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get a credit card and use it to make small purchases here and there, then pay them off before you accrue any interest
Several people have now advised me that I need to start "building" my credit. I have no idea what this means, so I could use some advice tbh.
Right now my only debt is my student loan, which I could pay off right now if I wanted. I got no credit card debt.
What do I need to do so in 4-5 years down the road when I probably want to buy a house, I would have good enough credit?
get a credit card and use it to make small purchases here and there, then pay them off before you accrue any interest
As for credit cards last I heard is have no more then 30% of the total credit limit in use. But it's good to have a small balance at all times. But that may have changed since they change it often on what builds good credit. Very grey area imo.
That's what I do right now pretty much. However, people keep telling me I need to get another credit card and do the same with it. How does that make sense tbh.
maybe each card adds to your credit score. so if you're keeping up with your bills on 2 cards that = 2 X added to your credit score
i think even those little in store credit cards count. so if you have somewhere that you shop alot just put it on your store card. ummm you should have also built credit when you financed your car. mines paid off now but what i did was right after high school i bought a better used to last through college and paid on that for a while.
You don't need a credit card to build your score. That is complete BS. I bought a $150K house in Austin when i was 28 years old and I didn't have a credit card. I had a good paying job and used FHA where i only needed a 3% down payment, financed the rest through a credit union. I sold the house three years ago for $245. I have an American Express card now but it's just for buying stuff online and travel, otherwise I use a debit card.
Don't buy a new car stick with something older until you get your house. Once you get your house then you can start raising your lifestyle.
Solid advise tbh.
Another question - what are good ways to protect my debit card?
I was thinking the other day - if someone gets my card and guesses/figured out my 4 digit password(like that Lucky fiasco, where I shop tbh), what's stoping them from withdrawing all my money? I would assume there's some kind of limit..... maybe a good idea would be to only keep 1 debit card(I have 2 right now) and only have 300 or so on it? then move the rest into a savings account or something similar.
Took a small loss on it eh?
Destro gave some sound advice. It's really hard to avoid temptation when you're young. If you can get out of your 20's without significant CC and auto/student loan debt you're halfway home tbh. Keep CC debt low, and keep old cards active if you already have them.
Your next step should be to invest in something tangible like real estate. Build up assets.
As for debit card security, your bank should provide you fraud protection. I had mine stolen once and the bank told me all that was required to have my funds restored was to file a police report. Nowadays, banks are more sophisticated though. I've been called by my bank a few times on my mobile when I've made large purchases or withdrawals from locations I don't frequent (before I've left the store or ATM). That might freak some folks out, but it gives me some peace of mind.
If you are going to get a credit card get the Chase Freedom. It rocks. I buy everything I can on that card and get almost $1000 back per year.
Never mind ... bubba can't do simple math. The Chase Freedom card is a good one.
Last edited by CubanMustGo; 02-06-2012 at 03:19 PM.
pay for everything in cash
Someone used my SS# before I was 18, so while everyone was getting their first cards on their birthday (some before), I didnt. Got a credit report and seen the problem.
So, in order to right that ship, I gave my bank $500 for a credit card that had a limit of $500. Had to do that for a year, if you pay on time, the bank sends you your $500 back plus interest and lets you keep the $500 credit card.
That was how I did it. My credit is sterling as of now.
I was a credit ghost for more than 20 years until I bough a new car in 2000. I don't know if things changed, but I was told to finance at least $6,000 over at least 3 years. I went to buy a car and did just that. I wrote a check for the down payment of $19,000 and finance a little more than $6k. Had a terrible interest rate, but now I have some pretty good credit.
As stated above you do not need credit to make major purchases. I can't think of anything more destructive than owning a credit card. I understand the value behind responsible card ownership and the ability it gives you to leverage your money in inconvenient times but overall there really is no long term value. People are inherently irresponsible and lazy with their money.
Save your money appropriately and you can pay cash for almost all of your purchases except maybe a house.
I highly recommended listening to Dave Ramsey before jumping on the credit ship like everyone else.
Financial Peace and Total Money Makeover are two must have books. Actually I found the audio books to be easier to go through because he actually emphasizes the bigger issues way more than the books can. Buy them or download the torrent for free.
I have abused, repaired, abused and used my credit just like anyone else. I've also seen how shaky and fickle the bureaus can be while working at a dealership for 7 or so years.
I rarely use credit anymore.
Eh, I pretty much pay for everything exclusively with a credit card through the month, pay it off at the end of the month and avoid interest while racking up rewards points. If you have the discipline to do this, its a way to get more out of your money.
That's what I do too. Paying your student loan on time, with no missed payments will give you a good credit boost.
Your credit is based on the bureaus seeing you have the ability to make payments on time. If you have more than one card going and you're making your payments, it's more proof that you can make payments. Try to find a rewards card and use it on small purchases like crazy. You get rewards, you pay it off to not get interest, and you build credit. It's a win win.
This is why a credit card is better than a debit card- just use one that charges no interest if you pay it off each month.
As for your student loan debt. Pay it off if you can. Think of it this way-- is the money earning you more sitting wherever it is than what you are accruing in interest on the debt? Paying it off yields a return.
Pretty much. Been using my credit for 4 years consistently, never miss a payment. Honestly, I've probably never made a purchase I haven't had the money for beforehand.
What are good credit cards to apply for? I've had the same one with WellsFargo since I was about 18, and the credit limit is pretty low(4500), although I don't really see the need for a higher one. I've gotten a few offers in the mail - most recent one being Citi Diamond Preferred Card. Is it any good?
When I was 19, I got a Sears card, bought a wrench, cut up the card and waited for the bill. I got a Dillard's card, bought a pair of socks, cut up the card and waited for the bill. I paid both bills as soon as they arrived and never had to worry about my credit again. I started getting credit cards in the mail after that. Unless something's changed, they only look at if you close an account or fail to pay a bill, they don't look at how much you spend. They'll constantly try to increase your limit to entice you to spend money.
It's like this thread was made for me. I have no credit history and had to get my fad to buy a tv for me. is pretty embarrassing.
I'm normally not a fan of store cards, but if you shop at Target with any regularity I'd recommend their card. It gets you 5% off of purchases there. That's one of the better rewards returns for a card that I've seen.
Most store cards close your account after 1-2 years of inactivity - so that necessarily doesn't help.
One thing that doesn't hurt someone young to do is, as other said, get a card, make a few purchases every month and pay it off. The simplest thing to do is to get a card and put a recurring payment on it (netflix, etc) and simply pay the $10 every month to pay the balance or whatever. It at least helps you build.
You do have to do SOMETHING. I know of a few people who's parents never let them/they never had anything in their name simply to establish credit through college. They get out of college, try to get an apartment and can't get a place because they don't have a credit history. So they try and build a credit history, but no one will give them a card. Brother-in-law had to do the credit loan thing through a credit union someone previously mentioned because no one would approve him for a card (or place) until something was established.
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