Building Credit...

[SJ413]

Howdy folks, hopefully much wiser than I.

I'm at a roadblock in my life right now. As a 23 year old male who has worked and become successful in my career, I have come to the point where I would really like my own place. Problem is, I live in the boonies (and plan to keep it that way). Renting homes is god-awful expensive, and why spend my hard earned money paying rent when I could be paying towards a home?

I have no credit, zilch, nothing, not even bad credit. Anything I've ever bought of considerable value, I've always paid in cash. So, where do I start? I cannot my father to co-sign on anything with me, as he is currently in the same position.

My current plan is to take some of my savings and tax refunds, put then into an interest-building account, and take out a loan against said funds to start with, and then work my way from there. Eventually, I will purchase a decent used larger truck and trailer (these would, help me earn cash on the side and make life easier for me), and then move on to finding my own decent sized plot of land. Unfortunately, I see no way to fast-track this, so it will be a few grueling years.

Any thoughts or suggestions for the younger folks starting out like myself?

 

[Sir Psycho Sexy]

Get a credit card. Carry NO balance at any point. Pay off your entire debt every month and keep your debt to credit limit below 25%. (10-15% is ideal)

When I got my first credit card I had no credit history like yourself. They started me off at 651. After only three months of carrying no balance and keeping my debt to credit limit ratio low they had bumped me up 51 points to 702.

If think you may ever carry a balance, make a late payment or rack up $300 in a month on a $500 dollar credit limit then DO NOT get a credit card.

If you are interested in getting a card then I would highly suggest a rewards card with no annual fee. So far the credit card companies have paid ME over 100 dollars to use their card instead of my old debit card. I haven't paid them a single penny.

Be sure to check your credit report from the three credit bureaus. Equifax is one of them I can't remember the other two. You can get your report once a year for free from each of them. Don't waste your time at all the "free" credit check websites. Go to annualcreditreport.com for your free copy and carefully look for any mistakes that hurt your credit or signs of IDENTITY THEFT.

There are hundreds of articles on the web on building credit so do some research and get a head start. Most people only try to improve their credit score after they have damaged it so you have a great opportunity here. If you have any questions about specific credit cards or checking your credit score let me know.

 

[speed dawg]

Agree on the credit cards.

Many people, like Dave Ramsey, are 100% against borrowing money from anyone. I agree with this premise, but having a credit card is not all bad as long as you have a brain, keep your sh1t together and don't buy crap on impulse. You seem to have all requirements. I use it for online purchases and 'set' purchases like gas and such that I would buy anyway. Basically if anyone ID thefted me, they are chasing a piece of plastic and not actual money in my account, like a debit card.

On getting loans, a good bank officer will give you a loan if you show the income. When you say your credit score is zero, tell them you've never borrowed money before. It's only the idiots that freak out about that, when it literally makes no sense at all. They are living in the consumer 'matrix' and think that everyone carries debt when it's simply not true.

 

[sageproduct]

The three credit bureaus are:

TransUnion
Experian
Equifax

You get 1 free check in a 1 year period with each, so what I do is I check TransUnion on January 1, then Experian on May 1, Equifax on Sept 1 so it's evenly spread out.

Get a credit card.

Unfortunately, OP will get declined if he applies for a credit card. Why? He has no credit history. How do you build a credit history? By getting approved for credit. How do you get approved for credit? By having a credit history.

Sucks, huh?

Here's the REAL way to start building your credit history, not lame sh1t like piggybacking off your parents and getting your name added to their card

You get a SECURED CREDIT CARD. What a secured credit card is is a card that you initially make an account deposit with. That deposit becomes your credit limit. For all purposes onwards, the card behaves like a normal credit card would (monthly statements, minimum payment, no interest charge if you pay off your balance every month). The only difference is that if you MISS a payment, then they have your initial deposit as collateral.

It's basically trading money for a start to credit history.

When I turned 18 I had no credit history, but I wanted credit cards to build credit and earn rewards. I got mailed some offers, so I thought hey cool, I'll apply for one. Got declined. Applied for a different one (at a bank that I already had checking and savings accounts at), got declined. Should have known, I had no credit history. I wanted to start building credit though, so I researched until I learned about secured credit cards. I applied for one, got approved, paid a $200 deposit, and got my card mailed to me a month later.

For the next year I'd buy something under $20 every month to keep my debt-to-credit ratio under 10%, always pay off my balance in full every month, and then a year later I applied for a pretty decent card at a big bank that I already had checking and savings accounts with. I got it!! I was real excited because it has 1% cash back rewards on every purchase and 5% rewards in quarterly revolving categories.

That was almost two years ago. Now I have about two and and a half years of credit history. It's about time for me to apply for my third credit card, actually (as well as ask for limit increases on my current ones)...think I'm gonna go with a 1% cash back card w/5% revolving categories from a different bank so I can take advantage of different categories in the same quarter

 

[Bible_Belt]

why spend my hard earned money paying rent when I could be paying towards a home?

There are over ten million American mortgages right now that are a greater amount than the market value of the home. The recent real estate crash has exposed the myth that renting is a waste of money. It's much, much better than going underwater on a bad mortgage.

If you have your own business, you might consider a lease for the truck and trailer, provided you have taxable income to offset. That is the one situation where leasing is better than buying.

And I agree to get a credit card. If you have a job, they'll give you a $500-800 limit. Work toward a higher limit by maxing it out, carrying a balance for one month, then paying it all off and asking for a higher credit limit. Then repeat the process. It's better to have one well-used account like this than several that you don't use.

 

[Sir Psycho Sexy]

Unfortunately, OP will get declined if he applies for a credit card.

He may get declined. You did. I didn't. It takes 15 minutes to apply so it's worth trying. I had a fair amount of income coming in and was older which may have made the difference. I agree staggering your credit reports on a 4 month cycle is ideal but can be a bit confusing when you are first starting out. Respect the fact you started right at age 18. Wish I had been a little more proactive at that age.

Bible Belt brings up a good point...buying is not always better than renting. This video explains and breaks down the math between renting and buying.
https://www.khanacademy.org/science.../renting-v-buying/v/renting-vs--buying-a-home

 

[backbreaker]

Get a credit card. Carry NO balance at any point. .

this is not good advise.


you want your utliatzation to always hoover around 10% meaning. this shows you can carry small amounts of debt and yet still pay it monthy. this raises your credit score higher than just paying it off every month would.


people who pay off their credit cards every month don't draw much interest and people who don't draw much interest aren't very inticing to credit card companies. but people who carry 10, 15% utilization shows enough hat they are willing to use their credit but they aren't' giong stupid crazy with it. banks / credit card companies love this guy. this is the guy they always keep throwing upgrades to as a way to try to get you to spend more money


OP it's easy. take 250-300 dollars, get a secured Credit card. add 50 bucks a month to the card to raise the limit, keep the balance about 10%. eventually they will double your limit without asking you to pay more of a deposit. eventually they will send the deposit back. this takes about a year maybe a year and a half. at that point go get you a gas/target/wal mart card something easy. keep at 10%. rinse, wash repeat.


first premier and cap one are auto approves for first time/ no credit. they wont' decline you but their interest rate is 17% that's too high.

I study this **** in mys pare time.http://creditboards.com/forums/ is a good forum for this stuff. i'm over there.

In what.. 6 years over there I've gone from a sub 600 credit score (business ****) to a mid 700 score on all three and about 100k in various lines of credit. there are guys over there that have 200-300k lines of credit.

 

[speed dawg]

you want your utliatzation to always hoover around 10% meaning. this shows you can carry small amounts of debt and yet still pay it monthy. this raises your credit score higher than just paying it off every month would.

WTF? Are you retarded?

 

[Sir Psycho Sexy]

people who pay off their credit cards every month don't draw much interest and people who don't draw much interest aren't very inticing to credit card companies. but people who carry 10, 15% utilization shows enough hat they are willing to use their credit but they aren't' giong stupid crazy with it. banks / credit card companies love this guy. this is the guy they always keep throwing upgrades to as a way to try to get you to spend more money

I disagree. Carrying a small balance does not increase your credit score faster than paying in full. It only adds to their profit which is why credit card companies love this type of customer.

people who don't draw much interest aren't very inticing to credit card companies.

I'm not interested in being enticing to banks. The enticing customers are the ones who they make money off. I'm interested in having a credit score they have to respect.

 

[backbreaker]

I disagree. Carrying a small balance does not increase your credit score faster than paying in full. It only adds to their profit which is why credit card companies love this type of customer.

i just showed you an entire site forum wtih people chalk full of 800 credit scores that says otherwise.

lol i'm not going to get into a pissing match with a 22 year old about credit. actually buy some **** and get back to me.

 

[Sir Psycho Sexy]

i just showed you an entire site forum wtih people chalk full of 800 credit scores that says otherwise.

lol i'm not going to get into a pissing match with a 22 year old about credit. actually buy some **** and get back to me.

I'm not interested in arguing any further either. OP can do his own research and make his own opinions on the best way to get where he wants to go.

I do plan on checking out the forum you linked fyi. Thanks

 

[backbreaker]

WTF? Are you retarded?

No I'm just informed

research utlization


i'll help you out.

http://creditboards.com/forums/index.php?showtopic=496475&hl=utilization&page=2

you don't want to be at 0% utilization your score will drop.

see what happens wehn you actually pick up a book or read some **** that's not feminist conspiracy related or game related you learn ****. 0% utilization is not good. you want to be somewhere between 5% and 10% with 15% really being the overall max. there is a sticky on that forum about this very topic.

this isn't a DEBT post it's a building credit post. your credit score will rise if you have a min but not 0% utilization

and the next time you try to AMOG someone know what the **** you are talking about

 

[SJ413]

Thanks guys, this is a big help, ad is really helping build on top of what i already know!

Houses are a buyer's market around here. Smaller old mill homes are being bought up as rental property left and right. There was a house that had smoke damage with a huge 2 level shop that I drooled over, but, you know my situation. Lol. You can buy homes for considerably less than you could five or so years ago, and the intrest rate is very low, if you can get the loan in the first place that is. Ive done work to rental homes in the past, and the profit margin is huge if you play your cards right. No offense to anyone who does rent, but I'm just not too keen on throwing my money at someone else. It would be a good business to invest in though.

I wish i had the capital to start my own business, I've got more side work than I can handle at any given time. I enjoy the security of my job and benefits right now though, but perhaps one day i can move towards the self-employed direction. I could use a larger truck to transport vehicles to repair and sell, as well as move my own without worrying about them making it home after I beat the snot out of em.

Thanks so much! It's settled, within the next month I'm going to get a secured card and get started!

 

[Bible_Belt]

It's been ten years since I dealt with credit reports, so I don't know for certain what has changed. Probably not a lot. One of the ways to make more money as a mortgage broker was to be really good at cleaning up bad credit reports. If you could fix their credit, it gave you a client no one else had, and the deal would get through the underwriter.

We saw every account of revolving credit. It shows the number of times you were 30, 60, or 90 days late on a payment. Three numbers that matter are the current amount you owe, the max you have had open - for a credit card that number is your limit, and the maximum balance that you have carried for at least one month. You want the first number to be small and the second two numbers to be as large as possible. Obviously it should read all zeroes in the # of times late column. And any sort of collection, default, or bill you just didn't pay is a deal-killer - if you have something like that, getting it off your credit report is priority number one.

Good luck in real estate. I've done a lot of remodeling myself. Most people are really horrible at being handymen, so if you're decent at it, that puts you ahead of other investors.

 

[twentee]

why do either one, when you can park a little pull trailer on public land, and put that 10k or so a year so saved into a decent investment? In a very few years, you can put enough down that a bank will loan the rest, and you keep 30k out for your living and "fix it up" expenses. then you get some great big old house, for 50k or less, with 15 or so BIG rooms in it, divide them in half, intall a manage living free, paying him $100 a week, to handle the place for you, and have 24 people paying you $100 a week. On something that cost you less than 100k (and some labor) CLEARING 30k a year or more is damned nice! with one litte trick that I know of, you can clear another 20k a year or more, too.
Once you have a secure 50k a year, after tax, you can live wherever you want, never have to work, unless you are stupid enough to want kids.

 

[Down Low]

The easiest, best way to do it is to take $500 to B of A and get a secured credit card. They'll hold the deposit in a special account. After a year, if you are paying as agreed and aren't over the limit, they'll end the secured card and mail you a real credit card, and return your money. I think they charge something like $50 to do it. You don't have to have a checking or savings account at B of A to do it.

Also, if you don't have them, you should immediately open both a checking and a savings account at any bank or credit union.

For any credit card, including your secured card, never exceed the limit and always repay the balance in full every month. In fact, your credit score will increase the fastest if you never exceed 10% of your limit.

After you get upgraded to a real credit card, wait about 3 months for the credit bureaus to update your history, and apply for some twaddly credit card. Maybe Hooters (it's a general-purpose credit card that can be used anywhere, but it's in the category of restaurant/entertainment) or Victoria's Secret (department store category) or Diamond Shamrock / Valero (travel/gas). Once you're approved, use the card every month for less than 10% of the limit, and pay the balance in full as soon as the bill arrives.

Wash, rinse, repeat. Apply for one and only one card no more than once every 8 to 10 months. That way, you'll have very few inquiries on your credit report.

After a year of good history with your real B of A card (or Wells Fargo or whatever), they should increase your credit limit. If after 15 months they don't, call customer service and ask to speak to someone about increasing your limit. Tell them flat out that you want a higher limit because you're never going to exceed 10% utilization -- because you want to improve your credit score / "FICO". Ask for something reasonable, such as $2000 limit.

You can always negotiate a higher limit on your cards when they don't automatically give it to you.

Eventually, you're going to buy a car. You'll need a loan from a credit union. About 2 years and 3 months before you plan on buying a car, buy something "on time" -- as an installment account. Apply for credit at, say, Dell computer, and buy something that takes 2 years to pay off. That way, your good installment-credit history will be very recent at the time you're applying for a car loan. When you go car shopping, do it all within one calendar month, so that the credit bureaus are required to suppress all of the credit inquiries except for the one where you buy your car.

What is the correct number of credit cards to have? At least four. One must be from a major bank (such as B of A), and the others must be from different categories of retailer.

Your credit score will be much better if you had the same address for more than 2 years. If you move around a lot, get one of those private postal boxes, and change the address on your drivers' license to match. Get the private box in the richest area you can conveniently get to. Use this address as your "residential" as well as "mailing" addresses for all your credit applications.

Also, the banks and credit card companies know only what you tell them. Use the most-flattering story about your job and income history, and tell exactly that same story for every account you ever apply for. Never tell anyone about arrests or lawsuits.

The "issuer" or "servicer" of your credit-card account usually isn't the same as the name of the retailer on the front of the card. For example, a Sears credit card may be issued by Citibank. Make sure you get no more than one account from each "issuer." For instance, if you apply for an American Express card when you open a Costco membership, the AE fee is waived for the first year. If it's important to you to get a Costco membership -- or to upgrade your existing Costco membership to an AE credit card -- you will want to avoid applying for AE before that time.

Don't apply for a Discover card until your credit scores are above 740.

Check your credit reports for free at https://www.annualcreditreport.com/ every year. If you notice any errors, correct them by contacting both the credit bureau and the credit issuer.

 

[Atom Smasher]

I would be careful about B of A. They are positively vicious if you get into trouble with them. I did once in my past and their collection tactics went beyond what was even legal. They will hound you with calls at work, they will consistently call your family members and your landlord if you have one.

They also play with the timing of deposit postings vs. withdrawals in order to cause a bounced check and thereby take an overdraft fee. They will do this in a matter of seconds, posting all your debits first and then posting your deposits a few seconds later, without regard for the actual timing of your deposits. I have seen this happen (always on a Sauturday morning, it seems) several times. You can actually see them doing it by going to your online banking and watching your balance dip and then go back up, with an overdraft fee.

In all my years I've never seen such a thuggish organization.

 

[Bible_Belt]

Although paying off every balance every month is typically wise in a personal financial sense, if you do that, the account will show on your credit report as being unused. It doesn't count as use of credit if you don't carry a balance from one billing period to the next. That's what they want to see - carrying a balance, then paying it off. Just one month should be fine. I don't think it states on your report how long you carried a balance; it just shows the maximum balance on which you have paid at least one month's worth of interest.

Ideally, you can max out your card on a big ticket item for which you already have the cash in hand to pay, wait for one billing cycle to pass, and then pay it all off with the cash that you had the discipline to save and not spend on something else. After they cash your check, call and ask for more credit and they will likely double your limit, as least for small accounts.

Although the exact formula of each bureau's scoring is kept secret, is it often thought that a typical visa/mc/amex credit card is more worthwhile than a department store card. My mortgage boss who had been doing credit repair for decades got the impression that the credit scoring agencies view department store cards as the charging of necessities, which is something that poor people do. A credit report with several department store cards makes you look like you really need credit. Credit is like a woman - being needy will get you denied Trying to get a limit extension on a maxed-out card is nearly impossible. But if that same card gets paid in full and you then ask for a higher limit, the company will fall all over themselves to give you more credit.

 

[twentee]

xmas time is the time to ask for a credit line increase. Go to walmart and have the STORE call in and ask for your increase.

 

[backbreaker]

The best credit card I have is hands down the USAA mastercard. They are very very picky you have to have good credit to get one.. at least 700, and you have to have a family member or yourself be in the military but they are great. low rate, they will up your balance often and they have great customer service. i went on vacation last year and didnt' want to take cash and just called them and asid hey lol, can i get a credit increase of $5,000 and they were pretty much like sure lol. i've had that account for almost 2 years though.

STarting out you want to get something like a goodwill credit card or something like that. the most important thing is to make sure that the card reports to all three bureaus, not all of them do. In fact most don't.


whatever you get, pay that **** on time no matter what or it's all for not