Financial Help

[InsidiousNstinct]

Hey guys, I'm not a financial buff by no means, which is the reason for this post. I've never really thought about my credit that much only being 19, etc. However, I checked my score which is around 540 I believe. I'd like to build it up, I know I will have to start small. So far the only thing I have right now is a loan. No bank accounts, no checking accounts, etc.

I've only had one job and that was at a records department for the county's sherrifs office. My main question is what are some good ways to start building up credit? Ive had a few people tell me to start a checking account and get a Visa Check card. Also what are some good "guru" books I guess you could call it on Financial status and understanding all of it.

I'm not a math person so I never really paid attention in economics it pretty much scares the living day lights out of me because i've heard of people getting ruined because they have no idea how to handle their financial affiars.

No disrespect, but i'd like people that have GOOD credit to respond to this post. In other words people that know what their talking about.

Thanks a bunch,

Jonathan.

 

[Interpol]

First, I'd go to Bank of America and open a student checking account with no minimum balance and no annual fees and get a debit card. If you don't have Bank of America near you then check out some other banks, most will have a similar program available. This won't help you build up credit but it will give you a free and convenient checking account.

Then you can apply for a credit card. Look for ones with no annual fee and fixed APR (the lower the better). Most companies offer cards targeted specifically to students and younger people. You should be able to get approved with a relatively small line of credit (few hundred bucks).

Now go out and make purchases using your card, but only things you can afford to pay for. Always pay your bills on time and whenever possible, pay the full amount of the charge so interest doesn't accumulate. This is how you demonstrate good credit. Eventually your line of credit will increase and you can apply for more cards. Don't go overboard! Never buy more than you will be able to pay for within a month.

Follow those tips above and you'll be off to a good start. I'm 20, have never had a full-time job, and yet have over $10k of available credit.

 

[InsidiousNstinct]

Thanks interpol

 

[diceman]

Hey wait!
How have you managed to get $10,000?
Have i missed something? Your advice is, "open a bank account, only spend the money that you have. Don't spend money you don't have - this leads to debt".

Um.. have i missed something?

 

[Interpol]

Originally posted by diceman
Hey wait!
How have you managed to get $10,000?
Have i missed something? Your advice is, "open a bank account, only spend the money that you have. Don't spend money you don't have - this leads to debt".

Um.. have i missed something?

I said $10k of available credit (meaning, how much I can charge to my credit cards). Not $10k of cash.

 

[al77]

Why?

Why would you need decent credit score?
Unless you are buying a huge house or a fancy car...

 

[WastelandWarrior]

I'd like to throw in my 2 cents here.

What do you need a credit card for? Notice I said "need" and not "want." Credit is a code word for debt. Any time you use that card, you are going into debt with a third party to buy something. Pay with cash that you have saved. This will keep you from buying garbage that you don't need.

As far as APR, it can be 100% and as long as you pay your bills on time, it won't mean a thing. You won't pay one extra dime. APR is what suckers that charge more than they can afford look for. It's the anual fees you want to stay away from.

I owned my own car and home before I ever even applied for a credit card. Now I get about 12-15 solicitations per week by mail for credit cards. File them right in the garbage after ripping them up.

Concentrate on saving money in a bank account and having a stable job history and you'll be able to do what you want as far as buying power.

The reason I have one credit card is for internet purchases and emergencies. The limit is $300. I can't see any justification for needing to go into debt any further than that.

Also, to be safe... on the back of the CC where you're suposed to sign, write in "ask for ID" or something like that. It serves as a failsafe incase you misplace your wallet and a theif tries to use it.

So far the only thing I have right now is a loan.

Make sure you stay on top of that. Make sure you send in your payments on time. If for ANY reason you can't make your payment or can't get it sent in on time, call the company in advance and let them know. They want their money and they will work with you to get it.

Be responsible.

Never buy more than you will be able to pay for within a month

This is very good advice, follow it and you'll be in great shape.

 

[TooColdUlrick]

Re: Why?

Originally posted by al77
Why would you need decent credit score?
Unless you are buying a huge house or a fancy car...

you need a good FICO score for a whole lot of reasons: credit in general, car loans, rent applications, car insurance, and yes even a job--a lot of employers check your credit history.

FICO > 700 is pretty much considered "excellent" credit. mine is 740, and that includes a total BS verizon cell phone situation of $50 bucks that i didn't even know about when i cancelled my account a couple of years ago.

the only real way to get good credit is to get a credit card or a car loan and make payments. it's better to make regular payments, than it is to pay off the balance, since a huge factor in your FICO is reliability (e.g. your payment history). if you miss a payment and it's reported, your score falls off a cliff, since they factor your most recent history more heavily.

it takes time to build it up, so be patient, and above all be responsible because if you fukk it up, it will haunt you.

i would also strongly suggest that you join one of those real-time credit reporting agencies---whereby you are notified of any activity on your credit report. get on the opt out list of the three reporting agencies, prohibiting them from running your report through their statistical analyses cr@p.

 

[Snatchmaster]

You need to have a stable checking account. If you're a student, check with your university to see if they have a credit union. Got my 1st cc through a credit union.

Definitely pay in full every month.

Never take a credit card with an annual fee. Only exception is American Express: Unlimited credit if you have a gold ($75 yr.) or platinum ($200 yr) card (might take you a while to get there).

While $300 seems like a low limit to me, keep in mind that too much credit can hurt your overall score when you apply for a mortgage. Even if all your accounts are paid off every month, if you have too much open credit available to you it increases the bank's risk that you may one day have trouble making the house note.

Scam to avoid: Never buy credit card insurance. Federal law limits your liability to $50 per account, but many card companies (the same ones who sell credit card insurance) will not charge you for fraud that takes place on your account.

Also, if you are ever late on a payment, the card co. will try to charge you a late fee, charge you interest for the late days, and increase your APR. Do not let them get away with this! Especially if you have a habit of always paying them on time. Call them up and calmly and politely ask them to remove any extra charges from your account and to decrease the APR. The customer service reps are typically allowed to do so if you ask.

If they refuse, ask to speak to a supervisor and tell them about what a good customer you are and get them to make the changes for you. Always dispute every late fee! Threaten to close your account if need be.

 

[spider_007]

Re: Why?

Originally posted by al77
Why would you need decent credit score?
Unless you are buying a huge house or a fancy car...

you need to have a credit record. I didn't know this, untill I went to by my house. Up untill then I paid everything in cash (even an $8 000 car for my mother). Credit is built up over time; used wisely it can be an awsome advantage.

 

[al77]

Re: Re: Why?

Originally posted by TooColdUlrick
you need a good FICO score for a whole lot of reasons: credit in general, car loans, rent applications, car insurance, and yes even a job--a lot of employers check your credit history.

Originally posted by spider_007
you need to have a credit record. I didn't know this, untill I went to by my house. Up untill then I paid everything in cash (even an $8 000 car for my mother). Credit is built up over time; used wisely it can be an awsome advantage.

I'd like to get to specifics:
Why would I need good credit in general? I need probably a credit in general, but why should it be good?
Lets see:

Job - they check credit history, ok. And if it is tiny they would do what?

Car insurance: If you go to expensive company and buy expensive car insurance - sure, good credit score may save you ...$10. I buy the cheapest insurance ~$400 per year, they dont give a damn about my credit score..
Why would I switch and buy expensice insurance?

Rent application: as with job, they may want to see credit history, but they don't care how good it is.

Car loans: I can't imagine that guys... why would you want to buy a car and make payments??? Not only you have to pay interest and full, i.e. more expensive insurance, you also are buying a new car - it eats your money much faster than a used one.
Now if you buy a used one: if you buy it from aprivate seller - he doesn care about you at all. Buying from a dealership - you have pay $1-2k more... why to do that?

spider_007 got it: the main reason to have a _good_ credit is when you buy a house. But I dont even like houses...an inexpensive condo is fine. I doubt I'll need a good credit for that purchase - I am going to pay it off in cash.

 

[TooColdUlrick]

Re: Re: Re: Why?

Originally posted by al77
I'd like to get to specifics:
Why would I need good credit in general? I need probably a credit in general, but why should it be good?
Lets see:

Job - they check credit history, ok. And if it is tiny they would do what?

Car insurance: If you go to expensive company and buy expensive car insurance - sure, good credit score may save you ...$10. I buy the cheapest insurance ~$400 per year, they dont give a damn about my credit score..
Why would I switch and buy expensice insurance?

Rent application: as with job, they may want to see credit history, but they don't care how good it is.

Car loans: I can't imagine that guys... why would you want to buy a car and make payments??? Not only you have to pay interest and full, i.e. more expensive insurance, you also are buying a new car - it eats your money much faster than a used one.
Now if you buy a used one: if you buy it from aprivate seller - he doesn care about you at all. Buying from a dealership - you have pay $1-2k more... why to do that?

spider_007 got it: the main reason to have a _good_ credit is when you buy a house. But I dont even like houses...an inexpensive condo is fine. I doubt I'll need a good credit for that purchase - I am going to pay it off in cash.

you must be from another country.

bad credit will haunt you. you're going to end up paying MORE for everything, as well you should because you're a "credit risk". if you are a credit risk, statistically you are more risky in a whole lot of other "things" (e.g. you are unreliable).

you might not get that job, your rental application will be rejected or you'll have to pony up an extra deposit, car loan is higher, cc's are higher, insurance costs could be MUCH higher...the list goes on and on...

you might not think that your credit history is important now. but in the future, it will be. and you'll regret either not having a credit history, or worse having bad credit.

it is a sad fact of being an american. your credit history matters. in order to get your FICO higher, and it's all about the FICO, you have to demonstrate that you can manage your payments. the way to do this is to charge on your cc or some other consumer loan, and make the payments. sad but true.

btw, consumer credit companies do not like it when you pay your balance in full. no one but FICO knows for sure, but your score is most likely LOWERED if you pay your balance in full every month. cc companies have their own statistical metrics, and they factor that in.

another important metric in the FICO is the percentage of consumer debt to available credit. if you're maxed out on your credit cards, you'll get dinged big time. and your variable rate cc, will go UP. the sweet spot ratio is about 25%. don't have more than 25% debt to your available credit.

recently i had to get a Department of Defense security clearance for some consulting work for a rather large defense contractor. guess what? they ran a credit report on me, and my company.

 

[spider_007]

if you got cash to pay for everything (including for something as big as a 30 000 car) feel free.

the advantage of a good score is;
-you can borow money at low rates IF YOUR CASH IS TIED UP IN ANOTHER INVESTMENTS. eg; I had to put in hardwood flooring in my livingroom. I like to keep everything BUT 2 000 (of working capital) in my investment account
-If you run into a good deal, and you don't have money you can put it on your credit. If you have a good score they will not charge you anything for like an year (not even interest) and then you can pay as you like (Even all of it at once). It's how I bought my coutch.
-If you open a buisness you'll defenitly need credit (unless you alredy got millions of dollars)
-If you are responsable with it, it's like using a debit card. In fact debit card might cost you more (withdraw charges)

 

[al77]

Originally posted by spider_007
if you got cash to pay for everything (including for something as big as a 30 000 car) feel free.

the advantage of a good score is;
-you can borow money at low rates IF YOUR CASH IS TIED UP IN ANOTHER INVESTMENTS. eg; I had to put in hardwood flooring in my livingroom. I like to keep everything BUT 2 000 (of working capital) in my investment account
-If you run into a good deal, and you don't have money you can put it on your credit. If you have a good score they will not charge you anything for like an year (not even interest) and then you can pay as you like (Even all of it at once). It's how I bought my coutch.
-If you open a buisness you'll defenitly need credit (unless you alredy got millions of dollars)
-If you are responsable with it, it's like using a debit card. In fact debit card might cost you more (withdraw charges)

I think it is better to be more financially responsible and thrifty.

30k car: It seems to me it is new? right? I'll never buy a new car! It loses it values extremely fast - once you bought, the very next second you already lost like 2-5k, i.e. the car depreciated by 2-5k.
If it is not new... I'll never buy it from a dealership: they charge you more 1-3k.
Buying used car from a private owner do not require any credit.

debit cards - I dont get it: I withdraw money from my bank or its atm. There is no charges for that AFAIK.

borrow money: I simply prefer not to borrow money: I save for some emergencies.

good deal: good deal on what? If I want a couch I won't buy it new - it is too expensive. Again, if I find a deal I simple go get money from my bank that I saved. Or get the invested money if I am going to by a condo (for exmaple).

business: right.. I didn't think about it yet.

TooCold is absolutely right, I grew up in another country and cannot grasp why it is so important to borrow money, unless you buy a large house or open a business.

rent - they check credit history - yes, but they dont care how good it is. If they deny my application I simply'll pay them in advance.

job - may they need it for somehting. This is probably the single good reason to have a credit history.

 

[aftershock]

My score last time I checked was better than most of the population. I'm 20. I have reason to believe that for my age, this score is fvcking great!

All I've done is get a credit card, put EVERYTHING £20+ on it, pay it off at the end of the month.

A good credit score gives you more OPTIONS. As a DJ, you should know that options are a good thing even if you don't think you'll ever use them.

 

[InsidiousNstinct]

Thanks for all the replies guys I'll take this information into consideration.

 

[stevera004]

Gotta agree with the minority here ... the credit obsession that US people have is really an obsession with debt. All this business about building up credit, FICO scores, etc. is the successful outcome of the debt peddlers attempt to get you into more debt! Just say no and get off the treadmill.

BTW, The best credit is money in the bank.

Later,

 

[aftershock]

Unfortunately, the minority here are failing to understand a basic point of life: we need more money that what we have when we are young and old, and middle aged we have more than what we need.

To put it simply:

1)

Baby - very reliant on parents
Child - reliant on parents
Teenager - may have part time job, but still needs parents for house and supplimentary money
College age - reliant on parents again for money
20s Adult - Earns decent money, but still needs more, perhaps to buy a house, have an active social life, further study etc

2)

30s - Starts to earn more money. Earn as much money as what you need. Social life becomes less active.
40s - Earn more than what you need
50s - Earn s**tloads, hopefully. Kids leave home freeing up even more income.

3)

60s+ - Retire. Again rely on pension rather than self sufficiency.


Credit, and debt, means that you can shift the financial burden from (1) onto (2), which makes perfect sense. Means you can live life to the full, and share the financial burden.

You actually should save NOTHING until your mid 20s, in my opinion, due to you needing all your disposable income for fun. Theres plenty of time to save when you are in your 30s.

 

[al77]

Originally posted by stevera004
Gotta agree with the minority here ... the credit obsession that US people have is really an obsession with debt. All this business about building up credit, FICO scores, etc. is the successful outcome of the debt peddlers attempt to get you into more debt! Just say no and get off the treadmill.

I have never been able to understand people who enjoy being in debt all their life.
They buy a new car and have huge debt just cuz it is new, high insurance, interest etc... buy the same used model and you will save tons of money... Why to buy new? To have high standard of living and have a huge debt?
I cannot get this concept: why so many people want t buy huge expensicve house and feel the debt all their lives???
Maybe somebody smarted than I am can elaborate on this?

 

[Interpol]

Originally posted by al77


I have never been able to understand people who enjoy being in debt all their life.
They buy a new car and have huge debt just cuz it is new, high insurance, interest etc... buy the same used model and you will save tons of money... Why to buy new? To have high standard of living and have a huge debt?
I cannot get this concept: why so many people want t buy huge expensicve house and feel the debt all their lives???
Maybe somebody smarted than I am can elaborate on this?

What's so difficult to understand?? Some people like having fancy cars and big houses. Not to mention some people can easily afford it without going into debt. Do you think millionaires should be driving used Toyotas?