-24-07, 02:43

As my title states I'm looking to build some credit for myself. I'm 23 and apparently don't have any credit. I think it's because I don't have any credit cards, except for one under my mother's name, and I never took out any loans for school or anything. I'm looking to build my credit up since I got denied from the Discover cashback rewards card a couple months ago; and just a couple days ago from the Express card. I remember always getting letters from credit card companies saying I was approved, yada yada back a couple years ago.

Anyway any help? I've always had a savings account and just opened up my checking account a couple months ago.

I'm not really in a rush since I don't have any huge purchases (car, house) in the nearby future, but I would like to get my credit up since I don't pay bills late and never had any financial/debt problems.

Any help would be appreciated.

Thanks!

paradigm · 11-24-07, 02:51

easy ways to build credit (i'm sure you'll get tons of responses on this):

1. use a credit card

--i use a credit card for nearly every purchase i make. not only it is convenient, but i only have to do one transaction online a month to pay most of my bills. i also get cash back at the end of the year, so it's nice. DO NOT carry a balance...only use it for convenience. pay it off every month. this will build a track record for your credit.

2. car payment

--a car payment will definitely show your history for credit reliability.

i'll let others fill in more.

RTexasF · 11-24-07, 02:51

This may help:

Build Credit - How to Build Credit - Why it is Important to Build Credit

RTexasF · 11-24-07, 02:54

Quote:

Originally Posted by paradigm

easy ways to build credit (i'm sure you'll get tons of responses on this):

1. use a credit card

--i use a credit card for nearly every purchase i make. not only it is convenient, but i only have to do one transaction online a month to pay most of my bills. i also get cash back at the end of the year, so it's nice. DO NOT carry a balance...only use it for convenience. pay it off every month. this will build a track record for your credit.

2. car payment

--a car payment will definitely show your history for credit reliability.

i'll let others fill in more.

I think you missed the entire point here:

He has no credit card so how can he use it?
How could he get a car loan with no credit history?
His is asking how to begin to establish a credit history.

L33 · 11-24-07, 03:00

Quote:

Originally Posted by RTexasF

He has no credit card so how can he use it?

He can go to his bank and see if what they have available. They will probably be able to help especially if he's had a savings account and now a checking acct. It may only be a couple hundred dollar limit at first, but it is something to start with.

Quote:

Originally Posted by RTexasF

How could he get a car loan with no credit history?

He would probably have to get a parent or guardian to co-sign the loan.

Those are definitely 2 ways to build credit.

One little know way to hurt your credit is to actually close credit cards. You wind up lowering your debt/credit ratio.

BlackElantraGT · 11-24-07, 03:29

If you're a college student it used to be fairly easy to get credit cards. You didn't even need to have a job or any income. College students are most likely to use their card unwisely but still pay for it eventually, so they practically hand it out on college campuses.

I don't know who you're banking with, but some financial institutions like Wells Fargo offers a secured credit card. Basically you give them money as a deposit (something like $200-$500, I don't know the required deposit amount) and they open up a credit card for you that gets reported to all 3 of the major bureaus every month. At first you'll have to pay the card every month to get the balance down and then you'll be able to "spend" on it. You can't get too crazy with it (it is your own money after all) and it builds up your credit.

You don't want to pay the balance off every month. Credit card companies are in the business of making money. They make money when you borrow their money and pay back interest. So when starting to build your credit, you don't want to pay the balance off every month. Make small monthly payments. Once you've established your credit, then it becomes wise to not have debt. Also, if your credit is new, don't keep opening and closing accounts. You have to show that you're a reliable customer so the longer your account is open, the better. It's called credit history afterall, not credit "future".

LouisanaJeeper · 11-24-07, 04:03

Quote:

Originally Posted by BlackElantraGT

You don't want to pay the balance off every month. Credit card companies are in the business of making money. They make money when you borrow their money and pay back interest. So when starting to build your credit, you don't want to pay the balance off every month.

Credit card companies also make money from the retailers also (usually 3%) off the top of every transaction.

I dont think carrying a balance on your credit card effects your credit in a positive way at all. Usually quite the opposite.

If you think your credit score is way off from what it should be, you need to get a new credit report and check for fraud...

rjstaaf · 11-24-07, 04:19

Here is a link about common credit score misconceptions...

The Simple Dollar » The FICO Battle: Ten Common Tactical Mistakes When Dealing With The Credit Score Blues

You might try getting one of those secured credit cards. If you keep up the payments they will raise the limit on the card beyond what you have in the securing account.

10 questions before getting a secured credit card (Page 1 of 2)

JohnnyDaJackal · 11-24-07, 04:57

I'm not sure if what I have is a secured credit card or not. I have a Visa check card which is linked to my checking account. If it isn't maybe I'll look into getting one.

I also agree with the two posters above me, I have no intention of carrying a balance and making payments for something when I have the money to pay everything off.

I just applied for a MC reward card so I'll see what happens with that. I do remember receiving a pre-approval for american express maybe a month ago, so if the MC doesn't work out I can always try the american express.

Thanks for the suggestions thus far.

stiffdogg06 · 11-24-07, 05:25

I suggest just applying for a credit card. Easiest way to build credit besides school loans.

I have 3 credit cards. 2 that have a limit $1,000+ and one that has $1,500 limit. I only have a total of $500 together on all three.

I've had them all for about 1.5 years. I am 19.5 years old. My credit score is 640. All you do is pay on time and ALWAYS pay more than the minimum payment.

Once you get going, a way to raise your credit score is be added to a parent that has good credit. And to be added as an authorized user. It will not lower their score.

Joshua312 · 11-24-07, 06:08

I've only had a credit card for less than a year (20 years old), but have had a car payment for the last 3 years and my credit score is 715. It won't take long to build good credit if you use it wisely, pay on time, and pay off as much as you can.

BlackElantraGT · 11-24-07, 07:10

Quote:

Originally Posted by JohnnyDaJackal

I'm not sure if what I have is a secured credit card or not. I have a Visa check card which is linked to my checking account. If it isn't maybe I'll look into getting one.

I also agree with the two posters above me, I have no intention of carrying a balance and making payments for something when I have the money to pay everything off.

I just applied for a MC reward card so I'll see what happens with that. I do remember receiving a pre-approval for american express maybe a month ago, so if the MC doesn't work out I can always try the american express.

Thanks for the suggestions thus far.

That's just a debit card. It does not get reported to any bureau so it will not improve your credit whatsoever.

Let me be clear on my previous statement about carrying a balance. Let's say you open a secured credit card with a $500 deposit. First and foremost, ALWAYS make sure your payment is on time and more than the minimum. What you don't want to do is pay that $500 back the next month, and then never charge anything on it anymore and expect your credit will go up because you carry a zero balance.

Carrying a $0 balance is a good thing, but you can't just pay it off once and then expect to build credit from that. If you want to pay off your balance every month, that's good but you need to establish a history to show your financial responsibility. Having a zero balance doesn't mean you're financially responsible. It just means you don't use credit and have no debt. Charging and paying for your items in a timely manner shows responsibility.

I'm not telling people to go buy a stereo and pay for it on credit. That CAN build credit, but it's not the smart way. Use your credit card to pay for things you would normally pay for with cash, such as food and gas, etc. And if you don't like paying interest, just pay that balance off at the end of the month. But you have to keep building your credit.

It's like a detailing. Some detailers on Autopia achieve "celebrity" status on here because they consistently prove they are pros and not hacks with their Click & Brags. Does it mean they are better than your average weekend warrior? Not necessarily, but people will put more trust in their work and in their opinions because they've shown in the past the quality of their work.

Building credit is much the same way, you're trying to prove to the credit companies that they can trust you with their money.