question about credit

Cylotron

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I remember when I was young & hearing my dad complain about credit cards... I'd think "dang I never want one of those!"

So, as far as a "credit score" goes, I never bothered to look into it. For the longest time I just assumed maintaining a bank account & paying bills on time was good enough. Now that I actually need to do something that requires having "good credit", I'm told I don't have a credit score(it's not bad, one just doesn't seem to exist).

I've researched it some and have gone ahead and applied for a secured credit card(should be arriving in a week or so). A side from making purchases & paying the bills on time, is there anything else I can do to help speed up the credit building process?
 

fake

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AFAIK, you'd just have to buy stuff with the card and pay it off without missing a payment, and always make the full payment, not the minimum $25 or whatever. And don't miss the payment deadline, even by a day.

Another way to increase your credit score is to get a loan and do the same - pay it off consistently. So like a car or home loan.
 

GohanX

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Yeah, best thing is simply pay the credit card bill on time. The catch is that a credit card can be a dangerous thing, it's very tempting to go buy this shiny thing you really can't afford.
 

skate323k137

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It's a game, but worth learning to play especially if you ever want to finance... anything.

I was in your boat at age 20. Just... no credit score at all. I got a small secured card, once I had that for a while I opened a normal card, but kept the secured one. This is because one factor is your oldest line of credit.

The most important thing is to carry small balances on your cards/credit accounts. If you have a 1000 dollar limit, keep the balance under $400 if you can. This is one of the largest factors; showing that even though you could spend the money, you have not. If you do this you're a lot more likely to get good auto loan rates etc. If your cards have high balances your score will suffer quickly.

I'll sound like a commercial but credit karma is worth it as a free site for what it is. Of course the "free" tradeoff is loan offers and credit card offers etc., but if you are trying to build credit that's not a bad thing. There are lots of "factors" in a credit score (age of oldest acct, no of accts, percent of credit used, etc.) so you want to be aware of them long term.
 

fake

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I haven't used Credit Karma because the app for my card (which I mainly use for keeping track of how much I've spent for the month and for security alerts) has a credit tracker built in, and I feel slightly less unsafe using that as opposed to a third party app.
 

NeoSneth

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Just owning a credit account for a long period of time helps. I still have my original credit card for this reason. i never use that one anymore, but it's there.


• You can always get a free credit report, once a year, at annualcreditreport dot com.
• CreditKarma dot com is also free but has sponsored ads. This will tell you where your score is weak. I used to always get penalized because I didn't carry a lot of credit debt. e.g. mortgage.

This is all for US based people of course. I have no idea what the rest of the world does for credit.
 

HDRchampion

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Which credit card did you use? Sometimes joining one gives you money, i think Chase Freedom gave me like $300 for opening one up. You can also use your credit card to pay for online payment bills like Health Insurance, Water, Cable, etc...Just pay that every month should build you up, you can also get some cash back for it.
 

Neo Alec

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Good move. If you don't have any credit score, it can be difficult to apply for a credit card. The solution is to get a secured credit card, like the ones that Capital One offers. You do a $50-80 deposit, they send you a card, and then suddenly in a month you have a default credit score. I wish someone had told me this.
 
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skate323k137

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I got my first line of credit through capital one as well. They seem to be the easiest for starting from scratch.
 

JoeAwesome

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I built mine through student and car loans. Same advice as all the others, but I've heard having many credit cards and cancelling credit cards can ding you.
 

madman

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Unless your goal is to end up a middle aged man with little savings, no retirement plan and few assets other than video games and dolls, you probably want to seek financial advice elsewhere.
 

sylvie

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just fuck everything up for yourself and wait until you're in your 30s to deal with it
 

mainman

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NEVER NEVER max out the card as this hurts your score, only use 70% limit. Never pay only the bare monthly minimum, never pay late. Don't keep increasing your limit if you don't have the income or assets to cover it.

In general you should only use the card for purchases you can pay off in no more than 3 mths.
 

kuze

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NEVER NEVER max out the card as this hurts your score, only use 70% limit. Never pay only the bare monthly minimum, never pay late. Don't keep increasing your limit if you don't have the income or assets to cover it.

In general you should only use the card for purchases you can pay off in no more than 3 mths.

You can just about max out credit cards so long as you pay the full statement balance each month before the due date. At least that's my experience.

As your "credit" improves, they will just start doubling your credit limit on the card automatically hoping you spend more than you can afford.

If you have an Amazon Prime account the Chase card they offer with 5% back is pretty decent. Otherwise the new PayPal card with 3%(?) back on everything is a good deal.
 

eek

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As your "credit" improves, they will just start doubling your credit limit on the card automatically hoping you spend more than you can afford.

OP, you can call them every 4-6 months and ask them to bump it up and they generally would.

If you shop at Costco you can try their credit card too. 4% back on gas (any gas station up to $7k a year). 3% for restaurants, 2% for Costco and 1% cash back on everything else. No foreign transaction fees.

After you establish some credit with your first card you can look into cards out there. TheWireCutter has reviews on cash back cards and travel cards so take a look.

Like others said, don't max out the cards and always pay them off. One thing to note too is that one of the factors to your credit score is how much of your credit you are using. If you know you will need a loan, try to use your credit less that month to boost your score when they pull it.
 

greedostick

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Just open one up and just use it to buy groceries or something, and pay it off immediately when you get home. The more money you have unspent on credit cards, the better your credit will be. You will need to make a few purchases though so they know you can pay back debt. The more transactions the better. Amazon use to give you I think a $100.00 sign on bonus. I did that a few years ago and got a Kindle for free.

You could also look into joining a credit union to get a loan just to establish credit. They are very good about working with you.

They also offer credit cards that are only used for gas.

A new credit card for someone with no credit will normally have outrageous APR. Like close to 30%. Which is why you pay that thing off immediately.

It can be a trap though if you are not financially stable. For example your car breaks down and you need close to a thousand or more for repairs. I had that issue when I was in my young 20's and had a credit card with $1700.00 worth of car repairs on it. Took me an eternity to pay it off. I do not recommend.

So basically, if you are not responsible and will rack up a boat load of purchases on that thing then don't do it. If you can be responsible then go for it. I would recommend a credit union forst though before going to get a credit card.
 

sr20det510

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A credit card is a good start, just make sure to link your bank account to it, so as soon as you make a purchase pay that balance off.

As long as there is a purchase record and a payment, you will begin building credit.

Someone also mentioned a credit union, they are a good idea. They can supply you with a loan. I would just flip their money back at them and payoff the loan off in a month or two. This will help build your credit.

Paying off a car loan also has a big impact on credit. So next time you buy a car, even if you have the cash to buy it, you should finance a small part, and pay it off quickly. You will begin having a history of credit, with low balances, that you pay off quickly.

As for the types of credit cards, I love my Discover card. I've probably had 0% interest for the last 4 out of five years. I just call, tell them I'd like to know what kind of offers are available, and they give me 12 months at 0%.
In addition, Discover card has price protection. Buy something at regular price, and if it goes on sale within 90 days, they'll credit the difference. This has even worked on Black Friday deals!! Only drawback is Discover is not as popular as Visa or Master Card.
 
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madmanjock

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Btw, this advice of paying your credit off in full each month actually might not help your credit card score much.

Sounds stupid but it isn’t, the credit card companies want to make money from you. If you pay off the credit card in full each month, they aren’t making much in interest payments from you. Over time, they may reduce your credit limit, or in some cases withdraw your credit card entirely.

Really something you want to talk to a finacial advisor about, but If I was building up a credit history from scratch I’d probably use my credit card up to about half the max limit, make minimum payments for 3 to 6 months then pay the rest off. That should show you are a good customer to your credit card company that they can make money from.
 

ookitarepanda

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There are a few things that build your credit score:
1) Age of accounts - the longer you have a line of credit, they higher your score becomes. You are loyal to lenders and won't jump ship.
2) Balance of accounts - if you keep things low, that means that you are trustworthy to lenders and they won't suffer from having you. This doesn't mean never buying stuff, it means buying and paying it off.
3) Number of accounts - Don't open too many lines of credit. It would make you look desperate to lenders for money which means you're higher risk.

Unfortunately, it takes time, but you can get your score up by buying easy things and paying it off immediately.
 

NeoSneth

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Unless your goal is to end up a middle aged man with little savings, no retirement plan and few assets other than video games and dolls, you probably want to seek financial advice elsewhere.

Unfortunately, this seems true based on the anecdotal recommendations on how to build credit in this thread.

• Get a credit card. You dont have to use it, but I don't know why you wouldn't. Online shopping is far more secure with credit card companies. Build credit account history. Having multiple old accounts is a huge base of your credit score.

• Pay everything on time. You can dispute any false dings on your credit score at annualcreditreport or the credit company site. It's just a checkbox in most cases, so it's worth looking if you have any false late payment claims.

• Loans - they count towards credit and history. Never be late. If you have never needed a loan, then there is nothing you can do to boost this metric.

Credit Utilization - Yes, maxing out a credit card is bad. This looks like max utilization, even if you pay it off at the end of the month. Yes, it can be reported as max because it depends on when they survey and report your account. This is a ratio of your total credit, and the amount used (utilized)

• Do not apply for more credit than you need. Credit inquiries and requests have minor impact on score.
 

Neo Ash

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Here's my advise. Credit is for poor people. Yeah, you heard me right. People that have money don't rely on credit cards and car loans to get through life. Doing so keeps people from rising above the ranks of middle class. If you want something, pay cash for it. If you can't afford it, have self restraint and save up a little longer. Don't let yourself get caught in the trap of credit card debt. If you do put something on a credit card, it should be an amount that you can pay off in full when the payment is due. Also, paying in cash will make you more mindful of how much you are actually spending as counting out cash has more impact than sliding a card - you see your money going away.

I've found that the above advice has served me well. I deal almost 100% in cash, regardless of how large the transaction is. There's nothing more satisfying that being able to buy stuff out right and not have the weight of paying high interest rates and monthly payments that simply drag you down. It is also a really cool experience to walk into a car dealership with a carry bag full of banded hundred dollar bills, leaving the sales guys wondering who the fuck you are, and driving off the lot with a car you own out right.
 
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JoeAwesome

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It is also a really cool experience to walk into a car dealership with a carry bag full of banded hundred dollar bills, leaving the sales guys wondering who the fuck you are, and driving off the lot with a car you own out right.

gtfoh...

I was fine up to then.
 

sr20det510

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Here's my advise. Credit is for poor people. Yeah, you heard me right. People that have money don't rely on credit cards and car loans to get through life. Doing so keeps people from rising above the ranks of middle class. If you want something, pay cash for it. If you can't afford it, have self restraint and save up a little longer. Don't let yourself get caught in the trap of credit card debt. If you do put something on a credit card, it should be an amount that you can pay off in full when the payment is due. Also, paying in cash will make you more mindful of how much you are actually spending as counting out cash has more impact than sliding a card - you see your money going away.

I've found that the above advice has served me well. I deal almost 100% in cash, regardless of how large the transaction is. There's nothing more satisfying that being able to buy stuff out right and not have the weight of paying high interest rates and monthly payments that simply drag you down. It is also a really cool experience to walk into a car dealership with a carry bag full of banded hundred dollar bills, leaving the sales guys wondering who the fuck you are, and driving off the lot with a car you own out right.

Your advice makes total sense, but the big dogs, Buffet, Soros, bloom, etc., all claim it's easier to build wealth using other people's money.

I think it is all about making wise decisions, like you said, can't afford it, save a little longer. In addition, if your card provides a benefit, for instance an extended warranty, it just makes sense to pay with the card. Just make sure to pay off the balance, in order to avoid paying any interest on the purchase. Simply sliding a card makes it difficult to keep track of purchases. So carry cash, spend it wisely, and you'll live a good life with less worries about being abe to afford something, or your going to make the payment.

Oh and last thing, fuck making minimum payments. That's what really fucks you over.
 

madmanjock

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I agree with saving and buying with cash, but most people won’t have the cash for a home upfront and will need a mortgage. To get a mortgage you need a credit history, so you will have to play this game, even if it’s only for a little while.

Even signing up for a mobile phone contract requires a credit check.
 

Cousin_Itt

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In today's society, good credit is a necessity. So unless you're paying full cash on a house or car, don't expect to get expect to get a good rate without it. Go to a credit union and get a secured credit card. Use it to pay for everyday items like gas/groceries/utilities. pay off at the end of the month. It's not the end of world if you can't pay off full balance each month, but don't ever be late on payments. Just set autopayment the week prior to be on the safe side.
 
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